New Mexico Administrative Code
Title 3 - TAXATION
Chapter 1 - TAX ADMINISTRATION
Part 11 - PENALTIES
Section 3.1.11.18 - WILLFUL ATTEMPT TO EVADE OR DEFEAT TAX

(a) engaging in business while not filing tax returns coupled with the knowledge that the business is subject to tax;

(b) filing tax returns without payment for an extended period of time while staying in business and paying other creditors;

(c) knowingly completing false tax returns or claiming exemptions, deductions, credits or other reductions of taxable amounts or taxes to which the taxpayer knows he is not entitled;

(d) hiding or transferring assets to hinder collection activity of the department; or

(e) advising or counseling any of the foregoing in the course of one's business as an attorney, accountant, bookkeeper, business consulting firm or tax preparer.

(a) A is the primary shareholder, controlling officer and sole employee of B, a closely held corporation. B is engaged in an on-going business and, on its billings to its customers, separately states and collects an amount denominated "gross receipts tax". B has not filed monthly gross receipts returns for eight consecutive months. B, however, has received frequent notices from the department and has received telephone calls from department personnel requesting that the returns be filed for the non-filed months and any tax due be paid. As a result of the frequent contact from the department, B files the gross receipts tax returns, each of which shows tax due, but refuses to pay the outstanding tax, penalty and interest due and does not protest the tax due. B is willfully evading or defeating the gross receipts tax due and A is willfully causing B to evade that tax.

(b) C is the primary shareholder and controlling officer of D, a corporation. D hires the services of a professional accounting firm. The firm prepares D's tax returns and forwards them to C. C receives the returns but simply stores them. D never files the tax returns or pays the taxes due. C has willfully caused the evasion of D's taxes.

(c) B keeps C's books. C is a corporation. E is the primary shareholder and controlling officer of C. B prepares the tax returns for C and drafts checks for E to sign. E signs the returns and the checks. B never sends the returns or checks to the department but endorses the checks to himself. B intercepts all mail and telephone calls from the department. When E becomes aware of what B is doing, E promptly contacts the department to make arrangements for the filing of the returns and payment of the taxes. Making the payments, however, proves unfeasible and C goes out of business. B has willfully caused C to evade its taxes but E has not.

(d) L is an attorney who is familiar with business and tax law and is the primary shareholder in PC, a professional corporation. PC has reported and paid gross receipts tax in the past. PC stops reporting and paying gross receipts tax; L is aware of this. L has willfully caused the evasion of PC's taxes.

(e) N is the primary shareholder and controlling officer of C, a corporation. C is assessed a substantial amount of tax as the result of an audit. N causes C to cease operations. N's brother, M, who has also worked in the business forms a new corporation D. D takes over C's business and assets, including C's customer lists, employees and goodwill. D operates at C's place of business, with strictly cosmetic changes in signs and stationery. Both N and M know of C's tax obligations and intended the change in form to strip the tax liability from the on-going business. Both N and M have willfully caused C to evade taxes.

(f) O is a company that researches tax liens. It contacts businesses with tax trouble as indicated by the existence of tax liens. It advises businesses in the use of techniques to avoid holding balances in bank accounts, thereby defeating any levy by the department on the business's bank accounts. O is willfully causing or attempting to cause another to evade or defeat taxes owed and may be assessed for the amount its clients acting owe in tax.

(a) G is the primary shareholder and principal officer of C, a corporation. C is audited and is assessed a substantial amount of tax. C had never reported or paid gross receipts tax because G erroneously believed C's business was exempt from gross receipts tax. C files bankruptcy under Chapter 11 and attempts to resolve the tax liability under the bankruptcy laws. While in bankruptcy, C reports and pays its current gross receipts tax obligations. Regardless of the outcome of the bankruptcy proceedings, G has not willfully caused C to evade tax.

(b) H owns C, a corporation. C encounters considerable cash flow problems. It becomes obvious that C is insolvent. C files three monthly tax returns without payment before going out of business. H has not willfully caused C to evade tax.