The man is now working through manually entering tax returns from 2004 to 2014. Photo / NZME
After thinking he owed Inland Revenue (IRD) a hefty sum for missing over a decade of tax returns, a Whanganui man was in disbelief to discover $28,000 waiting to be claimed.
The man, who wishes to remain anonymous, has been self-employed as a quantity surveyor since 2004 and has not filed a tax return in 15 years.
He said he overpaid his tax to “be on the safe side”, always choosing the highest tax bracket of 33.5 per cent, when he should have been paying between 20 and 25 per cent.
Because he didn’t have an online account and hadn’t filed tax returns, he didn’t know he had the hefty tax return owed to him.
He said over time, he never checked if he was owed money because he was scared he would owe large amounts to IRD.
“We thought we would have to go to a tax accountant to sort it all out, who might take a percentage of that, but her help was free.”
Whanganui Budgeting Advisory Service (WBAS) manager Sandy Fage said when people didn’t know how to deal with their debt, it could be easier to ignore rather than face it.
“People might biff their mail, or they just don’t open it because they cannot bear the thought and stress of going there,” Fage said.
“For us, we know it’s far better to go there so you know what you’re dealing with and you can sort it.
“This case is a classic example of how polar opposite the situation was.”
After his car failed a warrant of fitness, the man and his wife decided to settle any debt before purchasing a new car, so they approached Whanganui Budgeting Services, who put them onto Money Poppins founder Niki Vernon.
“It was a case of clearing the air before we went any further, and we didn’t want to take on any more debt,” the man’s partner said.
Money Poppins provides business and financial advice for sole traders and micro-businesses.
“As soon as I told Niki the situation, she said they would owe me money,” the man said.
Vernon helped the man set up a MyIR account, which allowed him to see returns back to 2015.
“That gave him back $28,000, let alone back to 2004,” Vernon said.
“He still has tax and expenses he can claim back to 2004.”
Vernon estimated the return would give him another $25,000 minimum.
She said back when he became a sole trader, everything was done by mail.
“So, he didn’t need an online account back then and was never told he needed one.
“Many people don’t know what they should be doing, and it can be really confusing.”
Vernon said their generation didn’t borrow frivolously.
“This couple has been frugal about every penny, yet IRD was sitting there with their money,” she said.
“I’m worried there are other people, particularly elderly people, out there in a similar position, who don’t know they have money owing to them.”
Vernon said if anyone received letters from the IRD and didn’t know what to do, they should find someone to help access their account and look through it with them.
“You never know what might be there.”
She said all that was required was an IRD number and basic information such as a name, date of birth and email address.
The man said there were urgent repairs on the house they could now carry out with the refund.
“It’s certainly made life a lot easier,” she said.
He said he tried to sort out his tax payments multiple times over the years, but the first time was at the old IRD office in Whanganui where there was no-one present that could help him, and when he tried again a few years later, the office was gone.
“It made me so frustrated, I essentially gave up.
“We’ve got a Department of Conservation office and other government departments - why haven’t we got an IRD office?” the man’s wife said.
An IRD spokesperson said the Whanganui office was closed in the late 1990′s/early 2000′s to allow the tax department to centralise more services into processing and service centres.
“At that stage, the site was being run as a Customer Service Office with only front-of-house and advisery services.”
The spokesperson said the site had previously been much larger, but most of the office structure, services and all compliance activity and staff had been removed in the mid-1990s.
“Sole traders and self-employed people (often contractors) have to file an IR3 return, also known as an individual income tax return,” the spokesperson said.
“If they didn’t, IRD couldn’t tell whether they were due a refund or had taxes to pay.
“Without an IR3 return, we can’t tell if they have had any other self-employed income, or whether there are any expenses to offset against their self-employed or schedular income.”
They said regular reminders were sent out from IRD to those IR3 filers with outstanding returns.
“But if an IR3 category customer neither files a return nor engages with Inland Revenue on the subject, IRD cannot issue the customer with an assessment that would tell them what their tax position was – that is, whether they are due a refund or have tax owing.
“So, IR3 customers who should have filed a return but have not are contacted with reminders.”
They said the pressures of providing Covid relief payments and all of the activity supporting customers over the last 30 months meant a significant reduction in outbound phone calls.
“We depend on customers to fulfil their obligations.”
IRD could not discuss the specific case due to the Tax Administration Act, which requires complete confidentiality of individual taxpayer affairs, the spokesperson said.