NZ Accounting

NZ Accounting: Self-Employed Overtaxed

http://www.voxy.co.nz/business/nz-accounting-self-employed-overtaxed/5/32286

Friday 4 December 2009

Less than 40% of people paying self employed schedular tax are claiming expenses which means since 2005 this group has been overtaxed at least $230 million.

Information from the Inland Revenue Department (IRD) shows that for the year to March 2008 94,576 taxpayers were making schedular payments and only 37, 171 people claimed expenses against their income, leaving 61% who claimed no expenses. The figures from 2005 to 2007 are similar.

NZ Accounting director Michael Fresnel took these figures and estimated how much people were being overtaxed.

“Working off my client’s records that are at a similar level of turnover to the IRD average of $21,226, I estimated that those people could be paying an average $975 per person more in tax than they should be a year,” Mr Fresnel said.

He estimates that this equates to overtaxing of at least $233 million since 2005, given 239,310 people did not claim expenses.

The figure could be a lot higher given that rates for tax on scheduler payments can go as high as 48% if no tax code declaration form has been filled out.

With a tax code declaration the rate ranges from 15% to 33%.

Fresnel says this overtaxing is really unfortunate for the group of people who pay schedular tax as they are often working harder than most for less than minimum wage at times.

A wide range of people pay schedular tax including freelancers, entertainers, models, gardeners, cleaners, salespeople, telemarketers and agricultural workers.

“Sure these are not all glamorous industries but as individuals these people are contributing taxpayers and a part of the national economy, like anyone else.”

Fresnel says the group of people making schedular payments needs to be better informed so they know the full picture, even if it’s a simple measure like a brochure or booklet sent out.

“In my opinion the IRD are not doing anywhere near enough to inform this large group of almost 100,000 people.”

The IRD says information for people regarding schedular payments, their entitlements and obligations is readily available on its website and through a variety of channels, including tax agents, articles in publications and through peak season advertising.

Fresnel however says he tried to search the IRD website using schedular payments as a search term and found it hard to come upon anything useful as a taxpayer.

“The only info readily available is for the benefit of the employer who deducts schedular payments.”

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Do Your Own Tax Refund

http://www.netprophet.co.nz/news/tax/do-your-own-tax-refund.html

Jenha White,  Thursday, 05 November 2009 15:35

A business accountant says people are misled by tax refund websites which charge percentage fees for a service which people can do just as easily themselves.

NZ Accounting proprietor Michael Fresnel says people who want a tax refund can go directly to the Inland Revenue Department (IRD) website to fill out a form and get their tax refund.

However a lot of people are going to the well advertised tax refund websites which get people to give them their details which they pass onto the IRD – something people can directly do themselves.

“The sites make money by charging a percentage fee, so if you get a $900 refund, you might be paying $200 to the tax refund site when you could have done it for free in five minutes by yourself,” he says.

Many people use tax refund websites because of the commonly held belief that if you approach the IRD you may also have to pay tax that you owe.

However the IRD has an electronic calculator online where people can work out whether they’re due a tax refund for a certain year, or whether they owe the IRD money, and it is the individual’s choice whether they let the IRD know either way.

“Individuals can go online, make the calculation and walk away if they want to. We do not have a system whereby we’re tracking the individual and their activity on the website,” the IRD says.

It also strongly advises that people using tax refund companies read the small print before they hand over any personal details to a company.

For example www.taxrefunds.co.nz and www.mytax.co.nz charge 12.5% of the tax refund to a maximum of $500 and myrefund.co.nz charges on a sliding fee scale with a maximum of $500.

The success of these tax refund companies is displayed on their websites.

mytax.co.nz says “our average tax refund is around $478 dollars, but often people receive thousands. Around 76% of our applicants receive tax refunds”.

myrefund.co.nz even says that the IRD suggests you speak to an accountant or tax agent such as themselves.

Chief executive of taxrefund.co.nz Adair Craik says the main difference between its website and the IRD is that it provides a free estimate of the tax refund.

“One of the incentives for people is that we’re not the IRD. Some people are apprehensive about dealing with the IRD and we help with that stress.”

Craik says taxrefund.co.nz has 430,000 people on its database and the average refund is $250 which they get $25 from.

She says many people are not sure about what they should include in their application, what expenses they should claim and whether certain income should be included.

However the IRD annual report says it has made it easier for customers to self-manage their tax affairs.

“We have stepped up the promotion of online services while developing new services for families, individuals, businesses and intermediaries that make it easier for them to access and manage their tax affairs online.”

The IRD says people just need to go to its website, www.ird.govt.nz, where they are guided through the process from the front page.

Fresnel agrees that the IRD has a very good system anyone could use and the only time people should get help is if they hit a snag trying to do it themselves.

“I’m making an instruction manual that can be downloaded to help encourage people do it themselves,” he says.