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What not to do when dealing with the tax department

A recent case is littered with examples of how not to handle your tax affairs. Case 2 2011 NZTRA 11

The taxpayer wanted to challenge assessments issued by the IRD. The court said she couldn’t because of the way she managed her tax affairs. She didn’t even get a chance to try to prove the IRD wrong.

The decision highlights these lessons:-

1. File your tax returns and pay tax on time.
2. If you rely on accountants or lawyers to handle your tax affairs make sure they do what is required because ultimately it’s your responsibility and it is you who will be penalised if you don’t meet timeframes.
3. Don’t allow someone else (even your partner) to conduct business activities using your name.
4. Make sure you understand the tax implications of what you do.
5. If you receive correspondence from the IRD read it and understand what you are required to do.
6. If the IRD give you time limits to do things comply with those time limits or, if you can’t, communicate with the IRD before the time limit expires to arrange an extension of time.
7. If you have to send formal documents to the IRD take whatever steps you can to ensure you can prove when and by whom those documents were received on behalf of the IRD.
8. Do not ignore dispute notices, notices of assessment or demands for payment sent to you by the IRD.
9. Don’t wait 1 1/2 years before you get around to trying to challenge an assessment made by the IRD if you don’t agree with that assessment.

The harsh reality of this case is we don’t know whether the amount of tax this taxpayer was held liable to pay is correct. Quite simply, because she didn’t comply with time limits for disputing assessments she lost the opportunity to challenge those assessments. Potentially a very expensive price to pay for inaction.

This is a brand new decision so of course we don’t know yet whether the taxpayer will appeal.

Iain

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