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Tougher scrutiny slows NM tax refunds

Copyright © 2016 Albuquerque Journal

SANTA FE – In the run-up to this year’s Tax Day, New Mexico’s tax agency asked thousands of taxpayers to provide more documents and personal information before their refunds could be sent out – prompting a cascade of complaints in the process.

The Taxation and Revenue Department is defending the tougher scrutiny – and the delay in how long it takes for some taxpayers to get their tax refunds – as necessary in the face of a recent rash of computer breaches and high rates of identify theft and tax fraud.

But the practice has already led an immigrants’ rights group to file a lawsuit against Gov. Susana Martinez’s administration, alleging refunds are wrongfully being denied to some immigrants who file state tax returns.

Others are feeling frustrated, too.

Joseph Stehling, an Angel Fire resident who helps elderly individuals prepare their tax returns on a volunteer basis, says the agency’s aggressive approach to double-checking taxpayers’ identities has led to an “unconscionable” burden on senior citizens, many of whom do not have computers.

He said at least eight people at a single Taos senior center received letters from the tax department asking for copies of tax documents, a valid driver’s license or other form of ID, plus bank statements or related records.

“Some of them are scared since the request for information is excessive and rather threatening,” Stehling said in a letter to the Journal, adding that one individual’s pending rebate is for $12.

He also said in an interview this week that this year was the first time in 12 years of assisting people prepare their tax returns that he could recall such scrutiny at the state level, describing the situation as “puzzling.”

Six to 8 weeks

In all, the Taxation and Revenue Department flagged roughly 59,000 personal income tax returns for closer scrutiny this year, a figure that represents about 13 percent of all returns, according to the agency.

Each filer whose return was flagged received a letter from the tax department asking that requested documentation and information be provided within two weeks, either via email or an online state tax portal.

TRD spokesman Ben Cloutier said taxpayers should expect to get their refunds in 6 to 8 weeks this year, instead of the usual two weeks, though he said prompt responses to the letters can help speed things up.

“The enhanced review process may increase the time it takes to process tax refunds and additional documentation may be requested from taxpayers to verify their identity,” Cloutier told the Journal .

But some New Mexico residents say they’ve been told the process could take up to 12 weeks. One Albuquerque taxpayer said he thinks the tax department’s tougher approach is aimed at bringing more money into the state’s coffers by increasing the amount of unclaimed refunds.

If taxpayers do not submit the necessary paperwork to claim their tax refunds within 90 days, that money ends up being forfeited and kept by the state. In the 2015 budget year, unclaimed state refunds totaled $2.3 million, according to TRD.

Stehling said it’s unclear to him how taxpayers are being picked for the extra scrutiny, since most of the elderly citizens who get help in preparing their tax returns have only low to medium incomes.

“We have no idea of how the individuals are selected for this scrutiny, but those we have seen certainly are not worth the time of a department that has difficulty even processing normal returns in a timely manner,” Stehling said.

Calls and questions

Lawmakers have also raised concerns about the practice, with several legislators telling Taxation and Revenue Secretary Demesia Padilla at a recent Roundhouse hearing that they have received calls and questions from constituents on the issue.

Sen. John Arthur Smith, D-Deming, chairman of the Senate Finance Committee, said he accepts Padilla’s explanation regarding the need for tougher scrutiny, but has asked for information about how other states are dealing with possible fraud and computer hacking issues.

“When you’re in an economic downturn like we’re in right now, that’s disposable income,” Smith said in an interview, referring to the tax refunds. “We need to get it circulating.”

Meanwhile, the agency’s increased scrutiny in handling personal income tax returns mirrors a similar approach to other types of tax filings.

Last year, the Taxation and Revenue Department ramped up its gross receipts tax audits – from 666 in the 2011 budget year to 17,930 in the year that ended in June 2015 – in an effort to collect delinquent and possibly underpaid taxes.

That effort also sparked complaints, with some taxpayers claiming the agency had been overzealous in its attempt to collect gross receipts taxes.

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