By SUE MAJOR HOLMES | Associated Press

Thu Sep 20, 2007 10:58 pm

ALBUQUERQUE — Gov. Bill Richardson on Thursday ordered the state Taxation and Revenue Department to refund penalties assessed on thousands of New Mexicans for their 2006 income taxes, saying taxpayers had not been warned about penalties.

He also directed the agency not to assess penalties for the 2007 tax year for underpaying estimated income taxes.

Taxation and Revenue Secretary Jan Goodwin made those recommendations to the governor, said Phillip Salazar, director of the department’s Audit and Compliance Division.

The department will fully enforce the law in the 2008 tax year, however, which means people who underpay in the future will be penalized.

The penalties affected 23,114 returns for the 2006 tax year. Most penalties were $150 or less.

Taxpayers who must make estimated payments four times a year include self-employed workers or retirees on Social Security and pensions — people who do not have paychecks in which income taxes are automatically withheld, Salazar said.

The tax department had not enforced a 10-year-old state law calling for penalties for underpaying estimated taxes because it did not have the computer software capability to assess the penalties until this year.

Salazar said the agency did not advise taxpayers in a timely way that it would start assessing penalties. “We recognize we could have done a better job of that,” he said.

The agency will be working overtime to refund penalties or waive penalties for those taxpayers who are still turning in estimated taxes, Salazar said.

“They don’t need to call us. They don’t need to contact us. We’ll handle it as quickly as we can,” he said.

Estimated payments are due April 15, June 15, Sept. 15 and Jan. 15 for each tax year.

The Taxation and Revenue Department does not know a particular taxpayer should have made quarterly payments until it receives and reviews a tax return, Salazar said. Instructions for state personal income taxes tell taxpayers who must make the estimated payments, he said.

Taxpayers should be thinking ahead to 2008 since the first estimated payment will be due in April, Salazar said. “It’s not that far away,” he added.

Richardson said the state takes tax delinquency seriously, but in this case, he believed people should not be penalized because they weren’t aware of the penalties.

“It is only fair to return the money these taxpayers paid and give them an opportunity to follow the law and avoid future penalties,” he said.