About Me

Albuquerque, New Mexico, United States
I am a Certified Public Accountant in Albuquerque, New Mexico specializing in representing taxpayers who are unable to pay the taxes they owe or must file delinquent returns or are under audit. I am also a frequent presenter of IRS Small Business Workshops for new businesses and new employers. You can read more articles on my website.

Wednesday, February 19, 2020

Is it true that independent contractors owe New Mexico gross receipts taxes?

Yes!  Income from the sale of services is taxed differently in New Mexico than in most other states.

Businesses in New Mexico receiving income from services provided to buyers located within New Mexico are subject to N.M. Gross Receipts Tax (GRT). Income from s
elf-employment is affected. Independent contractor income is affected.Caution: Gross receipts from the sale of services to non-profit organizations and government entities are subject to N.M. Gross Receipts Tax even though those organizations do not have to pay tax on the merchandise they purchase.

Businesses must register. 

If you live in New Mexico and receive income from your services (unless you receive a Form W-2) you are required to register your business with the N.M. Taxation & Revenue Dept., report your gross receipts and pay Gross Receipts Tax.Overlooking this tax can be costly.

Those businesses not already reporting their gross receipts to the N.M. Taxation & Revenue Dept. will be audited. That's because the N.M. Taxation & Revenue Dept. (TRD) receives information from the IRS about anyone living in New Mexico who files Schedule C.  The TRD then matches gross receipts (aka sales on the federal income tax return to gross receipts reported to the state. A discrepancy will cause the TRD to audit the business's gross receipts.

Important: The "employer" of the services of an independent will usually be required to send you a Form 1099-MISC and file a copy with the IRS as well. As a consequence the IRS will expect you to file a Schedule C, Profit or Loss from Business, with your Federal Individual Income Tax Return. 

Amnesty of sorts.

Once an audit begins the taxpayer will not qualify for the N.M. Managed Audit law, which is effectively an amnesty with respect to penalties and interest applicable to delinquent tax returns.Also read:

How to confirm the identity of a field revenue officer if they come knocking at your door.

When an RO visits a taxpayer, they will always provide two forms of official credentials, called a pocket commission and a HSPD-12 card. Both forms include a serial number and photo of the IRS employee. The HSPD-12 card is a government-wide standard for secure and reliable forms of identification for federal employees and contractors. Taxpayers have the right to see each of these credentials and can verify information on the RO’s HSPD-12 card by calling a dedicated IRS telephone number, provided by the RO, for verifying the information and confirming his or her identity.

Saturday, January 18, 2020

Do you have a balance due on your tax return?

It's best to file on time. You will avoid the 5% per month late filing penalty. And you can request an installment plan. You should know that many people are afraid to file a return if they can't pay. That fear can start a cycle of not filing for multiple years. Penalties build up to the point that they can add as much as 50% to the tax. This creates a "hole" that is very difficult and expensive to dig your way out of.