You are not giving us much info to go on, not even the OS you are using, so that you will have to bear with me if I am being a bit slow.
Mutt and S/MIME do not work together natively, so that you will have to do some work to get this going.
Second, which version of Mutt are you using? There is no support for S/MIME before 1.5. If you are using 1.4 or earlier, all I can say is to update your configuration.
Third, which OS are you on? I run Mutt and S/MIME on OpenBSD, and have used this guide in the past, and it worked perfectly. If you are on Linux, I know (but I have no direct experience with it myself) that many people have found this other guide very helpful.
Lastly, you should also be aware of the rather annoying fact that PGP/MIME messages, as produced by Mutt, are not supported by many other MUAs (Mail User Agents), so that you may have troubles reading messages by people using, for instance, Outlook or Outlook Express. You find this clearly stated in this excellent Web page.
Like I said, this is just a first crack at your problem, you may perhaps check the references I gave you and see whether you have already done all of the configuring they suggest, or none at all.