Jeremy Tauri: Withholding tax needs close watch

Jeremy Tauri

Are you a contractor that has withholding tax deducted from what you earn, and paid on your behalf? Then you may need to keep an eye on those tax payments to make sure they're getting paid to the IRD.

Some of the files running past my desk this year seem to have an issue of tax payments missing or not at the correct rate.

With the current building boom contract builders seem to be the most vulnerable. Those who are sole traders on the WT tax rate usually have their tax deducted at 20 per cent or under the new rules at the rate applied for.

This tax of 20 per cent or as specified is deducted from the contractor's invoice and paid to the IRD by the business that is using their services.

If the tax payments aren't made the danger is that when it comes time to square up the tax return at the end of the year then the tax is missing or short-paid - meaning potentially more tax to pay or a smaller refund.

If this has happened there's going to be some headaches and extra compliance to rectify, reconcile and recover the missing payments.

Your accountant may not pick up on the difference in tax payments until the end of the year - especially if you see them only once a year or you do your own GST returns.

If you want to check you can access this information online with the IRD.

If you do find yourself in a situation where the tax is underpaid then there are couple of things you can do.

For a start check with the business you worked for - it's possible there could be a genuine error - it does happen and it may be an easy fix.

If you're having no luck with any response then talk to your accountant about next steps for fixing this - it's possible they will have access to an account manager at IRD who can help.

Jeremy Tauri is an associate at Plus Chartered Accountants