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129 posts

Master Geek
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Topic # 173785 6-Jun-2015 14:14
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Anyone have any experience with this? It is my first time filling one out. 

If you are self employed as a part time sole trader as-well as having a fulltime job, how do you calculate income tax for the self employment proportion. Wage/salary income is $14,001 to $48,000 (17.5 cents to the dollar). Net profit from self employment is up to $14,000. Need to include income tax payable from self employment as current liability on IR10 form, as net profit from self employment is up to between $0 and $14,000 is this taxed at (10.5 cents to the dollar)?

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Uber Geek
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  Reply # 1318371 6-Jun-2015 17:54
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Call the IRD - they are usually extremely helpful. I have rung them numerous times in the past with provisional tax queries.

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  Reply # 1318386 6-Jun-2015 18:18
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I second the call the ird I would say 7 out of 10 are great and if you do get the occasional d.. thats right no profanity twit just hang up and call again.




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  Reply # 1318401 6-Jun-2015 18:38
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mb82: Anyone have any experience with this? It is my first time filling one out. 

If you are self employed as a part time sole trader as-well as having a fulltime job, how do you calculate income tax for the self employment proportion. Wage/salary income is $14,001 to $48,000 (17.5 cents to the dollar). Net profit from self employment is up to $14,000. Need to include income tax payable from self employment as current liability on IR10 form, as net profit from self employment is up to between $0 and $14,000 is this taxed at (10.5 cents to the dollar)?


I was heavily involved in the redesign of the IR10 from Accounts Information form to the current Financial Statements Summary. The guide should explain quite well how to calculate any of the key points that need it. You only need to complete it if you are in business, and you have the option of just sending in financial statements if you can't figure it out. 




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mdf

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  Reply # 1318402 6-Jun-2015 18:43
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The IR10 is just the financial statements summary - essentially your P+L and balance statement. It's not even compulsory - you can just use your existing accounts (hopefully you've got some).

Your tax return should actually be the IR3 (if you're self employed, i.e. not using a company). You'll essentially add up all your income (say, salary + self employed income + interest) and all the tax you've already paid (PAYE + provisional tax + withholding tax). You then calculate what tax you should have paid (there's a worksheet in the IR3G or here) and compare that to what you actually paid. If you've overpaid = tax refund, if you've underpaid = tax bill.



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  Reply # 1318438 6-Jun-2015 20:30
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The self employed 'operation' is small, literally consist of some stuff I have sold on trademe here and there. I have records of all income and expenses and have completed the IR3. I am doing it online and up to the IR10 stage, have worked through net profit calculations etc. I just need current liabilities. As I understand it a current liability of my self employed 'activity' (also the only current liability) would be the income tax to pay for any profit during the year. 

On the IR3 form total expenses is greater than total income. 
Calculations on the IR10 form show a net profit. I was told by IRD I am required to fill out an IR10.

Therefore as I understand it I need to know the amount of tax owed to ird from my self employed part time 'activity' and this is a current liability on the IR10. 
If the operation was a official company, simple, company tax is paid on net profit. But how should I work out the current liability of tax to pay for the year in this situation?


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  Reply # 1318517 7-Jun-2015 06:07
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Does your ir10 online have asterixes beside the questions? You only have to fill in those as I remember. I just did my first one. Also, if you call them up they will walk you through the whole form. I rang them up and did that to double check I had done it correctly. And yes, you can get a weenie but if you call back you'll hit a more helpful person.

mdf

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  Reply # 1318633 7-Jun-2015 11:50
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mb82: The self employed 'operation' is small, literally consist of some stuff I have sold on trademe here and there. I have records of all income and expenses and have completed the IR3. I am doing it online and up to the IR10 stage, have worked through net profit calculations etc. I just need current liabilities. As I understand it a current liability of my self employed 'activity' (also the only current liability) would be the income tax to pay for any profit during the year. 

On the IR3 form total expenses is greater than total income. 
Calculations on the IR10 form show a net profit. I was told by IRD I am required to fill out an IR10.

Therefore as I understand it I need to know the amount of tax owed to ird from my self employed part time 'activity' and this is a current liability on the IR10. 
If the operation was a official company, simple, company tax is paid on net profit. But how should I work out the current liability of tax to pay for the year in this situation?



Huh, this is an unusual one.

So, just to check I have it right, suppose we ringfence your "business activities" and pretend that they were carried out by a separate entity (e.g. a company). The business activities turned a small profit.

But when you combine your business activities with your personal situation in the IR3, you don't have any tax to pay. You might have paid too much tax elsewhere, or have sufficient deductible expenses (income protection insurance I guess, since the only other one is paying someone to finish your tax return).

So the net situation is you have no tax to pay. If this is the situation, I'd say your current liabilities are zero. I'd probably put zero on the IR10 and include a note to IRD describing what you've done. As others have said, IRD is typically really helpful and I've never had any trouble with them as long as (1) you've paid the right amount of tax; (2) you've explained what you've done and (3) you've paid the right amount of tax. Did I mention paying the right amount of tax?

It is a little awkward though - I've not come across using an IR10 for an individual. I'm assuming you wouldn't include things like your personal house in your balance sheet, since it has nothing to do with your business. That said, if you made a business mistake as a sole trader and got sued, you could potentially lose your house. Odd.

If you do end up incorporating a company for your small business, it is remarkably easy and cheap in New Zealand.

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