Tax Law in New Mexico

Tax law refers to the regulations governing the calculating, filing, and paying of taxes. When handling tax law cases, attorneys may manage taxes at various levels, such as local, state, and federal. The practice of this type of law involves understanding, defending, and resolving issues related to payment or non-payment.

If you hire a qualified New Mexico professional to handle your business or personal taxes, you may feel protected from disputes. However, even a misplaced comma or added zero can cause the IRS to believe you owe more than you do. In some instances, accountants might also take deliberate actions that result in legal and financial repercussions.

Under New Mexico’s Income Tax Act, most residents and nonresidents who earn money in the state must pay state income tax. The rate depends on income level, and it can range from 1.7% to 5.9%. However, New Mexico also exempts some individuals from part or all of their tax liability. For example, the state offers a partial exemption for people over 65, and a full exemption for those over 100. In addition, some Native Americans may be exempt if they earn their income on a federal reservation or pueblo.

Tax Law Topics to Understand

If you find yourself facing New Mexico taxation issues, understanding tax law and how it works can help. Most Americans have only basic knowledge of how the tax systems work, and with good reason. They are complex. Small business owners need to understand tax law and how it impacts their business. Here are some essential tax law topics to get you started.

IRS Audits

An IRS audit is a review of an experienced New Mexico individual’s or an organization’s finances and accounts to ensure accuracy. The audit may also uncover discrepancies business owners were not aware existed.

These are just a few of the things the IRS looks for when conducting an audit:

• Does your lifestyle match your income?
• Are you passing off personal expenses as business expenses?
• Are you overstating any of your business expenses?
• Did you fail to report any business income or did you inflate that income?
• Do your payroll taxes match that of your employees?
• If your business handles a lot of cash,  are you diverting any of this into your own pocket?

If you are about to have your business audited, consider hiring a qualified New Mexico tax law attorney. They can help you to navigate the complex process ahead and offer advice as issues arise.

Tax Evasion

Tax evasion refers to any activity an individual or business in New Mexico engages in to reduce or avoid their tax liabilities. There are two types of tax evasion: evasion of assessment and evasion of payment.

Evasion of assessment means the taxpayer performed an action with the goal of defeating the assessment of a tax. The under-reporting of taxes is a common example of this. Evasion of payment means that you avoid paying the IRS by hiding money or assets that should become taxed.

Here are some examples of tax evasion:

• Keeping a double set of books
• Overstating deductions
• Destroying financial records
• Concealing sources of income
• Filing a false return
• Making false invoices
• Holding property in another person’s name to avoid taxation

If you are found guilty of tax evasion in New Mexico, you can face hefty fines, prison time, or both.

Income Tax Fraud

Income tax fraud is the willful attempt to evade or defraud the IRS and New Mexico tax laws. Tax fraud occurs when an individual or business does any of the following:

• Prepares and files a false tax return
• Willfully fails to pay taxes
• Intentionally fails to file an income tax return
• Intentionally fails to report income received
• Makes fraudulent or false claims on the tax return

Willful tax evasion is a felony in New Mexico. Conviction can result in a fine of $1,000 to $10,000 and 1-5 years in prison. On the other hand, tax fraud can be either a misdemeanor or a felony, depending on the amount of tax in question. Fraud involving amounts under $500 is a misdemeanor, while anything larger will be a felony.

When Would You Need an Experienced New Mexico Tax Law Attorney?

Facing Legal Issues Regarding Taxes

If you’re under investigation from the IRS or planning a lawsuit against, you will need a New Mexico attorney who practices tax law. To illustrate, counsel can help collect the information you need and create a viable defense.

When Starting a Business

There’s more to starting a business in New Mexico than selling products or services. You also need to determine the business type and structure. This status, in turn, determines how the business and your earnings get taxed. Choosing the wrong business structure can cost you.

All C and S corporations in New Mexico must pay an annual franchise tax of $50. In addition, C corporations are also subject to New Mexico’s corporate income tax. The rate is 4.8% for net income up to $500,000. For any income over that threshold, the rate jumps to 5.9%. However, certain businesses can qualify to pay taxes on their gross receipts, rather than income. These are typically businesses that only conduct small sales in New Mexico, with no other activity or operations within the state.

If You Have a Taxable Estate

If your estate is worth more than $11.58 million, or $23.16 million if you’re married, your estate might get taxed up to 40% for surpassing that threshold. No one wants a huge portion of their estate going to the IRS instead of their heirs. This is why wealthy people involve tax lawyers in their estate planning process.

According to the New Mexico Taxation and Revenue Department, as of 2005, the state no longer collects estate tax. However, qualifying estates in New Mexico are still subject to the federal estate tax.

Work with an Experienced Tax Law Lawyer in New Mexico

Facing issues related to tax law can feel overwhelming. No one wants to go head-to-head with the IRS. Experienced New Mexico tax law lawyers have the expertise you need, from conducting audits to defending you in court.  We can even help you connect with an attorney across New Mexico state lines.

Submit a request online or call us today at (866) 345-6784 to get in touch with an experienced lawyer in your area!