Tax bills raise questions over Inland Revenue's automated system

Friday, 11 June 2021

Inland Revenue is unable to say how many people may have been affected by an issue causing some to receive unexpected tax bills this year.

The tax department began sending out automatically issued income tax assessments in late May, but the process has left many taxpayers confused.

In post on social media platform TikTok, user Manihera Te Hei called for someone at Inland Revenue to explain how it worked out whether someone was due a tax return or owed money.

“This is the first time I’ve ever had to pay money back,” he said, pointing to a bill for $353.

* Inland Revenue mileage reimbursement rates – what you need to know

Inland Revenue isn’t saying how many people have been affected by an issue causing some to receive unexpected tax bills this year. (File photo)

* High-earning workers don't appear to be using trusts to dodge tax rate

* IRD letter to accommodation providers says times are tough but pay your tax

“In the past I’ve got a tax return, now I’ve got this. Explain yourself.”

The post has been viewed more than 290,000 times and has attracted 2200 comments, many from other taxpayers facing an unexpected bill.

One superannuitant who contacted Stuff said both he and his wife had been told they owed tax, despite the fortnightly Government payment being their only source of income.

“We were both told we owe extra tax – around $42 each – for the year ended March 31, 2021,” he said.

“There are some 770,000 superannuitants in New Zealand. If they're all charged an extra $42 in tax this year, that would be more than $32 million.”

The couple had been told their tax to pay was due to an extra pay period during the last tax year, meaning they had each received 27 pension payments, rather than the usual 26.

After their accountant queried the bill, it was waived by Inland Revenue, he said.

In a statement emailed to Stuff on Wednesday, Inland Revenue said several factors contributed to someone receiving a tax bill.

“For example, employees who are paid weekly, fortnightly or monthly may receive an extra pay in a year, depending on the day of the week that they are paid.”

In 2021, some people, including most Government employees, had received 27 fortnightly pays, rather than the standard 26, the statement said.

It did not address questions over the total number of people affected or what action was being taken to resolve the issue.

When the questions were resubmitted, an Inland Revenue spokeswoman said was unable to say when a response would be provided.

If assessed tax to pay was only because of an extra pay period during the year, the full amount would be written off.

Inland Revenue says bills sent out this year are correct and due to the way the PAYE system works, not any fault in its own systems. (File photo)

However, tax bills could also be due to fluctuations in income throughout the year and incorrect use of tax codes.

As each person’s tax situation was different, Inland Revenue encouraged those with concerns were to ask for more detail.

The situation has raised questions over Inland Revenue’s automated tax assessment process, introduced in 2019 as part of business transformation.

The process allows Inland Revenue to automatically check all refunds.

But another taxpayer facing an unexpectedly large bill of more than $800 said the system seemed to have “zero checks and balances and lay people are unable to understand what’s going on.”

“What angers me even more is that I have now paid this amount, but friends of mine have encouraged me to ‘just leave it and IRD will write it off’. Why should I be punished for making prompt payment?” she said.

“I’m at wit’s end and don’t know what to do. I have no control over my employer’s payroll system, I am simply asked for my tax code at the start of my employment.

“There is zero transparency and the New Zealand public deserve better.”

In a statement on Friday, Inland Revenue said bills sent out this year were correct based on the employer information it had received and were due to the way the PAYE system works, not any fault in its own systems.

“Once an assessment is finalised a write-off will be applied if the amount to pay is solely because of an extra pay period – for example, 27 fortnightly pays or 53 weekly pays received in one year.”

Those who qualified for an extra pay write-off would have their bill automatically wiped after the assessment was finalised.

When customers had received a request for more information, the write-off would usually be applied the day after they confirmed their income details.

“Anyone who pays the bill before it is finalised, and who is entitled to a write-off, will have what they paid refunded,” Inland Revenue said.

Accurate figures on how many write-offs had been applied to automatic income tax assessments would not be available until all assessments had been sent and details or extra information confirmed.