The state of New Mexico requires that you file a state return if you received income in the state and you are obligated to file a federal income tax return. But even if you are not legally obligated to submit a New Mexico return, it may be to your benefit to do so, since you may qualify to receive state credits or a refund.c  

Most kinds of earned income are subject to tax in New Mexico, including wages and salaries from employment as well as net self-employment earnings. Unearned income that is subject to federal taxation will also be taxed in New Mexico, such as unemployment compensation, bank interest, and rental property income.c 

The first step in preparing New Mexico taxes is to gather all of your significant tax information. This will save you time when you begin preparing the return. You will need the following:

1. Your Social Security number
2. Your current mailing address
3. Your spouse's full name and Social Security number, if you are filing a joint tax return
4. The names, Social Security numbers, and dates of birth for any dependents you are claiming
5. The total amount of your earned income––This includes the wages and salaries reported to you on Form W-2 or Form 1099. If you are self-employed, you will need to add the total of your gross earnings and subtract your eligible business expenses.
6. The total amount of your unearned income that is subject to New Mexico taxation, such as unemployment compensation, retirement distributions, bank interest, etc.
7. The total of your state income tax payments during the year––For employees, these are generally made through wage withholdings. On Form W-2 these appear as state taxes withheld. For self-employed individuals, this will be the total of any estimated tax payments made.
8. A copy of your federal income tax return, if you are required to file one
   

If you are filing a federal tax return, be sure to complete it before you begin working on your New Mexico state return. You will need your federal adjusted gross income, itemized deductions, and dependent exemptions as reported on your IRS Form 1040 to complete your state form. If you are not filing a federal return, you may want to speak with a tax professional who can help you to calculate these figures.c  

Once you have all of the relevant information you need, your next step is to get a copy of the state return and begin preparing it. In New Mexico the tax form is entitled Form PIT-1 "New Mexico Personal Income Tax." If you have Internet access, you can download this form and the instruction booklet from the New Mexico Taxation and Revenue Department website. If you do not have Internet access, you can generally obtain a paper copy of the form and instructions from your local library during tax season.c 

If you prefer to file your return electronically, you can do so for free using the Taxation and Revenue website. New Mexico residents are encouraged to e-file their returns if possible, since e-filing speeds up processing time. If you are due a refund, you will be able to receive it several weeks faster if you file electronically. To prepare your return using the state website, simply follow the screen prompts.c  

If you are using tax preparation software to prepare your federal return, you will generally be given the option to include your state return for an additional fee. This option is usually the most convenient, since the necessary information for your state form is directly imported from your federal return.c

To file your return by mail, you can download a web fill-in version of the state form to complete on your computer. You can also print out the form and complete it by hand. If you decide to do so, be sure to write clearly and use black ink to avoid processing delays.c  

Begin the return by entering your full name and Social Security number as well as your spouse's, if applicable. Complete the address section and enter the number of dependent exemptions you will be claiming. Go on to enter the names, Social Security numbers, and dates of birth for each dependent you are claiming.c  

Now is a good time to stop and read the tax form instructions carefully. The booklet explains any state credits you may be eligible to claim, as well as the details you will need to know to complete each line of the form correctly. Take out your federal Form 1040 and carry the amount of your federal adjusted gross income over to line 7 of your state return.c 

Make any income adjustments necessary and then subtract your qualified deductions and exemptions. This will give you the amount of your New Mexico taxable income on line 14. Then, consult the tax tables located in the instruction booklet to find the correct amount of state tax liability for your taxable income bracket. Enter this total as your tax on line 15.c 

After that, make any adjustments to tax as needed to figure the total amount of tax you are liable for on line 19. Then deduct the state income taxes you have already paid, through withholding or estimated tax payments. What is left over will be either an amount that overpaid, resulting in a refund, or an amount that you underpaid, resulting in a balance due.c  

If you are owed a refund, choose if you would like to receive your payment via check or direct deposit. Then sign and date the return, and have your spouse do the same. Make a copy of the completed form for your records. Then write out a check or money order for the amount you owe and enclose it with the return to the address stated on the form. Be sure to do so before April 18, 2011.c 

Should you need additional time to complete your return, you can file a state tax extension in New Mexico.