Debt options. What to do if you re having trouble paying your tax on time. IR 582 April Classified Inland Revenue Public

Transcription

1 Debt options What to do if you re having trouble paying your tax on time IR 582 April 2015 Classified Inland Revenue Public

2 Contents About this guide 3 Why paying tax matters 4 Struggling to pay a tax bill that s due soon 5 Missed your payment date 6 Options for paying your tax bill 7 Can t pay now or in the future 10 Paying Inland Revenue 11 What happens if you do nothing 12 You don t agree with an assessment 13 Planning for your taxes pays off 14 Terms we use 16 How to contact Inland Revenue 17 Privacy 17 Inland Revenue s services 18 This guide is A5 and can be economically printed two pages per A4 sheet. If you re printing from a downloaded PDF, check the layout settings in your printer options to achieve this. The information in this guide is based on current tax laws at the time of printing. 2 Classified Inland Revenue Public

3 About this guide This guide gives you options for paying tax debt and advice for avoiding debt. This guide covers: how we ll work with you to decide the best option, based on your personal circumstances options if you have a tax bill due soon but don t think you can pay it what to do if you already owe us money charges for not paying on time what you can do if you disagree with the amount we say you owe what happens if you don t pay a tax bill or let us know you can t pay on time planning for payments and filing returns the terms we use. If you realise you can t pay some or all of your tax by the due date, you can make an offer to repay the amount by instalments or call us to talk about the best option for you. You can make a repayment proposal online at (search keywords: instalment proposal), or talk to us by calling Any reference to tax in this guide includes student loan, child support and Working for Families Tax Credits. We explain all the tax terms we use in this guide on page 16. Classified Inland Revenue Public Debt options 3

4 Why paying tax matters Everyone in New Zealand must pay their share of tax. This is how the Government spent our taxes in The Government uses taxpayers money to pay for services we all need. Social security and welfare $24b Transport and communications $2.2b $4.8b Core government services Education $12.8b $6.8b Other $3.5b Law and order Finance costs $3.9b $15.1b Health 4 Classified Inland Revenue Public

5 Struggling to pay a tax bill that s due soon Getting into tax debt will only lead to a bigger bill. If you don t think you can pay your tax bill by the due date, please contact us as soon as possible. Don t wait until the due date has passed the sooner you contact us the easier it ll be to stop the bill growing. We ll talk with you about payment options and find the one that works for you. You ll find the options on page 7. Because we charge penalties and interest on unpaid tax, your best option is finding the money from another source to pay your tax debt in full. Even paying part of your tax bill will reduce some of the penalty and interest charges. Send in your tax returns, even if you can t pay the tax bill. It s a simple way of avoiding late filing penalties. Read our guide Penalties and interest (IR 240) for details, see page 17. We want to help you pay on time in future and avoid penalties and interest. Read our suggestions about planning for payments and filing returns on time on page 14. Once you realise you can t pay on time, the most important first step you can take is to contact us. We ll work with you to decide the best payment option, based on your personal circumstances. Call us to talk about overdue tax payments and returns on: in New Zealand from overseas. Send in your tax returns, even if you can t pay the tax bill. Classified Inland Revenue Public Debt options 5

6 Missed your payment date Contact us if your tax payment is now overdue. You ll save money and stop getting further into debt. The sooner you talk to us the sooner we can help. We may need more information before deciding how best we can help you, so we ll agree on a timeframe for you to get this to us. We won t charge further late payment penalties during this time, but we ll still charge interest. Late payment penalties and daily interest will increase the amount you owe us. 1 Call us to discuss repayment options How we ll help you 2 We may need more information so we ll give you a date to get this to us We ll negotiate a repayment plan with you 3 You ll pay your debt over time We may start debt recovery if you don t: get us the information make agreed payments. See page 12 for more details. 6 Classified Inland Revenue Public

7 Options for paying your tax bill When you contact us we ll talk to you about the best option for paying your tax bill. You may be able to pay: in full now with voluntary part-payments through an agreed instalment arrangement in full, at a later date. Paying in full Payment in full is always the best option. Even if we agree to an instalment arrangement we ll still charge interest on the tax owing. We ll ask you these questions to see if you can make payment in full: Do you have money in a bank account you can use, eg, a term deposit? Can you get and pay back a loan? Do you have assets you could sell or borrow against? These could be insurance policies, houses, cars, shares or business assets. Can you get an overdraft? Can you pay the bill on a credit card? If we owe you a refund, we ll use this first to repay or part-pay your debt. It may cost you less in the long term to get money from other sources to pay your tax bill in full. Example Joe owes $500 in child support. He can t pay it by the due date, but has $1,000 coming in three weeks. He puts the tax payment on his credit card so he pays on time, and pays off his credit card when he receives the $1,000. Voluntary part-payments Paying taxes by voluntary part-payments is a good way to avoid late payment penalties and interest charges. If an amount is due in the future, paying a little towards it on a regular basis will reduce the pressure on your finances. You still need to have paid the full amount by the due date to avoid penalties. See page 14 for more information about planning for your taxes. Classified Inland Revenue Public Debt options 7

8 Paying through instalments You can apply to pay the full amount in a series of regular payments over an agreed period of time. We call this an instalment arrangement. We have to agree with both the amount and the length of time it will take you to repay the debt. Applying for an instalment arrangement You can send us a proposed instalment arrangement online. It doesn t matter if the amount you owe is overdue or not yet due. We may be able to negotiate a plan with you over the phone. You need your IRD number and details of your current financial situation, including your weekly after-tax income and details of the amount(s) you want to pay off. You can get this from a recent statement or your myir secure online services account. Go to to register or to log in. We ll ask you about your circumstances. We have to look at whether your debt repayment plan is realistic and if you ll still be able to pay future tax bills. If you can t give us all the information straightaway, we ll agree on a timeframe for you to get this to us. We ll suspend penalties during this time, but we ll still charge interest on the unpaid tax. If we ve made an agreement with you We ll send you a letter confirming how much you have to pay and the dates payments are due. If you set up an instalment arrangement with us before your tax bill is due, we ll only charge you the initial 1% penalty after the due date. We won t charge further monthly penalties after the due date, as long as you make the agreed payments until you ve paid the debt in full. You ll still pay interest on the money owed. This will be included in the amount we ask you to pay. Go to (search keyword: proposal) and send us your proposal for an instalment arrangement. Have your income and expenses details on hand. We won t charge penalties if you make an arrangement with us before the due date for payment. See our Penalties and interest (IR 240) guide. If we don t accept your offer, we ll explain why. You ll need to reconsider the amount and make an alternative offer. 8 Classified Inland Revenue Public

9 It s important to keep up with instalment payments. Contact us immediately if you find you can t make them. If you miss payments and don t contact us, we may cancel the agreement. We could charge penalties on the money you still owe and take action to get the money paid. One option is legal action. If you miss payments we ll charge you a penalty and interest for that month. 1 You make a repayment offer How an instalment arrangement works We accept it and send you a letter 2 We don t accept your offer. We explain why. You consider an alternative amount and make another offer You set up regular payments from your bank 3 We suspend all penalties from this date 4 You pay the debt in full (we send a final statement) Paying at a later date You can also apply to pay the full amount at a later date. You can send us your proposal by going to (search keyword: proposal). Classified Inland Revenue Public Debt options 9

10 Can t pay now or in the future Where you don t think you can pay a debt now or in the future, you can ask us to write the debt off. For example, you may be in serious financial hardship because you have a long-term illness, or you can t pay rent or buy essential food and services. If you ve tried all options for raising the money and been unsuccessful, we may agree to: a full write-off, which means you don t owe the money any more write off part of the debt, with you paying the rest through an instalment arrangement. Individual taxpayers can apply for serious hardship, but only some companies may qualify. Hardship relief for student loans You can apply for hardship relief if you re having trouble paying a student loan. We ll assess your financial situation and if we agree with you, we may be able to help. One option for hardship relief is adding back all or part of your previous year s repayment obligation to your current loan balance. We may charge interest on the amount added back. Another option is giving you a special deduction rate, which will reduce the amount you re repaying through your salary or wages. Find out about hardship relief for student loan borrowers at (search keywords: student loan non payment). We ll only agree to an instalment arrangement or writing off a debt if you can t pay in full by using another option. Serious hardship includes being unable to afford minimum living expenses (eg, rent, essential food or services) or being unable to meet the costs of medical treatment for yourself or a dependant. For more information go to (search keywords: financial difficulty) or call us on Classified Inland Revenue Public

11 Paying Inland Revenue You can pay us electronically, by credit or debit card, or by cheque. Electronic payments You can pay by: online banking automatic payment direct credit. Most banks have a special online tax payment option on their websites, so your correct payment reference details come to us with your payment. Never post cash. Go to Making payments at and follow the onscreen instructions. Tax payment details IRD or GST number Tax type Tax Under Arrangement ARR Payment amount $ Payment date 2 23/02/2015 Cancel Next Or you can pay online using your bank s normal payment option. Put your IRD number in the reference field, so we can record your payment correctly. Credit and debit cards We accept Visa or MasterCard credit or debit card payments through our website. Paying by cheque If you post us a cheque we must receive it on or before the due date of your tax bill. Make sure: your cheque is payable to Inland Revenue your cheque has not transferable written on it you ve put your IRD number, tax type and the period the payment is for on the back of the cheque you include the payment slip, if you get one with the tax bill. Classified Inland Revenue Public Westpac New Zealand provides our online card payment service. They charge a 1.42% fee for each card transaction. The fee doesn t apply to child support (paying parents) or student loan payments made from overseas. Debt options 11

12 What happens if you do nothing If you don t pay the money you owe us on time or contact us, we can t ignore the debt. We want to help you work out how to pay the tax you owe, but it s still our job to collect it. Depending on your circumstances and your history with us, we can do one or more of the following to collect the debt. We can: take money straight out of your wages, bank account, or from someone who owes you money seize and sell your property start legal action, which may lead to bankruptcy or liquidation start legal action for outstanding returns, which could result in a criminal conviction charge you court costs and other costs for collecting the money get a judgment against you in court, which will affect your credit rating. We ll take a firmer approach with anyone who deliberately avoids paying their tax, but if you still intend to pay it, contact us at any time. We want to help you do the right thing. Contact us We can help you work out your best options and avoid any more serious action being taken. Not paying your debt Unpaid tax could affect your credit rating. This might stop you from getting a loan or taking out a hire purchase. Owing $500 or more in overdue student loan payments stops you borrowing through the Student Loan Scheme Classified Inland Revenue Public

13 You don t agree with an assessment Each year, you assess your tax based on information you ve kept during the year. This is called filing a tax return. We ll either agree with your assessment or amend it to more or less than the amount you assessed. We ll then send you a request asking for payment. If you have a student loan, pay or receive child support, or you or your partner receive Working for Families Tax Credits, you may also need to give us further information to ensure your entitlements and obligations are correct. If you disagree with the amount owing because you ve made payments that don t show in the notice, statement or letter you ve received, call us. Have your payment information, including dates, bank account details and cheque numbers on hand. Was the amount an estimate? If we ve asked you to file a tax return and you haven t done it by the filing date, we ll estimate the amount of tax we think you owe. We call this a default assessment. It s likely this will be more than your actual assessment, so it s important you file your return. When you ve done that, the amount on your return will replace the default assessment. If you don t file your return or contact us, we ll collect the amount in the default assessment. You ll still have to file the tax return, unless you have a valid reason not to. Disputing an assessment If you still don t agree with the amount to pay after talking to us, you ll need to use the disputes resolution process. You ll find details in our factsheet If you disagree with an assessment (IR 778). You have to start the process within four months of the date of the assessment, or from the date a personal tax summary becomes an assessment. Always file your tax returns, even if you can t pay what you owe. If you don t, we ll estimate what you owe without all the true detail. This could put you in debt. A default assessment is an estimate of the amount of tax you have to pay where you haven t filed your tax return. If you believe you don t need to file a return, it s important to tell us. Your personal tax summary shows your income and the amount of tax your employer has paid to us for the income year. It tells you if you ll get a refund, or need to pay more tax. Classified Inland Revenue Public Debt options 13

14 Planning for your taxes pays off Budgeting for your tax payments can help you meet your payment deadlines. Putting money aside as often as you can throughout the year will help you meet taxes like GST and end-of-year income tax. This will make it easier to pay the full tax payment when it s due. Filing your tax returns ahead of or by the due date means you ll know what your tax payments will be. The easiest way to meet a return filing due date is to: Filing your returns late or paying late will cost you penalties and possibly interest. know when a return is due update your tax records regularly complete your return well ahead of the due date use electronic filing options Prepare for tax payments All taxes are due by set dates, depending on the type of tax. You can: make voluntary payments ahead of a due date, or set up a tax account with your bank and automatically transfer a regular amount into it Classified Inland Revenue Public

15 Keep records If you re a business operator, keeping good records will help you prepare for tax payments and filing deadlines. Read our factsheets Record keeping (IR 323) and Record keeping checklist (IR 1008) for good tips. Do you need a tax professional? If you run a business or your taxes are complex, we recommend you use a tax agent. They can help you get it right so you can file returns and make your tax payments on time. Keep on track by using our due dates calendar By filing your tax returns and making payments when they re due, you avoid late filing penalties or receiving a default assessment. Our tax due dates calendar helps you meet filing and payment deadlines. You can create and print off a personalised calender from our website or request a wall-planner-style printed copy (see page 17). Business customers can get a Tax due dates calendar (IR 328) by calling Use our Adjust your income (IR 215) form to adjust your income for child support, student loan repayment and Working for Families Tax Credits. Tax returns can include: income tax GST FBT employer information. Use our calculators, worksheets and tools to help manage your taxes. Go to work-it-out Classified Inland Revenue Public Debt options 15

16 Terms we use Assessment Bankrupt Balance date Credit rating Default assessment Due date Employer monthly schedule Extension of time Instalment arrangement Interest Late payment penalty Penalty Personal tax summary Tax agent Voluntary disclosure A calculation of the amount of tax you need to pay. A person judged by a court to be unable to pay their debts. The last day of your tax year (usually 31 March). An authorised agency s assessment of a borrower s ability to meet their financial commitments. An estimate of the amount of tax you have to pay made where you ve failed to file a tax return. The last day to make a payment or file a return. A form completed by employers to show how much money they ve paid their employees or contractors, and the deductions they ve made each month. Extra time we allow you to file your income tax return. An agreement we make with you to pay your tax bill either in regular payments over time or at a later date. Also called a repayment plan. Money we charge on late or underpaid tax, or pay you for overpaid tax. An amount we add to tax that hasn t been paid by the due date. Money Inland Revenue charges when you don t keep to your tax obligations. Your income and tax deduction details for the year, based on employment, pension or benefit information. A person who manages your taxes on your behalf. Telling us about an error in your tax assessment before we start a formal audit of your taxes Classified Inland Revenue Public

17 How to contact Inland Revenue How to get our forms and guides You can view copies of all our forms and guides by going to and selecting Forms and guides. You can also order copies by calling Need to talk to us? You can call us on these numbers: General tax, tax credits and refunds Employer enquiries General business tax Overdue returns and payments Calling from a mobile phone Calling from overseas We re here to take your call between 8 am and 8 pm Monday to Friday and Saturday between 9 am and 1 pm (excluding child support calls). If you have an IRD number, remember to have it with you when you call. For more information go to Privacy Meeting your tax obligations means giving us accurate information so we can assess your liabilities or your entitlements under the Acts we administer. If you ask to see the personal information we hold about you, we ll show you and correct any errors, unless we have a lawful reason not to. Call us on for more information. For full details of our privacy policy go to (search keyword: privacy). Classified Inland Revenue Public Debt options 17

18 Inland Revenue s services myir secure online services Inland Revenue s online service makes it quicker and easier to manage your tax and entitlements. Go to to find out more. Go to our website for information, and to use our services and tools. Business tax support in the community We offer a business tax help service for those new to business or a business process and non-profit organisations. The service is free and is also available to Māori organisations and individuals. Find out more about this service and our free seminars at (search keyword: seminars) or by calling us on Language Line Language Line is a phone-based interpreter service for Inland Revenue customers whose first or preferred language is not English. There are 44 languages available see for the full list. Whenever you need to talk to us you can ask for a Language Line interpreter and choose the language/s you feel most comfortable using. The service is free. Follow us on Twitter for regular tweets on a range of tax and social policy matters, including our most recent media releases, due dates and consultations Classified Inland Revenue Public