Check out these tips to simplify your life when it comes to tax time – and learn what to do if you make tax mistakes on your tax return.
When it comes to all taxes and levies, make sure you’re aware of how much you owe and when the payment is due. It’s a good idea to put money aside regularly into a separate account, as the interest earned could be sufficient to cover costs like tax agent fees or your ACC levies.
It’s crucial to make your payments in full and on time. If you’re having trouble, it’s advisable to contact Inland Revenue as soon as possible at 0800 377 772 – or get in touch with ACC if you’re struggling to pay your ACC levies.
Explain your situation and investigate the potential support options that may be available to you. If you choose to ignore the issue and don’t make your payments, you’ll be charged interest and could incur a penalty.
0800 377 772 — Inland Revenue
What to do if you underpay
“Lots of people underpay their tax by mistake,” says tax expert John Shewan, formerly of PwC. “The key question they often ask people like me is ‘What do I do? Do I put it under the carpet and just hope it goes away?’ Clearly no.”
It’s best to own up quickly, says Mr Shewan. “Inland Revenue is very approachable about these things. They encourage voluntary disclosures and, in fact, the tax legislation contains quite big concessions if people voluntarily disclose. Generally, if you offer up the tax that you have mistakenly not paid, the only penalty might be some use-of-money interest that Inland Revenue will charge you and that’s legitimate under the law.”
See Interest on tax — Inland Revenue
Mr. Shewan remembers providing assistance to a business owner who had underpaid $20,000 in taxes by claiming depreciation deductions on multiple business assets using outdated information. “They were very worried about the penalty implications, even thinking about leaving New Zealand. We rang Inland Revenue and said we would like to come and have a talk with them.”
Depreciation: How to spread the cost of your assets
The Inland Revenue waived the penalties and facilitated a payment plan for the business owner to pay the $20,000 shortfall in instalments.
“That taxpayer, having learnt the lesson, put in place new procedures and actually had a much more robust business going forward,” says Mr Shewan.
If you make a minor error on your individual tax return (IR3), there’s no need to panic, and you don’t have to submit a corrected return. You could correct the error in your next return, or get in touch with Inland Revenue to discuss your circumstances.
Fixing mistakes in my return — Inland Revenue
If you are self-employed or operate a business and have designated work areas in your home, you may be eligible to claim some of your expenses. These expenses could include portions of your power, phone, and internet bills, as well as your rates.
During your first year of trading, you won’t have to pay taxes until after you’ve submitted a tax return at the end of the tax year (31st March). Make sure to plan for your tax bill to avoid being caught off guard by the payment.
Provisional tax is a form of tax that is paid in several instalments throughout the year. Inland Revenue will notify you if this method of payment is necessary, which often applies to businesses in their second year of trading.
If you’re required to pay provisional tax, ensure that you set aside enough money since you’ll be paying the provisional tax instalments for the current year as well as the previous year’s tax.
For self-employed contractors who typically pay provisional tax, new tax laws provide an opportunity to reduce these payments:
- From 1 April 2017, contractors hired and paid through a recruitment agency or other labour-hire business must have tax deducted from their pay.
- Other contractors can choose to have tax deducted from their pay if their payer agrees.
- If tax is deducted from their pay, contractors can select the rate at which tax is deducted.
Work out and declare my tax rate for schedular payments — Inland Revenue
If you use an online auction site such as Trade Me to sell new or used items or to promote your services, you may be considered a business and required to pay tax on the money you earn.
If in doubt, contact Inland Revenue
If your e-commerce business trades internationally and you’re paying income tax in both New Zealand and another country, verify with Inland Revenue whether New Zealand has a double tax agreement with that country. If it does, you may qualify for a tax credit.
Tax treaties — Inland Revenue
If you believe that your tax assessment is inaccurate, contact Inland Revenue or ask your accountant to do it on your behalf.
You might not need to register for GST immediately unless you anticipate earning over $60,000 in your first year of operating.
Find out if you need to register — Inland Revenue
If you are GST registered, remember to charge GST even if your revenue is low. It’s crucial to continue collecting and paying GST until you deregister with Inland Revenue.
Instead of simply sending a new return, you can handle minor errors differently. For errors under $1,000, you might be able to correct them in your next return. However, for errors over $1,000, you should request a return amendment through your myIR account.
How to correct a GST error — Inland Revenue
Amend the employment information return in myIR.
How to amend a mistake — Inland Revenue
If you do not have access to myIR, you can fill out the ‘Employment information amendments – IR344’ form and send it to Inland Revenue.
Employer monthly schedule amendments (IR344) — Inland Revenue
0800 377 772 — Inland Revenue
You are still required to pay ACC levies even if you are self-employed. The amount you owe is determined by various factors such as your liable earnings.
Are you struggling with accounting and business management for your business? We are here to help! Get in touch with us to discuss how our expert services can support your business’s success. Contact us today to schedule a free consultation and see how we can add value to your operations.
