How do you change a tax return? That’s quite a common question. It’s very easy to overlook a matter or to make a bookkeeping error which results in understating tax. Mistakes happen. Alternatively you may discover that you have inadvertently overpaid tax. In this blog we look at what you need to do to change a tax return. There are some rules around how you should inform the IRD.
The Commissioner of Inland Revenue has discretionary power under the Tax Administration Act 1994 to amend tax assessments. We rely on this section when we apply to amend a tax return on behalf of a client if it transpires they have underpaid tax or are subsequently due a refund.
Section 113 allows taxpayers to correct any errors in their returns if the amount is for $500 or less. This section covers income tax, FBT returns or GST. For amounts under $500 you can simply correct the error in your next return or instruct us to do this for you.
For amounts over $500 you need to rely on the discretion of the Commissioner.
Filing a revised income tax return is not an acceptable solution.
Errors identified should be corrected by filing a Notice of Proposed Adjustment (NoPA) within 4 months of the date of assessment. As a general rule the Commissioner will agree to amend a return so long as the technical treatment of the income tax is accepted as the correct position. There may be a knock on effect to other returns.
Beyond the four month period, taxpayers have to make a formal late adjustment request, again under section 113. If you have made a genuine error, the IRD will normally accept this. If the Commissioner is not convinced the oversight was genuine then there is no compulsion for the IRD to accept the adjustment.
Any oversight in a GST inputs can be corrected in a subsequent return. Inputs are the GST amount claimed on purchases or expenses. The rules that govern correcting GST returns are set out in the Goods and Services Tax Act 1985. The error or errors need to have been caused by a clear mistake, simple oversight or mistaken undertaking that results in an under or overstatement of your tax liability.
For amounts over $500, you will need to file a Notice of Proposed Adjustment within four months after the due date of the GST return concerned.
Where the reassessed GST is an amount to pay and it’s over $100 you will be charged you use-of-money interest. However if the sum of reassessed GST is a refund over $100, the IRD will pay use-of-money interest. Penalties may also be considered.
We are only too happy to assist clients in filing late adjustment requests if you have inadvertently adopted a position that is results in either too much tax being paid or there is a tax shortfall. We believe that you should always ‘front-foot’ these matters and we have expertise in liaising with IRD to arrive at a satisfactory outcome.