IRD system issues affecting tax pooling

IRD system issues affecting tax pooling

IRD system issues affecting tax pooling 1200 630 Lee Stace
Image: IRD system

IRD is working to resolve the problem of its system incorrectly sending grace period letters to taxpayers flagged as using tax pooling.

However, they have fixed the issue which was seeing someone’s GST refund being automatically applied to their provisional tax.

Here’s what you need to know about both problems.

Plus, we also highlight some other system bugs impacting provisional taxpayers.

Grace period letters

Some taxpayers marked as using tax pooling to pay their income tax were receiving a letter notifying them that:

  • They didn’t make a payment on time; and
  • IRD was giving them a grace period to pay before imposing late payment penalties.

This should not be happening.

We understand the cause of this issue is due to IRD’s developers not fixing this problem as expected last year. They got diverted to other tasks before the change on which they were working made it through the test cycle and into production.

They are currently working to correct the accounts of those who have been impacted. This includes reversing the application of the grace period.

IRD will provide an update once it resolves the issue.

In the meantime, anyone who is using tax pooling can ignore any grace period letter they receive.

GST refunds applied to income tax

Despite someone being flagged in the system as having a tax pooling arrangement in place to pay their provisional tax, IRD was still applying their GST refund against their income tax.

Again, this should not be happening.

We understand the cause of this issue was IRD’s system automatically ignoring the tax pooling indicator on someone’s account.

That was part of a wider issue relating to GST refunds offset against provisional tax.

However, the problem has now been fixed and this will no longer happen.

That said, anyone whose GST refund was transferred to provisional tax prior to this fix will need to contact the department. They can do this by sending a message in myIR.

IRD will then reverse the transfer or refund any excess credits (where appropriate).

In case you missed it…

Below are the other system glitches impacting provisional taxpayers.

These updates from IRD are as at 16 April 2020. However, as far as we can tell, these are still ongoing issues.

Incorrect instalment dates

There is a problem causing some six-monthly GST filers to have three provisional tax instalments instead of two.

As a result, some taxpayers may have had interest (UOMI) charged incorrectly.

IRD is working on fixing this issue. It will provide an update once it finds a solution.

Incorrect UOMI and penalties on weekend due dates

There may be cases where late payment penalties and UOMI have been incorrectly charged if a provisional tax payment date fell on a weekend.

Again, the department is in the process of fixing this issue.

TMNZ will continue to keep you abreast of any IRD issue or update that pertains to tax pooling or provisional tax.

Lee Stace

Lee Stace is the PR and Content Manager at Tax Management NZ.

All posts by: Lee Stace

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