Provisional Tax "Period Ended" Date?

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Forums › Finance and wealth management › Provisional Tax "Period Ended" Date?

MurrayM

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#113155 8-Jan-2013 12:37

Being self-employed I pay provisional tax to the IRD. I like to pay this through my bank's (ASB) website. But every time I go to make this payment they ask for "Tax period ended: 31 March" and offer a drop-down list of years (2011, 2012, 2013, etc). I always get confused as to which year to choose.

My tax year goes from 1st April to 31st March and I make three provisional ax payments per year. The next is due on 15th January.

How do I figure out which year to choose from the drop-down list? The reminder letter I get from the IRD doesn't really say (unless I'm just not understanding it correctly).

melissa65

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#741606 8-Jan-2013 13:35

Your provisional tax payment due on the 15th of Jan will be for the FY13 year :-)

melissa65

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#741611 8-Jan-2013 13:38

Dependant upon whether or not you under/over paid your prov tax, you may also have some terminal tax which will be due around April/May (unless of course you are registered with an accountant, and have an extension of time...). Anyway, select FY13 for this also, and then after that, all prov tax payments should pertain to the FY14 year.

MurrayM

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#741618 8-Jan-2013 13:54

melissa65: Your provisional tax payment due on the 15th of Jan will be for the FY13 year :-)

Thanks for confirming that for me!

So, January payment is for the current year. What about my May and August payments? Are they also 2013 (ie the current year)?

mint

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#741619 8-Jan-2013 13:56

I would agree its 2013 as in the year ending April 2013.

melissa65

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#741624 8-Jan-2013 14:01

May and August payments will be FY14. (even though we are in the 2013 year, we will be in the 2014 financial year).

MurrayM

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#741625 8-Jan-2013 14:01

I think what confuses me is that I tend to think that the financial year ends in 2013 and that my January payment is before the 2013 end of year, so it must be my final (3rd) payment, and then the May and August payments are after the start of the 2014 year and so they must be my first and second payment for 2014 financial year. But on the IRD website they say the January payment is the second payment for the financial year...

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melissa65

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#741626 8-Jan-2013 14:01

May and August payments will be FY14. (even though we are in the 2013 year, we will be in the 2014 financial year).

geek4me

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#742717 10-Jan-2013 11:37

I have picked the wrong year too at times. So long as IRD have the money you will not be penalised for picking the wrong year. You may, as I have, receive a tax overdue letter with penalties added after the payment date has passed. You then have to call IRD to sort it out. If you don't more threatening letters follow unless someone at IRD picks it up first.

When you call, IRD tell you that one tax year is in credit by the same amount that the other tax year is overdue. They correct this and reverse the penalties. The IRD computer is too dumb to figure this out and issues the overdue letter(s). IRD say you may have had genuine reasons to put the wrong tax year in credit (yeah right). The system does not check if your overall tax liability taking into account all credits and debits is zero.

The same thing can also happen with Paye and GST posted to the wrong tax period. If you really want the IRD computer to get confused try paying your Paye in two amounts. One generally gets credited okay, the second one ends up in a suspense account and you get overdue invoices plus penalties for the second payment amount even though they have the money tagged to your account but not posted to the correct tax due. You then have to call IRD ... (see paragraph two above)

surfisup1000

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#742727 10-Jan-2013 11:55

melissa65: May and August payments will be FY14. (even though we are in the 2013 year, we will be in the 2014 financial year).

This is incorrect. The May 2013 payment is for the year ending 31/03/2013 (ie, 2013 tax year).

So, 2014 provisional payments are made as follows.... 1/3 on 28 august 2013, 1/3 on 15 jan 2014, and 1/3 on may 5th 2014.

surfisup1000

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#742731 10-Jan-2013 12:04

melissa65: Dependant upon whether or not you under/over paid your prov tax, you may also have some terminal tax which will be due around April/May (unless of course you are registered with an accountant, and have an extension of time...). Anyway, select FY13 for this also, and then after that, all prov tax payments should pertain to the FY14 year.

This is also incorrect ( I believe). Terminal tax is not due until feb the next year.

ie, for 2013 tax year , 1/3 prov in Aug 2012, 1/3 prov in Jan 2013, 1/3 prov in May 2013. Then, you file your ir3 before july 7th which shows the terminal tax position. If you owe tax, you have until feb 2014 to pay this.

A word of advice-- make sure you always slightly overpay your tax by the final prov payment (you can work it out roughly on paper if you have good records which you should). This way, you are guaranteed not to incur use of money interest penalties.

If you do owe terminal, pay it right away to avoid compounding UOMI interest charges. They may or may not charge UOMI fees, but, better not to take the risk . My accountant even got it wrong when I had one.

I used the IRD standard provisional option (previous years income + 5%) under which you are not supposed to pay UOMI -- however, they whacked me with these UOMI fees anyway -- when I complained, they just said that their website was wrong and that if you know your income is going to be higher than 5% extra you have to make voluntary payments. This was completely opposite to the information on their website.

MurrayM

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#742735 10-Jan-2013 12:06

geek4me: I have picked the wrong year too at times. So long as IRD have the money you will not be penalised for picking the wrong year. You may, as I have, receive a tax overdue letter with penalties added after the payment date has passed. You then have to call IRD to sort it out. If you don't more threatening letters follow unless someone at IRD picks it up first.

When you call, IRD tell you that one tax year is in credit by the same amount that the other tax year is overdue. They correct this and reverse the penalties. The IRD computer is too dumb to figure this out and issues the overdue letter(s). IRD say you may have had genuine reasons to put the wrong tax year in credit (yeah right). The system does not check if your overall tax liability taking into account all credits and debits is zero.

The same thing can also happen with Paye and GST posted to the wrong tax period. If you really want the IRD computer to get confused try paying your Paye in two amounts. One generally gets credited okay, the second one ends up in a suspense account and you get overdue invoices plus penalties for the second payment amount even though they have the money tagged to your account but not posted to the correct tax due. You then have to call IRD ... (see paragraph two above)

Yes, I've had to contact them in the past when I've received an overdue letter but I know I've paid. They've corrected the payment and put it in the correct tax year. This is what I want to avoid in the future and why I want to get it straight in my head about which payment is for which financial year.

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surfisup1000

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#742737 10-Jan-2013 12:08

MurrayM:
Yes, I've had to contact them in the past when I've received an overdue letter but I know I've paid. They've corrected the payment and put it in the correct tax year. This is what I want to avoid in the future and why I want to get it straight in my head about which payment is for which financial year.

You can make your own calendar in this link...

https://interact.ird.govt.nz/forms/duedates

melissa65

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#742742 10-Jan-2013 12:19

surfisup1000:
melissa65: Dependant upon whether or not you under/over paid your prov tax, you may also have some terminal tax which will be due around April/May (unless of course you are registered with an accountant, and have an extension of time...). Anyway, select FY13 for this also, and then after that, all prov tax payments should pertain to the FY14 year.

This is also incorrect ( I believe). Terminal tax is not due until feb the next year.

ie, for 2013 tax year , 1/3 prov in Aug 2012, 1/3 prov in Jan 2013, 1/3 prov in May 2013. Then, you file your ir3 before july 7th which shows the terminal tax position. If you owe tax, you have until feb 2014 to pay this.

A word of advice-- make sure you always slightly overpay your tax by the final prov payment (you can work it out roughly on paper if you have good records which you should). This way, you are guaranteed not to incur use of money interest penalties.

If you do owe terminal, pay it right away to avoid compounding UOMI interest charges. They may or may not charge UOMI fees, but, better not to take the risk . My accountant even got it wrong when I had one.

I used the IRD standard provisional option (previous years income + 5%) under which you are not supposed to pay UOMI -- however, they whacked me with these UOMI fees anyway -- when I complained, they just said that their website was wrong and that if you know your income is going to be higher than 5% extra you have to make voluntary payments. This was completely opposite to the information on their website.

You wouldn't pay your FY14 terminal tax before the financial year has finished (let alone barely started), hence when you pay it, you would select FY13. You generally pay your first FY14 prov instalment, prior to your FY13 terminal payment. Payment dates vary dependent upon your own situation (i.e. have a tax agent or not), the IRD are generally pretty good at sending you correspondence advising when you're due (and particularly if you're overdue!) I'm a CA and have worked in a CA firm for several years so have a reasonable gauge on this!

In the chance you DO get the FY selection wrong, then the IRD are very good at reallocating and wiping any unecessary UOMI/penalties (you just have to go through the ordeal of waiting to speak to an operator first!).

As surfs up mentioned, it definitely pays to reassess your income situation, because UOMI can be a killer, particularly if you earn significantly more than expected and have to shell out more than expected for terminal + interest than can be avoided with good planning. Have you got an accountant? Some basic interim accounts may be worth the investment.

wallop

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#742753 10-Jan-2013 12:29

surfisup1000:
melissa65: May and August payments will be FY14. (even though we are in the 2013 year, we will be in the 2014 financial year).

This is incorrect. The May 2013 payment is for the year ending 31/03/2013 (ie, 2013 tax year).

So, 2014 provisional payments are made as follows.... 1/3 on 28 august 2013, 1/3 on 15 jan 2014, and 1/3 on may 5th 2014.

+1.

geek4me

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#742803 10-Jan-2013 13:35

Provisional Tax Payments can also be posted incorrectly if you pay GST every two months and combine your Provisional Tax Payments (when due) on the GST payment forms which have been made more helpful by including both.

When paying by automatic payment on the due date after sending the combined GST/Provisional Tax forms earlier, the total payment is either credited as all GST or all Provisional Tax and is not correctly split between the two tax types. I used the combined tax Type payment code "GAP". One has to call IRD to get this sorted after the usual overdue letters arrive. Also the Provisional Tax and GST "Period Ended" dates are different and only one can be entered on the payment. The solution has been (on IRD's advice) to make separate payments for the Provisional Tax and GST due on the same date. So much for the GST form which has a combined tax due total for both.