The Government recently pledged more money to allow the IRD to increase its audit activity, so your chances of being audited have increased.
The following tips are sure to be useful if you have an IRD tax audit on the horizon:
1. Know your rights and don’t panic! Seek professional assistance. Preparation is the key.
2. Keep all your receipts and log them neatly so they are easy to reconcile.
3. If you’ve made a mistake – be upfront about it from day one. Don’t wait to be audited. Contact IRD the day you realise your mistake. There are generous deductions in the penalties regime that apply if a voluntary disclosure is made in time. The IRD looks more kindly on voluntary disclosures than enforced tax audits. In addition, voluntary disclosures may save you from prosecution.
4. Keep your options open. Respond to the IRD swiftly because, as the audit progresses, they will ask for information and impose deadlines. It is important to meet these deadlines as missing them could lead to your losing your right to take any dispute further. You generally get a 2 month period to respond.
5. Get help from TMNZ. Tax pooling can substantially reduce the IRD’s penalties and interest. You can put in a request to reserve audit tax now to save yourself money if you’re audited.
Tax Management NZ has the largest pool of audit tax in New Zealand.
Buy any type of tax to save on costs for tax audits or voluntary disclosures – income tax, provisional tax, terminal tax, PAYE, fringe benefit tax, resident’s withholding tax, GST or NRWT.
TMNZ has tax as far back as 2003.