IRD Penalties – What is it costing you?
Late payment penalties start from the day after the due date for payment. If the tax due is increased as the result of a reassessment, a new due date will generally be set for paying the newly assessed tax.
When penalties start
Late payment penalties start from the day after the due date for payment. If the tax due is increased as the result of a reassessment, a new due date will generally be set for paying the newly assessed tax. There will be no late payment penalty imposed on the newly assessed tax if it's paid by the new due date. Late payment penalties are not charged on unpaid tax of $100 or less. These penalties, don't apply to student loan or child support payments.
If this is your first late payment in a two-year period, (being the later of 1 April 2008 and the day 2 years before the default date and ending before the default date), you will be entitled to a grace period which means the IRD will send a warning letter advising the payment has not been made and giving a further date for the tax payment to be made. If the payment is then not made by the extended date, the late payment penalty is imposed from the original due date. Interest will still apply.
Instalment arrangements – these can save you money
If for some reason you know you will be unable to meet your upcoming tax obligation, you (or your agent) should contact the IRD as soon as you think your need an instalment arrangement or want to renegotiate an instalment arrangement.
The IRD will consider all instalment arrangement proposals and the information you provide to the IRD is vital in helping IRD make any decisions.
It is important to note that the arrangement needs to be in place prior to the due date. An arrangement will often void payment penalties, but use-of-money interest will be charged during the arrangement. The IRD will respond to any instalment arrangement requests within three to five working days.
Tax Types & Associated Penalties
If you require any further information, please contact us or visit the IRD website.
Author: Kim Marshall