First time tax time

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Forums › Finance and wealth management › First time tax time

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#1758105 7-Apr-2017 12:55

Geektastic:

Accountants have access to a system called Bank Link which does that fetching transactions from your accounts and so on. Ours charges no extra for using it. They just query us if they have questions on what something was for.

Another benefit of accountants is the whole advice aspect and the assistance if the Revenue decide to come poking around.

Bank Link, that's it. It's fairly old system, made in 1986 but of course evolved since then, so it predates the internet. It's fairly opaque for business owners. Xero gives you a LOT more visibility and control, but not everyone wants or needs that. Xero means you can do more yourself.

Accountants are good during things like audits. I imagine that someone fairly organised who's approached things fairly will probably be ok either way. I've had a business for something like 15 years and haven't been audited yet, but it's almost inevitable that it will happen sometime. I'm told that sometime audits request very specific information, sometimes it's everything. My accountant offers a sort of audit insurance policy, pay them all the time and they'll cover any audit related costs on their side if it happens.

I also figured that having an accountant is someone to blame of something goes wrong. They get around this by making you sign something for submissions to IRD that says "I fully understand and verify all the information being submitted", which is clearly bollocks - I have no idea what that thing says or how they worked it out.

Mattnzl

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#1758106 7-Apr-2017 12:58

If you want a free alternative to Xero (useful if you aren't making much income per year & the Xero fees would be a substantial expense), try Wave:

https://www.waveapps.com/

I've been using it for the past 18 months for invoicing, expenses, GST etc. Does NZ bank feeds no problem & like Xero you can create a login for your accountant to use for end of year tidy ups etc.

sonyxperiageek

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#1758111 7-Apr-2017 13:01

Mattnzl:

If you want a free alternative to Xero (useful if you aren't making much income per year & the Xero fees would be a substantial expense), try Wave:

https://www.waveapps.com/

I've been using it for the past 18 months for invoicing, expenses, GST etc. Does NZ bank feeds no problem & like Xero you can create a login for your accountant to use for end of year tidy ups etc.

I can also vouch for WaveApps. I also have been using this free (features such as PayRoll are paid) cloud-based accounting system and it's great!

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#1758113 7-Apr-2017 13:04

how "safe" is using something like waveapps? Free service with no catch and collecting all your financial data?(genuine question as i'm interested!)

timmmay

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#1758118 7-Apr-2017 13:14

Wave looks pretty interesting, especially for a small business. One advantage I can see Xero has is it will produce all your tax returns for you, whereas Wave gives you the information for you to fill out.

At $27.50 for the starter plan up to $55 or $70 for the higher plans, I think I'll keep using Xero. It's not a lot of money and they're a trustworthy company. Wave probably is as well. But if anyone starts a new small business I might point them at wave.

cadman

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#1758129 7-Apr-2017 13:39

sonyxperiageek:

cadman:

It's really not that complex unless they choose to make it that way with tricky tax minimisation schemes. So it's best for them to learn to do it for themselves because they need to UNDERSTAND the implications of expenditure rather than just know the amounts - you'd be surprised the number of people out there that think just because something is 100% tax deductible it's somehow free.

They don't need to purchase a specific program like MYOB or XERO - once you know what you're doing you can just use Excel which is is more than sufficient with a fairly basic spreadsheet. That's what I've used for nearly 20 years.

So if something is 100% tax deductible, what does it potentially mean? (I want to try and understand this concept too)

It simply means you can deduct 100% of the cost of it from your income (or the depreciation value on it in terms of an asset that has to be capitalised and depreciated). What you 'get back' is effectively just a discount on the item equal to the value of the applicable marginal tax rate on the value of the item. So if the money you spent was going to be taxed at 33% because that was the pre-expense gross income, you get 33% of the value back as a tax credit. But you're still paying the other 67% of its cost out of your own pocket.

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#1758143 7-Apr-2017 13:59

I brought a copy of Quickbooks Easystart Lite when I first started out for like $50 or something (doesn't appear to be available now as Reckon are pushing subscription plans). It did enough to let me categorize expenses and print P&L reports for the accountant which was useful.

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jonb

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#1758198 7-Apr-2017 16:22

Thanks for all the replies, the income will be highly variable each year.

Receipts mostly kept but not itemised or recorded, so need sorting in excel, and then see an accountant once things are relatively in order. Also accountant for tax minimisation e..g home office on one room against a share of mortgage and that sort or thing.

Geektastic

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#1759279 7-Apr-2017 22:03

timmmay:

Geektastic:

Accountants have access to a system called Bank Link which does that fetching transactions from your accounts and so on. Ours charges no extra for using it. They just query us if they have questions on what something was for.

Another benefit of accountants is the whole advice aspect and the assistance if the Revenue decide to come poking around.

Bank Link, that's it. It's fairly old system, made in 1986 but of course evolved since then, so it predates the internet. It's fairly opaque for business owners. Xero gives you a LOT more visibility and control, but not everyone wants or needs that. Xero means you can do more yourself.

Accountants are good during things like audits. I imagine that someone fairly organised who's approached things fairly will probably be ok either way. I've had a business for something like 15 years and haven't been audited yet, but it's almost inevitable that it will happen sometime. I'm told that sometime audits request very specific information, sometimes it's everything. My accountant offers a sort of audit insurance policy, pay them all the time and they'll cover any audit related costs on their side if it happens.

I also figured that having an accountant is someone to blame of something goes wrong. They get around this by making you sign something for submissions to IRD that says "I fully understand and verify all the information being submitted", which is clearly bollocks - I have no idea what that thing says or how they worked it out.

I hear you. That thing they sign is surely not worth the paper it's written on, as it is tantamount to saying "Yes, I am an accountant. You have paid me lots of money, but anything I told you might be BS"!

If you pay a professional, you should expect to be able to rely on their advice and for that to be a reasonable defence where you acted in good faith (i.e. you are a lay person who could not be expected to know that what they told you was wrong/illegal etc). Surely that is why professionals are supposed to have Professional Indemnity insurance - so you can sue them to kingdom come if they cock it up!

For me, it's as much the fact that I do not want to spend my time doing book keeping and admin, I want to spend it doing fee earning work.

ANglEAUT

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#1759280 7-Apr-2017 22:34

MikeAqua:

MikeB4:

A quick return to answer this.

I am assuming this person is self employed. What kills many start ups and self employed aspirations is the second year tax burden where you are dealing with potential terminal tax for the first year and provisional for the second year. It is important at this point to get good professional advice as this can stop considerable expense and stress.

^^^ This

And don't forget your ACC levies either.

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timmmay

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#1759320 8-Apr-2017 06:37

Geektastic:

I hear you. That thing they sign is surely not worth the paper it's written on, as it is tantamount to saying "Yes, I am an accountant. You have paid me lots of money, but anything I told you might be BS"!

If you pay a professional, you should expect to be able to rely on their advice and for that to be a reasonable defence where you acted in good faith (i.e. you are a lay person who could not be expected to know that what they told you was wrong/illegal etc). Surely that is why professionals are supposed to have Professional Indemnity insurance - so you can sue them to kingdom come if they cock it up!

For me, it's as much the fact that I do not want to spend my time doing book keeping and admin, I want to spend it doing fee earning work.

That's what I said when I was a contractor, too hard and too much time, before Xero came along. The day to day stuff is trivial with Xero. End of year I'd have to work out income and expenses outside Xero (home office, vehicle expenses proportion, etc), journal them, then have Xero generate the returns.

If I actually had vehicle expenses and a vehicle used for personal and business that can be a bit tricky. If some expenses came from personal account and some from business then it's a PITA. So I would just do it all in a personal account and claim as expenses.

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tdgeek

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#1759327 8-Apr-2017 08:06

jonb:

Thanks for all the replies, the income will be highly variable each year.

Receipts mostly kept but not itemised or recorded, so need sorting in excel, and then see an accountant once things are relatively in order. Also accountant for tax minimisation e..g home office on one room against a share of mortgage and that sort or thing.

Mortgage interest, not payments. You probably meant that but just clarifying.

Vehicle if not a dedicated vehicle, get a logbook.

timmmay

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#1759328 8-Apr-2017 08:21

Good point that you can only claim mortgage interest, not principal. If it's home office you can claim only the area of the home dedicated to the business, or maybe in proportion to how much it's used. That's an accountant question.

cadman

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#1759440 8-Apr-2017 12:19

tdgeek:

jonb:

Thanks for all the replies, the income will be highly variable each year.

Receipts mostly kept but not itemised or recorded, so need sorting in excel, and then see an accountant once things are relatively in order. Also accountant for tax minimisation e..g home office on one room against a share of mortgage and that sort or thing.

Mortgage interest, not payments. You probably meant that but just clarifying.

Vehicle if not a dedicated vehicle, get a logbook.

And don't forget that interest payments don't include GST - nor do bank fees...

sonyxperiageek

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#1760422 10-Apr-2017 20:27

Since we were on the topic of tax, just wondering how would one be eligible for a tax refund if they are for example an independent contractor with a fixed scheduler payments and only worked part of the year and made less than $48,000 in that year (as mentioned on IRD)?

Sony

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