Inland Revenue continues to bombard taxpayers with correspondence that is duplicated, redundant, and in some cases, just plain wrong.
Worse, Inland Revenue seems to make very few distinctions between taxpayers who file their own returns and those who have engaged a tax agent to communicate with Inland Revenue on their behalf.
This severely undermines relationships between IRD and agents, IRD and taxpayers, and worst of all, between agents and their clients.
Postscript – In late November IRD advised as follows:
Tax agent redirect
We’ve received feedback that some of our letters are being issued directly to clients, rather than redirecting to tax agents. Over the past few weeks, we’ve undertaken a systematic review of all the letter currently set to not follow the tax agent redirect.
While some of these letters are correctly designed to go directly to clients, some have been programmed incorrectly, and we’re working on each letter individually to fix this. We’ll provide an update here once we have more information. You can find more information on the letters which we’ve already fixed in our archive.
We’re also working to update our system so that all new letters after April 2020 will be set to follow the tax agent redirect by default.
This is a positive development although:
- For ‘some’ letters – read hundreds of thousands of letters
- We’ve received feedback – read hundreds of agents complaining about this for the last two years or more
- Good to see it being resolved from April 2020 – of course IRD has made similar promises including to fix by April 2019
Imagine how much quicker this could have been resolved if IRD had not put so much effort into denying the problems existed
The Minister of Revenue, Commissioner of Inland Revenue and her staff all have a statutory obligation to use their best endeavours to protect the integrity of the tax system. Integrity of the tax system includes all taxpayers’ perceptions of the tax system. However, those responsible are not being held to account when IRD drops the ball.
Inland Revenue is failing taxpayers and tax agents in the following areas:
- Taxpayers are bombarded with correspondence seeking tax returns and payment of tax that is not yet due and in some cases is completely fictitious. Much of the correspondence is not relevant, correspondence goes to incorrect addresses, deceased taxpayers etc
- Where the taxpayer has a properly appointed tax agent much of this could be filtered if it was only addressed to the agent. However Inland Revenue ignores agreements with professional bodies and frequently goes behind tax agents backs and hounds their clients without the tax agent’s knowledge. When this happens, clients worry they have done something wrong and it is left to the agent to sort out the mess.
I have attached some examples for readers.
This issue has been raised with Inland Revenue staff on many occasions. On each occasion the response is to deny these things happen, or to make partial belated apologies and give undertakings to fix the issues, but the fixes often fail.
Inland Revenue staff either:
- have no control over the new system, and/or
- do not know what the systems are doing,
The longer this goes on it seems Inland Revenue may be deliberately undermining the role and function of tax agents in the tax system. The irony is that tax agents play a key role in tax compliance: especially in a tax system that relies on self-assessment. Without tax agents tax compliance would be seriously impaired.
Inland Revenue’s actions in side stepping tax agents is damaging the integrity of the tax system. The integrity of the tax system is not a one-way street where taxpayers are expected to comply with complex tax laws, yet Inland Revenue can act in a Laissez-faire manner outside its own legislation with no one holding them to account on this. When this was raised with the Minister the response was “accountants will have to get used to the new way of doing things”
There is no doubt the right hand and left hand are not talking to each other and messages to the public are confused and contradictory.
Deliberately sending tax demands to taxpayers who owe nothing, circumventing a person’s appointed tax agent, and denying this happens, is sailing very close to breaching the IRD’s obligation to maintain integrity of our tax system.
This fiasco has been ongoing for several years. The Minister and Commissioner need to take control and ensure it is fixed.
I have circulated this article amongst many colleagues, and they confirm it reflects their experience
I have listed below the issues I have experienced. I guarantee that any other agent will endorse that they have similar experiences
Misleading information sent to taxpayers
Any client who has a tax obligation and logs into IRD website immediately sees a message
This is followed by text:
“Your account is in debt. You may be charged late payment penalties and interest on overdue amounts.”
IRD also sends letters direct to taxpayers warning them of large amounts of tax due ‘soon’.
For both the above, frequently it transpires that the ‘debt’ is not due for many months and it’s already arranged for payment, the prime example being provisional tax not due until as late as January or May next year.
IRD sends ‘statements of account’ to taxpayers, often running to dozens of pages and all but incomprehensible.
If a tax payment is inadvertently applied to the wrong tax period, instead of waiting for taxpayer or agent to reallocate, IRD refunds it back and notifies them of a refund. The taxpayer is then exposed to penalties and interest.
As well as sending tonnes of paper mail., IRD sends texts, email alerts, alerts through its ‘myIR’ website.
In July 2019 IRD contacted thousands of taxpayer automatic assessments of their tax obligations and issued automatic refunds. IRD has stated to relevant Ministers:
The automatic assessment process was completed during July for approximately 2.9 million customers. We automatically issued approximately $572 million of refunds to 1.2 million people. Around 271,000 people have received a bill to pay, totalling approximately $96 million.
This ignores the fact that in many cases there is more income yet to return. The taxpayer then needs to reopen those returns and apply for remission of false penalties and interest.
In the past IRD has ignored pending tax credits paid through an intermediary and chased the taxpayer directly, in some cases resulting in taxpayers paying their tax bills twice.
Bypassing tax agents
The majority of taxpayers with less routine circumstances engage a registered tax agent to look after their affairs.
IRD routinely bypasses the agent and contacts the taxpayers directly.
Some of it is misleading as above. Agents are equipped to sift out and correct IRD’s correspondence but don’t get the opportunity.
At best, a large proportion of such correspondence is duplicating what the agent is going to tell their clients anyway and simply services to make clients panic and generate more unnecessary dialogue between taxpayers, agents and IRD. So much correspondence that IRD has taken senior staff off their substantive roles and allocated them to answering phones or replying to routine correspondence.
Many of IRD’s letters are auto signed by individuals in IRD who have no knowledge or control over the correspondence, and if we contact them they simply don’t respond.
IRD often claim they have applied a ‘stop mail’ instruction but the computer system overrides it and keeps pouring out mail anyway
IRD gives ongoing conflicting instructions as to how to prevent mail going to clients, but they fail.
In early September IRD gave yet another instruction to add a ‘master link’ and change address there. IRD then immediately wrote to clients of agents and stated their agent ‘now’ has access to their tax details, access that the agents have had for years already
Some clients prefer that tax refunds are directly credited to an agency trust account where they can be disbursed to tax and other obligations. Those details are registered with IRD. In April 2019 IRD removed those details, wrote to all my clients and said they require their bank account details. I then reinstated the correct details on my agency listing and then IRD wrote again to my clients telling them their bank account details had changed
IRD sends letters direct to taxpayers advising that IRD want to complete the client’s IR3 assessment and asking them to provide information to IRD instead of their advisor.
IRD uploads electronic letters to the agent and says they have automatically calculated an assessment, but writes separately to the client and states “We received your Income tax return and have refunded you $xxxx”. This is misleading – IRD didn’t ‘receive’ an income tax return, IRD made one up based on incomplete information. Further they have written to the client and not even alerted the agent.
I have facilitated hundreds of disclosures to IRD, someof which identify tax obligations that IRD would otherwise struggle to find. Instead of thanking me and my clients, IRD regularly writes to them directly and demands immediate payment of amounts that in fact are already settled and agreed with IRD. I have asked senior staff to explain why they sent those letters and they simply have no explanation.
IRD has written direct to taxpayers telling them there is a better way to manage their provisional tax obligations without going through an agent. IRD is wrong and their new scheme ‘AIM’ method is widely acknowledged as a dead duck
IRD has written to many thousands of taxpayers and said they have used an incorrect tax code for deductions when in fact that code had been deliberately selected to ensure tax was paid on time instead of as an unexpected tax bill. Again these letters have bypassed tax agents.
IRD has provided many undertakings to correct the position but they are largely not delivered. They include:
- November 2017 (!!!) IRD would not contact clients of agents. That would be a significant breach of protocol
- July 2018(!!) I confirm that our Collections area are reviewing how they approach the collection of debts for clients of agents. I have passed your communication guidelines onto our Collection area for guidance on tailoring the approach for contacting tax agents about their client’s debts.
- At this time I cannot confirm that the protocols will be fully implemented by 31 July 2018. However, I will keep you updated on our progress
- November 2018: We do not bombard our customers with emails and the majority of emails we send are automated to notify customers, or tax agents, that there is something to do, or view, in myIR. From personal experience I have noted that our customers receive three emails in the months that a GST return is due, one to notify them the return is available, the second issued close to the due date to remind them that the return needs to be filed and the third is a notification that there is correspondence to view after the return is filed and payment has been made. This is not bombardment and merely takes the place of mail that used to be posted.
- November 2018: I acknowledge that when customers are correcting their tax positions through voluntary disclosures that cover several years or they have overdue taxes then the number of automated email notifications increase as would the physical mail sent in the post. It is not reasonable to stop these notifications but it is acknowledged that they could be better targeted or redirected when the customer has a tax agent. This is something we are reviewing. However, this does take time and any system enhancements will likely be introduced when income tax is moved to our START system in April 2019. This is the best use of our resources and ensures that any enhances are fit for purpose to meet the needs of customers and tax agents.
- November 2018: I note your comments about staff sending emails to customers. However, this should only occur when its agreed between the parties for a specific purpose. In these cases I would expect that the customer or tax agent is expecting an email from the Inland Revenue staff member.
- June 2019: you do not need to add your postal address to your clients account as mail will be redirected to your agency’s postal address when you have linked them
- IRD website states:
(From April 2019) We’ll no longer use ‘workspace’ to determine which agency logins we’ll send client notifications. There will be a new myIR service to subscribe to client notifications. This service will be prepopulated within the existing workspace for each web login from 26 April. There are several options for receiving notifications and you can easily turn on or off all notifications.
- As noted above very senior staff have personally told me that IRD would never contact my clients. The Minister’s comment ‘accountants will have to get used to the new way of doing things’ is closer to the truth although woefully misguided
- On its website IRD discloses the issue as “We’ve received feedback that in some cases [certain] letters were going to clients instead of the tax agent” and goes on to list three circumstances where this was arising. IRD has then marked this issues as archived on 26 June 2019.
- IRD has then amended the website to provide a never ending list of new breaches and (retrospectively) resolution. “We’ve had feedback that some of our letters are being issued directly to clients, rather than redirecting to tax agents. While some of our letters are designed to always go to the client, there are others issuing incorrectly. We are working to resolve this issue as quickly as possible and will update this page as we receive more information.”
But the breaches just keep coming.
- IRD also states
Letters correctly sending to clients
The following letters have been designed to always go to the client:
Linking and delinking letters, letting the customer know that an intermediary was added to or removed from their account.
Bank account change letters, notifying the customer when a refund bank account was changed or added.
Certificates of exemption from schedular deductions, which are sent directly to ensure there are no delays for customers who need to urgently give it to their employer. You can view a copy of this letter in myIR.
Letters asking that the client provide income information to their tax agent, so that a return can be filed (L letter).
The second notification of an outstanding amount to pay, with the first notification letter going to the tax agent.
We say these are largely not necessary and cause vastly more harm than benefit, and also that IRD sends a lot more correspondence than just these specified examples.
- October 2019: We have recently been spreading the word about AIM to encourage more businesses to take up this option should they wish.
While I appreciate your comments on “leave it to the experts” Inland Revenue is responsible for the administration of the tax system and it is appropriate for Inland Revenue to inform its customers of changes to tax legislation and processes.
Once again we say this is tax agents’ role not IRD’s. Does the Ministry of Health write to taxpayers and tell them how to remove their own teeth?