What Is a New Mexico
Managed Audit?

• Under New Mexico law (Section 7-1-11.1 NMSA), a managed audit (sometimes called a “self-audit”) is a program that allows qualifying taxpayers to audit themselves under the supervision or agreement with NM Taxation & Revenue (TRD). realfile.tax.newmexico.gov+3Justia Law+3klvg4oyd4j.execute-api.us-west-2.amazonaws.com+3
• It is an alternative to a traditional field or desk audit. The taxpayer and the state agree in advance to the scope, process, and terms. klvg4oyd4j.execute-api.us-west-2.amazonaws.com+2Taxation and Revenue New Mexico+2
• One major benefit: if done properly, the taxpayer may avoid penalties and interest on the additional tax assessed — provided the assessed tax is paid within 180 days from the date of assessment. Taxation and Revenue New Mexico+3Taxation and Revenue New Mexico+3klvg4oyd4j.execute-api.us-west-2.amazonaws.com+3
• If the tax is not paid within 180 days, interest accrues on the outstanding balance from the original due date. Taxation and Revenue New Mexico+3klvg4oyd4j.execute-api.us-west-2.amazonaws.com+3realfile.tax.newmexico.gov+3

• You must apply and be accepted into the managed audit program. It is not automatic. Taxation and Revenue New Mexico+4Taxation and Revenue New Mexico+4klvg4oyd4j.execute-api.us-west-2.amazonaws.com+4
• The audit period, scope, types of taxes (gross receipts, corporate income, withholding, etc.), and methodology must be spelled out in a written agreement between you (or your representative) and the Secretary or their delegate. realfile.tax.newmexico.gov+3Justia Law+3klvg4oyd4j.execute-api.us-west-2.amazonaws.com+3
• The agreement generally includes a waiver of limitations on assessments for those periods. Taxation and Revenue New Mexico+3Justia Law+3klvg4oyd4j.execute-api.us-west-2.amazonaws.com+3
• The state may consider factors such as:
  • Your history of compliance Taxation and Revenue New Mexico+3Justia Law+3klvg4oyd4j.execute-api.us-west-2.amazonaws.com+3
  • Quality and availability of records Justia Law+3klvg4oyd4j.execute-api.us-west-2.amazonaws.com+3realfile.tax.newmexico.gov+3
  • Your ability to dedicate resources to the audit Justia Law+1
• You are generally not eligible if the tax has already been assessed for the period in question, or if the TRD has initiated an audit for those periods already. Law 4 Small Business (L4SB)+2klvg4oyd4j.execute-api.us-west-2.amazonaws.com+2
• You should have filed all required returns (or be willing to file or amend) for the period(s) that the managed audit will cover. Law 4 Small Business (L4SB)+2realfile.tax.newmexico.gov+2

1. Application / Request
   • The taxpayer submits a request for a managed audit via the TRD’s Taxpayer Access Point (TAP) system. Taxation and Revenue New Mexico
   • The TRD reviews the request and decides whether to enter into a managed audit agreement. Justia Law+2klvg4oyd4j.execute-api.us-west-2.amazonaws.com+2
2. Negotiation of the Agreement
   • The written agreement defines what periods and taxes are included, the audit procedures, the documentation required, and deadlines. Justia Law+2klvg4oyd4j.execute-api.us-west-2.amazonaws.com+2
   • It must be signed by both parties (taxpayer or authorized representative, and Secretary or delegate). Justia Law+1
3. Audit Work / Self-Audit
   • Two common modes exist:
     • Option A – the taxpayer prepares the audit work papers with minimal guidance, and the state reviews them. klvg4oyd4j.execute-api.us-west-2.amazonaws.com+2realfile.tax.newmexico.gov+2
     • Option B – the taxpayer works with an assigned auditor to develop an audit plan, supply required records, and proceed collaboratively. realfile.tax.newmexico.gov+1
   • The taxpayer submits the audit findings, documentation, and tax due for the agreed period(s). klvg4oyd4j.execute-api.us-west-2.amazonaws.com+1
4. Assessment and Payment / Conclusion
   • The TRD assesses the additional tax determined by the managed audit. klvg4oyd4j.execute-api.us-west-2.amazonaws.com+1
   • The taxpayer must pay the assessed tax within 180 days to avoid penalties and interest. Taxation and Revenue New Mexico+3Taxation and Revenue New Mexico+3klvg4oyd4j.execute-api.us-west-2.amazonaws.com+3
   • If not paid within 180 days, interest accrues from the original due date on the remaining tax. klvg4oyd4j.execute-api.us-west-2.amazonaws.com+1
   • Upon successful completion, certain issues covered by the agreement may be closed to further audit. (Option B often gives stronger closure) klvg4oyd4j.execute-api.us-west-2.amazonaws.com+2realfile.tax.newmexico.gov+2

• Avoidance of penalties (if timely payment) and interest (for the audit-determined portion) Taxation and Revenue New Mexico+3klvg4oyd4j.execute-api.us-west-2.amazonaws.com+3realfile.tax.newmexico.gov+3
• Greater control by the taxpayer over the audit process (self-audit)
• More predictability and cooperation, less adversarial than surprise audits
• In Option B, finality for the audited items (i.e. closure to further audit for those items) realfile.tax.newmexico.gov+2klvg4oyd4j.execute-api.us-west-2.amazonaws.com+2

• You must waive statute of limitations for the audit periods in the agreement. Justia Law+2klvg4oyd4j.execute-api.us-west-2.amazonaws.com+2
• If you fail to pay within 180 days, interest accrues on the leftover balance retroactively. klvg4oyd4j.execute-api.us-west-2.amazonaws.com+1
• Scope is limited — the state may restrict which periods, transactions, or tax types are included. Justia Law+2klvg4oyd4j.execute-api.us-west-2.amazonaws.com+2
• No guarantee your application will be accepted — the state has discretion. Justia Law+1
• You need accurate, complete records to support your audit; poor records make your disclosures riskier
• The agreement may bind you more tightly than a normal audit in those covered areas

• After assessment, you have 180 days to pay to keep penalty and interest relief. Taxation and Revenue New Mexico+3Taxation and Revenue New Mexico+3klvg4oyd4j.execute-api.us-west-2.amazonaws.com+3
• If you miss that window, interest begins accruing from original due dates. klvg4oyd4j.execute-api.us-west-2.amazonaws.com+1
• Be mindful of statute of limitations: generally, the TRD has 3 years to assess tax after the year in which it was due. Justia Law
  • This can extend to 6 years if underreporting exceeds 25%. Justia Law
  • Also, for failure to file, assessments may go back 7 years. Justia Law

• Evaluate whether you are eligible for a managed audit
• Prepare and submit the managed audit request via TRD’s TAP system
• Help negotiate, review, and finalize the managed audit agreement
• Perform or assist in the self-audit work papers, documentation, and calculations
• Advise on selection between Option A or Option B
• Ensure that payment is made in time and correctly, preserving penalty/interest relief
• Liaise with TRD on any follow-up or clarifications