Just
two things which seem beyond me today:
First,
the below is a reply to a simple query on why a client, with extension of time,
was showing as having terminal tax not payable until 7 April coming, as ‘owing
immediately’ on their assessment with penalties for ‘late payment’. You’ll just
have to take my word that the below answer through online correspondence doesn’t
actually answer the question at all, indeed, missed it entirely – you’ll have
to take my word for it, because you figure it out otherwise.
Thank you for your email regarding terminal tax.
The reason the penalties have been charged is that the provisional assessment is usually based on the residual income tax (RIT)for 2011 but as the 2011 return was not filed before the first provisional tax instalment was due it is based on the 2010 year. The provisional assessment for 2012 was $5025.00. Then as the RIT was under the $2500 for 2010 they are not liable for the first two prov tax instalments for 2012, therefore when the 2012 Income tax return is filed the RIT is lower than than the provisional tax assessment therefore the provisional tax assessment is the same as the RIT for 2012. The only provisional tax instalment was due on the 28 June 2012 $3591.64. Your client had only paid $2562 therefore was short by $1029.64 and this is the reason penalties have been charged.
My
second is an on-going horror with a company client who due to a mix up between
paying provisional tax on the ratio option and the traditional safe harbour
uplift option ended up overpaying their 2011 provisional tax by $80,000. One
would think as the company at all relevant times has had enough imputation
credits in its account – there must be enough credits to match all refunds - it
would be a simple matter of getting the overpayment refunded.
Don’t
be silly.
After
filing the company’s 2011 income tax return we assumed the overpayment would be
refunded as, then, a terminal tax refund. It was not.
I
rang IRD to ask them to release the credit showing in the 2011 year, but it was
unfortunately by this time into the 2012 year, so they said I had to file an
interim Imputation Return, which I did. I then asked – stupid me, I should have
kept checking up on it – the client to advise me if the amount wasn’t refunded
by the end of that relevant month. They didn’t check in with me, but it was
not. We were then into the 2013 tax year, so when they brought me their records
we decided to get their 2012 year tax return filed, with its imputation
schedule as that should then release the $80,000 credit in the 2011 year. I
filed that return two weeks ago, we’ve just got the assessment back, all
figures correct, however the overpayment is still being held to credit of 2011
year, not refunded. I’ve just rung IRD to ask could they please now release the
$80,000 to be told although I had filed the company 2012’s income tax return,
it could take up to ten weeks to process the included imputation return –
PARDON, this is all on electronic efile – which may well take us beyond the end
of March and into the 2014 year, at which time I’ll have to file an interim
imputation schedule.
Mr
Dunne. … Mr Dunne, Mr Dunne, Mr Dunne, what have you done?
I think I must have been lucky with IRD. I always had good journal ledgers. I found it useful to engage it simple banter with IRD man, and enquire about his family, and general things not tax. It worked , .. I had three investigations and I gave them all my files. But I put in markers within those files, and interesting little snippets you might say. When the files were returned it seemed to me they had not read them, I was small fry. For some reason they just made a casual decision. It is important to get out of your first investigation well. Once you get the file named 'harmless, minor" you are free.
ReplyDeleteFirst, thanks for reading and commenting Paul.
DeleteGreat you've had a good run :) As you can read on my disclaimer at the bottom of the blog, I've always had a good run with IRD personnel, it's the philosophy behind taxation I disagree with, then the powers of IRD that are those of a police state, not a civilised, free, society, and IRD on a policy level where they are rolling back certainty, and via retrospective legislation, the rule of law, via a philosophy bereft judiciary.
from above comment. I had much more trouble with my accountant, than IRD. My accountant he had an interesting computer, which required him to send out accounts every month, and all he had to do was type in some words ,
ReplyDelete"perusal of 2007 accounts"
Well this was interesting because he did not have those accounts.
I eventually did all the work myself. the Trust account, the Business Account, the personal account.
The little dog Accountant filed a bankruptcy charge because I had not paid him for work not done.
I lost of course .
I have never engaged and accountant or Lawyer since , and I have never had difficulty with IRD or authority since ..
Hah!
DeleteSo long as you understand the taxation laws, and accounting conventions that are involved with your business (accruals accounting, etc), then that's great. Just make sure you get advice on activies or transactions you're uncertain of - because mistakes with IRD are expensive. By this I mean, anything to do with property transactions, unusual timing or deferrals, and anything, I mean anything, regarding the international tax regime if you have investments overseas, and so forth.
Keep reading.