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Anne
Anne, Master Tax Preparer
Category: Tax
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Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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The state of New Mexico has notified me that I owe State income

Customer Question

The state of New Mexico has notified me that I owe State income tax ( 2006 ) for income earned in New Mexico. I was a Texas resident at the time traveling into New Mexico to work and then returned to Texas. I have formally disputed the issue with New Mexico. My question is this: Does New Mexico have the authority, or does Texas allow New Mexico the authority to collect on a tax lien, if it gets to that point. I have no property in New Mexico, and am now unemployed due to military service connected injuries. 100% service connected by the VA, also collecting social securtity disability.
Submitted: 4 years ago.
Category: Tax
Expert:  Anne replied 4 years ago.
HiCustomerbr />
Thank you for using justanswer. First, New Mexico law requires that they get a judgment against you before they can garnish.

Secondly, Section 207 of the Social Security Act (42 U.S.C. 407) protects Social Security benefits from assignment, levy, or garnishment except for the following 5 reasons:

· Section 459 of the Act (42 U.S.C. 659) allows Social Security benefits to be garnished to enforce child support and/or alimony obligations;

· Section 6334 (c) of the Internal Revenue Code (26 U.S.C. 6334 (c)) allows benefits to be levied to collect unpaid Federal taxes;

· Section 3402 (P) of the Internal Revenue Code allows beneficiaries to elect to have a percentage of their benefits withheld and paid to the Internal Revenue Service to satisfy their Federal income tax liability for the current year;

· The Debt Collection Act of 1996 (Public Law 104-134) allows benefits to be withheld and paid to another Federal agency to pay a non-tax debt the beneficiary owes to that agency: and

· The Tax Payer Relief Act of 1997 (Public Law 105-34) authorizes the Internal Revenue Service to collect overdue federal tax debts of beneficiaries by levying up to 15 percent of each monthly payment until the debt is paid.

Please see below:


However, the burden of proof that the money in your checking account is not subject to garnishment is on the receiver. It is recommended that you keep your disability money separate from any other accounts you have, so as to be able to clearly define which money is exempt from garnishment.

If New Mexico wants to come after your VA disability, again, they need a judgment, and it is very difficult to garnish that on a state level, but again, with a judgment, it is possible.

Your best bet may be to talk to the taxing authorities in New Mexico and see if they will accept a portion of the tax due under an offer in compromise due to your situation. If accepted, this would stop any further legal action to collect. Here is an email site for them if you want to pursue this angle.

E-Mail Us

I hope this helps.
Customer: replied 4 years ago.
Thanks, XXXXX XXXXX However,does the fact that I live in Texas offer any protection from a lien out of New Mexico. I read a 2nd. Circuit Court of Appeals case that prohibited one state from collecting a lien on a person residing in another state. Of course Texas is 5th and New Mexico is 10th circuit, so that does not apply to my situation. I also never got an E-mailnotification that you accepted my question.
Expert:  Anne replied 4 years ago.
It can make it more difficult to collect across state lines, but if you legitimately owe the tax to New Mexico for monies earned in their state as a non resident, the IRS can now step in under their "offset" program and "offset" any federal refund you may be eligible for the amount owed to a state. I realize that under normal circumstances you will not be required to file a Federal tax return since none of the income you mentioned is taxable by the government, but remember the $300 stimulus program that we just had in 2008. The only way to get the stimulus money, if you qualified, was to file the Federal tax return. Please see below:

Tax Topics - Topic 203 Failure to Pay Child Support, Federal Non–Tax Debts, State Income ...

Its important I think that you realize that while being in another state can make things more difficult for them to collect, New Mexico still has options, and it would be a mistake to become complacent and let this ride and hang over your head. When I first started as a tax preparer 24 years ago, not only were Social Security benefits protected, meaning they could not be garnished for ANY reason, they were not taxable. Over the years, this has changed dramatically, and up to 85% of your Social Security benefits can now be taxable, when paired with other taxable income (VA disability doesn't count as taxable income you need to worry about pairing with Social Security) The message here is that while its difficult to collect, its not impossible, and Social Security and VA funds are issued by the government, and the government imposes taxes, whether at the Federal or State level.

I gave you the best information at this time,and I have no idea how much you owe, or if you ever plan on owning any property, such as a home or even a car that could be levied against. so again, I still believe your best bet is to reach some kind of settlement with New Mexico, but as it stands today, there must be a judgment entered and approved for New Mexico to try to garnish any of your income for back taxes, and while your Social Security and VA disability is at this moment fully protected against garnishment, the banks don't always know the nature of the income in your account or even whether or not the money in your account can be levied, however, they really have no choice but to act should a lien reach that far, and then its up to you to contact the debtor and fight to reclaim your money. You will have to be vigilant in watching and protecting your funds.

I hope this helps.
Customer: replied 4 years ago.
Are you aware that Texas does not allow garnishment of wages in order to collect on a debt, except unpaid child support. Texas is very protective of personal property in these cases. I'm not completely up to date on the law, but it seems to me that if wages are protected within the state, Texas would never allow another state to attempt to levy a bank account held by a Texas resident. I understand judgements and jurisdictions, which brings up the question, as I have asked previously, is a judgement in New Mexico valid and enforceable in Texas. If you say it is, then please refer me to the statute which states so.
Expert:  Anne replied 4 years ago.
Yes, I'm aware of that, but the point I was making is that Social Security and VA are both paid by the government, and the government has drastically changed their stance on social security benefits no longer being taxable, so it isn't out of the question that in the future, the Federal government may also force a state's hand re: garnishment, etc.

I also told you that under current legislation your funds were protected from garnishment, and gave you the section and code that protects your current income.

I wasn't trying to upset you, only pointing out that laws can and do change.

I hope this helps.

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