It’s understandable that for some people filing their end of financial year tax returns is right down the bottom of the to-do list. It’s one of those jobs that feels hard and often results in tax to pay so people put if off, sometimes for years. In reality though, putting off filing your returns makes everything harder and often results in even more to pay.
Keep on top of provisional tax
One example here is provisional tax. The IRD won’t show an amount due for provisional tax unless the prior year’s income tax return has been filed. That doesn’t mean there is no provisional tax to pay, it’s just not visible on MyIR (your personal IRD account) until the last year’s return is filed.
When you finally prepare your income tax return for the year and you haven’t paid any provisional tax, you are going to be stung with late payment penalties and interest right back to the provisional tax due dates (August, January and May for most people).
Tax never sleeps!
In some cases it seems people think that if they don’t file their return then the tax is not due but that is not the case. Although the IRD doesn’t know about the tax yet, they will sooner or later, and the more overdue it is the less lenient the IRD will be.
If you have a tax bill that you are unable to pay you are better to file the return with the IRD and negotiate an instalment arrangement with them. This way you can drip feed the payments at amounts you can afford and the IRD will charge you less in the way of penalties than if you don’t get in touch with them at all.
Early filing = better business
In our experience, clients who file their returns early in the year are always more successful in their business than those who are late. Having the annual reports early helps with decision making for the following financial year and helps with planning your cashflow around your tax payments.
Top tips for on-time filing
Some tips for getting your income tax returns filed on time:
- Use a Chartered Accountant. Filing your returns via a tax agent gives you an extension for filing your income tax return – in most cases until 31 March the following year.
- Use software to record your transactions. We love Xero for this but it can be any cloud-based software that helps you record your business income and expenses.
- Have a separate business bank account that you do not use for personal transactions. This keeps your business records nice and tidy. Be disciplined about this, almost always if a client has not filed returns there is significant overlap between their business and private lives.
- Set a calendar reminder every year for early April to get your information together e.g. bank statements, a summary of mortgage interest/rent and rates paid during the year.
So shuffle your tax return to the top of the list and get it knocked out early in the financial year. You’ll be glad you did!
Get it touch with us if you’d like help getting your tax return done on time.
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