Dear smut,
Because NM and TX do not have recipricol tax agreements, then you will have to file a tax return this year in both states.
You would file a non-resident return in Texas first in order to get any refunds or pay any short falls. This is because Texas has first go at your Texas sourced earnings.
Then you file a return in NM because as a NM resident you must report world wide earnings. However, do not panic...you will be given credit for taxes paid to TX, and would only end up paying any additional taxes that are derived from differences in how NM and TX figure taxable income, or differences in the tax rates.
Thanks for getting back to me. I had forgotton about that, yes you are right. There was an attempt to institute income tax there, but that failed, and in fact the Texas constitution forbids the passage of any income tax law. I apologize for that oversight.
I can not give you the logic behind the law. BUT, in all of the states that have an income tax law. I say again...ALL states that have an income tax law, require its residents (citizens) to report and pay taxes on world wide income; regardless of where it was earned. (this is refered to as a tax model) The exception is between states that have reciprical tax agreements, that allow its residents to choose to only pay tax in the state in which it is earned. Since Texas does not have an income tax, they would not have a recipricol agreement.
State Recipricol agreements (site information verified): http://www.payroll-taxes.com/articles/reciprocals.html
New Mexico Code requires Residents to report income from ALL Sources. (world wide income).
New Mexico Code Specifically states that emplyment on federal reservations and property or (federal sources) are not exempt.
the exception is certain treatment of active duty Military persons, who by federal law, may only be taxed in the state of thier home of record.
http://law.findlaw.com/state-laws/state-codes.html
http://www.conwaygreene.com/nmsu/lpext.dll?f=templates&fn=main-h.htm&2.0
Reference: http://www.tax.state.nm.us/forms/year07/2007pit1instrfinal.pdf
Tax Preparer
GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee