From time to time everyone goes through rough patches in life, business and people alike. I truly believe that the majority of people do their best to pay their bills and stay on the right side of the Inland Revenue Department.
Yet sometimes circumstances may make staying on top of your return filing and tax payments challenging. So, what do you do if you find yourself behind in meeting your tax filing obligations or tax payments.
First off, the worst thing that you can do is to put your head in the sand and hope that it will all just disappear.
The IRD take non filing of returns seriously and will charge late filing penalties and also charge penalties and use of money interest on any outstanding payments. These penalties and interest charges continue to be charged by the IRD until full payment is made, and all outstanding returns are filed. If left unattended to, a small amount tax debt after the addition of interest and penalties can quickly get out of hand and compound into a rather large amount of money. In addition, the IRD will take action to recover any outstanding amounts which in extreme cases can lead to legal action and eventual bankruptcy.
Even if you cannot make the payment required, make sure that you still file your returns when they are due. If you are not able to file on time, contact the IRD and let them know why and when they can expect the return to be filed.
As long as all your returns are filed, if you are experiencing financial difficulty, the IRD have many payment options available that can be utilised at their discretion to assist a tax payer in sorting out their tax arrears.
These options include instalment arrangements so that the tax arrears can be paid off over time, debt write offs if the IRD believe that full payment would cause serious hardship, remission of penalties and interest in certain circumstances, or a combination of all three.
The criteria that the IRD considers before an instalment arrangement is approved are:
- If you can afford to make the payment in full by borrowing the money
- Your current financial circumstances
- If enforcing payment would cause serious hardship
- Is the instalment plan proposed realistic
- Your ability to meet future tax obligations while also making the agreed payments under the instalment plan
- That all outstanding returns have been filed
- Your past involvement with IRD in regard to communications, return filing and payment history
If contacting the IRD to sort out your arrears just seems to difficult to manage yourself, contact us, or your Chartered Accountant to help you work through the process.
… the worst thing that you can do is to put your head in the sand and hope that it will all just disappear.