Source: Fair Go
Web-based tax refund companies have been popping up like mushrooms in the past two years. They offer to check with the IRD to see if you're due a refund - if you are they'll sort it and take a commission or a fee, if you're owed nothing, you pay nothing.
One firm claims to have got $100 million dollars back for clients in the last two years, another says it's got over 200,000 Kiwis on its books.
And the Online Tax Agents of New Zealand (OTANZ) - that's their professional body - says if it wasn't for them, the IRD might still be sitting on millions of dollars worth of over-paid taxes.
But a couple of things to look out for:
- Once you've signed up then the company becomes your tax agent and all mail from the IRD goes to them.
It's then up to new tax agent to let you know if, say, you owe money to the IRD. If they don't do that job properly, you could end up owing penalties and/or interest on top of any IRD debt. Delays in sending on IRD mail affected about 2000 clients of TaxRefunds.co.nz. and company director Geoff Matthews says it was the result of the huge number of clients, plus the difficulties of switching from a paper based tax system to an electronic one. Geoff says the problem's been sorted, and any clients affected will not have to pay any interest or penalties incurred.
- Make sure you know what you're being charged.
Some companies take commission: 12.5-19.5% is standard; others charge a flat fee (where you might pay $120 for a $300 refund, which would be over 30%.)
- Several companies claim an average refund of around $500 - but this is often over a five year period.
- If you want to lose your tax agent.
You have to formally let the IRD know if you no longer want one of the online tax refund companies to be your agent.
It's known as "de-linking". And, as its common for the agents to link your tax account, to their bank account or trust fund (for the purposes of refunds), you should also let the agent know they've been de-linked.
Finally, you can actually check on your own tax refund situation direct with the IRD without risking having to pay up if you owe them money. Go the IRD website: www.ird.govt.nz On the home page, go to "work it out" on the right side of the screen, open up it up, then go to "individual income tax," click on that. Then scroll down to find the "personal tax summary calculations" for the year you want, say, 2010, and fill that out. At the end, it'll then tell you if there's a refund and how to go about claiming it. If it says there's 'tax to pay" - no problem, because, at that stage, nothing's been activated so it's up to you whether you want to proceed or just leave the site, no harm done.
You can do all that without registering on the IRD website, but if you do go through the registering process (which takes a few minutes and involves a phone call to the IRD) it does make things even simpler and quicker for claiming refunds etc.
So, what are the chances that you have a refund owing? Not that great probably, if you're on a fixed income, taxed at source, and it's a single income. The tax you pay is usually pretty spot on. You're most likely to be due a refund if you earn in peaks and troughs - for instance -
if are a seasonal worker, you're in part time work, have mulitple jobs, or if you get cash bonuses or commission on sales.
But if you're are thinking about checking out your tax refund situation, get on to it. You can only claim for the last five years - it's too bad if you might've been owed before that
And there is another way of getting some unexpected cash from the IRD - through this website: www.ird.govt.nz/unclaimed-money .Source: tvnz.co.nz