Ask your accounting and tax questions here

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  1. Post
    #1

    Ask your accounting and tax questions here

    Any questions you have ask away and I will do my best to answer them.

    I am a Chartered Accountant but please do not consider any of this professional advice. I am working with exactly as much information as you give me and also "the guy on the internet who claimed to be an accountant said so" is not a good defense for anything really

    I also reserve the right to maybe put your questions on my website (when I get around to setting it up properly) .

  2. Post
    #2
    Neither is it a defense even if you have the accountant doing your books professionally.
    As a friend of mine found out.

    Accountants can and do screw up and you are the one stuck with the tax penalties.

  3. Post
    #3
    pctek wrote:
    Neither is it a defense even if you have the accountant doing your books professionally.
    As a friend of mine found out.

    Accountants can and do screw up and you are the one stuck with the tax penalties.
    As long as you're not a complete twat I find it hard to believe that the IRD wouldn't wave any penalties and only demand what was owed in such a case...

  4. Post
    #4
    where are you based brand if you dont mind me asking?

  5. Post
    #5
    I have for several years developed and sold Android applications, they're not my main source of income (I also work full-time as PAYE-subjected employee), but it's not a whole lot of work for an extra $20-30K a year (it fluctuates). I am supremely lazy and have never declared this income to IRD. At some point I received a letter from IRD asking me to fill in a tax return form, which I'm guessing was their subtle way of telling me they think something is up? In any case things came up and I never filled it in, eventually they sent me a letter telling me that I owe them a $50 late filing fee and that they may file a default assessment against me.

    My question is how long do you think it'll be before IRD file the default assessment and how bad are these things generally (i.e. are they laden with penalties or is it likely to be a fair assessment)?

  6. Post
    #6
    eug1404 wrote:
    I have for several years developed and sold Android applications, they're not my main source of income (I also work full-time as PAYE-subjected employee), but it's not a whole lot of work for an extra $20-30K a year (it fluctuates). I am supremely lazy and have never declared this income to IRD. At some point I received a letter from IRD asking me to fill in a tax return form, which I'm guessing was their subtle way of telling me they think something is up? In any case things came up and I never filled it in, eventually they sent me a letter telling me that I owe them a $50 late filing fee and that they may file a default assessment against me.

    My question is how long do you think it'll be before IRD file the default assessment and how bad are these things generally (i.e. are they laden with penalties or is it likely to be a fair assessment)?

    http://www.ird.govt.nz/yoursituation...airsright.html
    http://www.ird.govt.nz/how-to/debt/p...alty-what.html

  7. Post
    #7
    Looks like it's voluntary tax disclosure time!

  8. Post
    #8
    pctek wrote:
    Neither is it a defense even if you have the accountant doing your books professionally.
    As a friend of mine found out.

    Accountants can and do screw up and you are the one stuck with the tax penalties.

    Accountants are only human, mistakes will happen. I like to think the majority of accountants would try to fix their mistakes without causing loss to the client.

    Unfortunately like any industry there are good accountants, bad accountants and cowboys.


    Most of the time you can't tell what you've got, the best I can do is offer a few tips:

    Being a Chartered Accountant or CPA is good, it means they have at least achieved a standard set down by those organizations. That isn't a guarantee though -I would be wary of anyone named here for example http://www.nzica.com/dt.aspx

    Ask about qualifications, history and experience (and that of the staff) you should know about the people providing the services to you.

    If you don't understand something then ask -what use is an accountant who can't explain to you why they did something?

  9. Post
    #9
    massive wrote:
    As long as you're not a complete twat I find it hard to believe that the IRD wouldn't wave any penalties and only demand what was owed in such a case...
    You don't know IRD very well -they don't care it wasn't your fault. As far as they are concerned you are responsible for the tax return filed in your name.

  10. Post
    #10
    Corruptfacta wrote:
    where are you based brand if you dont mind me asking?
    Newmarket, Auckland

  11. Post
    #11
    There's suppose to be a small tax discount for paying income tax before the end of your first year in business (before you become liable for provisional tax). Is it worth the hassle? Last I heard it was like 5% or something.

  12. Post
    #12
    eug1404 wrote:
    I have for several years developed and sold Android applications, they're not my main source of income (I also work full-time as PAYE-subjected employee), but it's not a whole lot of work for an extra $20-30K a year (it fluctuates). I am supremely lazy and have never declared this income to IRD. At some point I received a letter from IRD asking me to fill in a tax return form, which I'm guessing was their subtle way of telling me they think something is up? In any case things came up and I never filled it in, eventually they sent me a letter telling me that I owe them a $50 late filing fee and that they may file a default assessment against me.

    My question is how long do you think it'll be before IRD file the default assessment and how bad are these things generally (i.e. are they laden with penalties or is it likely to be a fair assessment)?
    The default assessment isn't what you think it is... IRD might file a default assessment for the amount they think/estimate you might owe BUT it isn't over if you just pay their default assessment THEY STILL EXPECT YOU TO FILE A PROPER TAX RETURN!!

    In the end interest and penalties will be recalculated based on the actual figures you file NOT IRD's default assessment (its just a placeholder).

    You could potentially be be in more trouble than though -you have basically evaded tax by not declaring your income and that puts you in line for some major fines.

    Basically the longer you stay on IRD's radar with outstanding returns the more serious this gets...


    Depending on how many years and the amount I would probably consider making a voluntary disclosure to IRD that you had income in years X, Y, Z that you haven't included in your tax return. That will at least get you out of any tax evasion penalties.

    Tell them that you/your accountant will have the returns filed within X days. That will halt any pending collection or court action.

    Ask to enter into an arrangement to pay the outstanding tax e.g. at $100/month or whatever you can manage. That will stop any further penalties being charged (interest will still run at around 8% p.a.).

    This is very important for anyone struggling with outstanding tax and penalties ring up IRD (or tell your accountant) as soon as possible and ask for an arrangement the earlier you do it the earlier the penalties stop -you could literally save yourself thousands of dollars.

  13. Post
    #13
    Hamburglar wrote:
    There's suppose to be a small tax discount for paying income tax before the end of your first year in business (before you become liable for provisional tax). Is it worth the hassle? Last I heard it was like 5% or something.
    I think its 6.7% and it only applies for individuals (not companies) -in the 9+ years I've been doing this I have never used it once.

    Why? Well if you want to take advantage of the discount you can choose to voluntarily pay IRD $XXX in tax before 31 March 2013 OR you can pay the full amount when it is actually due which is 7 April 2014 (if you have a tax agent). That's a whole year and a bit that you could hold onto your money for.

    Also bear in mind that you don't actually know how much your tax actually is before 31 March so you could be over paying IRD quite alot.

    That and the fact most people don't realise they are provisional tax payers until we tell them after we do the tax returns (which is well after 31 March) anyway and the whole thing is a non-starter.


    If you know exactly how much tax you have to pay for the year before the year has even finished then 6.7% is a good deal but if you knew that then you probably know what the winning Lotto numbers are and money isn't an issue

  14. Post
    #14
    brand wrote:
    You don't know IRD very well -they don't care it wasn't your fault. As far as they are concerned you are responsible for the tax return filed in your name.
    I was just going off the number of agreements my father had come to with the IRD with regards to his clients over the 30+ years of being a practicing CPA to wipe out penalties and organise payment plans to them so that they would eventually get the money they were after.

    Mind you the clients he would put in the extra hours for to help out like that were usually pretty boned financially, the IRD was probably just glad to hear there was an accountant involved.

  15. Post
    #15
    massive wrote:
    I was just going off the number of agreements my father had come to with the IRD with regards to his clients over the 30+ years of being a practicing CPA to wipe out penalties and organise payment plans to them so that they would eventually get the money they were after.

    Mind you the clients he would put in the extra hours for to help out like that were usually pretty boned financially, the IRD was probably just glad to hear there was an accountant involved.
    The above was about an accountant stuffing up and the client getting stuck with the penalties. Unless it is a clear case of fraud IRD aren't usually sympathetic. Take the accountant to court to recover the penalties if you want but you still owe IRD what you owe.

  16. Post
    #16
    Do I have to pay tax on poker winnings? It's a hobby.

  17. Post
    #17
    what part of accounting do u specialise in brand? tax? bas?

  18. Post
    #18
    Possible dumb question.

    1. I receive a rental income from a property that I own(that still has a mortgage), its managed. I pay gst on the management fees, does this rental income get added to my PAYE income?

    2. My personal circumstances are probably going to change soon. Does this rental income count when it comes to calculating student allowance? If I put it in a trust etc can I avoid this?

    Apologies if these questions are out of your expertise.

  19. Post
    #19
    The Muel wrote:
    Do I have to pay tax on poker winnings? It's a hobby.
    No you shouldn't have to -not unless you are a "professional gambler" in which case you pay tax on your winnings but can also deduct your losses and no you can't suddenly claim you're a professional gambler after taking a bad bath

  20. Post
    #20
    Afgan Monster wrote:
    Possible dumb question.

    1. I receive a rental income from a property that I own(that still has a mortgage), its managed. I pay gst on the management fees, does this rental income get added to my PAYE income?

    2. My personal circumstances are probably going to change soon. Does this rental income count when it comes to calculating student allowance? If I put it in a trust etc can I avoid this?

    Apologies if these questions are out of your expertise.

    1. It depends on what you mean by "added to your PAYE income" if you mean does IRD already know about it and take PAYE tax out along with the other income then NO. If you mean does it get counted as part of your overall income then YES.

    You do realise that you have to file a tax return including this rental income (and claiming expenses like interest on the mortgage) right? This is especially true if the property is managed by a professional property manager (Barfoots, Ray White etc.) it is very easy for IRD to request landlord details from those companies and chase up anyone not filing tax returns.


    2. Yes, rental income counts. You are shit out of luck. The tightening up of Working for Families and Student Loans means that Trust income (and just about everything else including Christmas money from your Granny) counts as income when applying for Student Loans etc.

  21. Post
    #21
    Shinken wrote:
    what part of accounting do u specialise in brand? tax? bas?
    We're just Chartered Accountants in Public Practice so a bit of Tax, a bit of BAS, a bit of everything else... I always think of us like GPs in medicine -we know enough to treat most things but may sometimes refer you to a specialist or rush you to the emergency room

  22. Post
    #22
    brand wrote:
    including Christmas money from your Granny) counts as income when applying for Student Loans
    Family scheme income - only if that's used to meet day to day living expenses.

    brand - any tips for PAS? are you at HWI?

  23. Post
    #23
    Can you tell us more about your journey to becoming a CA? How did you find the NZICA courses and what your background is (internships you completed? etc etc). Just wanting to know more about CA and see how others got there.

  24. Post
    #24
    I also want to know which of the two is the easier between the new and the old CA programme, apparently for people starting this year they can opt to take either.

  25. Post
    #25
    Shinken wrote:
    I also want to know which of the two is the easier between the new and the old CA programme, apparently for people starting this year they can opt to take either.
    The new because you can complete the requirements 1 year quicker