Are you tempted to save money on your accountant’s bills by telephoning the IRD for advice? It could cost you a lot more!
Previous surveys have found, of the answers to taxpayer enquiries supplied by the IRD, nearly a quarter are wrong and more than half those dealing with GST are incorrect. The IRD is not responsible for its mistakes. You are expected to find the right answers and to seek expert advice if needed.
It is no use saying an IRD staff member told you, even if you can quote the person’s name and the date you were advised. If you have a tax problem, consult us: if we do not know the answer immediately we can find it.
Recently an acquaintance of mine told how she solved her tax problems. She would ring three different IRD officials with her question. She would then compare the answers and if there was one which suited her, she would accept it and make her tax claim accordingly. She figured if she were ever challenged she could always say she was advised by the IRD and followed this.
To be fair the IRD has a huge staff and it would be impractical for the Department to train all its employees, to the level of a tax consultant – after all, it us taxpayers who would foot the bill! Tax law is vast and it requires considerable experience to understand the nuances.
An example is the fine line between personal and business expenditure. Why, for example, if I have to have a car for work should the costs of running it between work and home not be tax deductible? If I need reading glasses to do my job, why should I not be able to claim them as a business cost? If I meet regularly with friends for a drink and I do business with them, why is this considered a personal cost? At other times, having a drink with business associates can be accepted as a business entertainment cost. We should not expect IRD staff to have such a detailed knowledge.
Tax law is built up from a mixture of statutes and case law. Every year there are acts of parliament and regulations which change tax law and there are cases decided in the courts which also change the law.
If you seek the advice of an officer of the IRD, you do so at your peril. There are numerous examples of the IRD changing its mind despite the taxpayers having fully disclosed all the necessary information leaving the taxpayers exposed to the tax, interest and penalties.
The message here is clear – avoid ringing IRD for advice. If you are tempted, do not rely on the answer you receive!
