By MARK FRYER
The days are getting shorter, winter is in the air and, yes, it's tax time again.
For many of us, that's no longer the gloomy prospect it once was, because we no longer have to file a tax return.
But ignoring tax altogether could be a costly mistake, however tempting it might be.
That's because many people stand to get something back from the taxman - but only if they ask.
The Inland Revenue Department has been running an advertising campaign to remind us that now is the time to start thinking of such matters.
The revamp of the tax system, which did away with returns for many people, is now into its third year, and should be less of a mystery than it was. But it's still the case that those who don't ask, won't get.
But first, a little history. Once upon a time, all taxpayers had to file an annual return, which told them whether they had more tax to pay, or had already paid too much and were due a refund.
For people whose tax affairs are relatively simple, those returns were abolished in the 1999-2000 tax year.
If you're in that category - because your only income was in the form of wages, salary, interest or dividends which were taxed at the source - the system now works on the assumption that you pay just the right amount of tax and the end-of-year calculations are not needed.
In many cases, if that's the way you want it, that's where you can leave it.
However, there are four groups who should still devote a little thought to tax matters:
1. Those who are required to work out their tax position, and who will automatically get a reminder from the IRD. That includes many family assistance recipients, people with student loans who qualify for an interest write-off, and people who used the wrong tax code.
2. People who are obliged to work out their tax position, and inform Inland Revenue (see
below).
3. Anyone who thinks they may be in for a refund (see
below).
4. Anyone who can claim rebates for charitable donations, or childcare or housekeeping expenses (see "Rebates - a taxing issue...", below).
If you're in one of the first three categories, the document that matters now is the Personal Tax Summary, which details how much you earned and how much tax you paid.
As mentioned above, some people will automatically get a summary, some will be obliged to ask for one and some will find it well worth their while.
If you automatically get a summary, the IRD will send it out in June. Otherwise, you can ask for your summary in July.
That summary will show whether you have more tax to pay or are in line for a refund. You can either confirm the information or correct it and send it back to the IRD.
If you're owed a refund and it is under $50, the IRD will pay it out in 30 days. If it's more than that you'll have to confirm the details before you get the money.
However, there is a danger in asking for a tax summary; if it reveals you have more to pay, you'll have to do so, unless any of the details are wrong and you send the correct information to the IRD in time.
If you want to play it safe, ask for a personal tax summary worksheet (an IR746) by phoning 0800-277-774. It's also available on the internet at the IRD website (see below). Unless you know exactly how much you earned and how much tax you paid, you'll also need to ask Inland Revenue for a summary of earnings, which includes that information.
If you have a student loan you will also need a student loan worksheet (an IR767). Again, those are available on the net at the IRD website.
Once you have the forms you can work out your tax position for yourself.
If your calculations reveal you have more tax to pay, you can let sleeping dogs lie (assuming you're not required to fill in a tax summary, and haven't misled IRD in any way, such as failing to declare income).
If you're in line for a refund, you can go ahead and order a tax summary.
None of the above applies if you received income other than wages, salary, interest or dividends taxed at the source. If that's the case, there's still no escape - IR3 returns are still required by July 7.
Who should do the numbers
Even if you don't have to work out your tax position, doing so can be a profitable exercise if:
* You worked part-time while you were at school. If you were under 15 at any time during the tax year, or still at school and under 18, you're entitled to the child rebate, which gives back 15c for every dollar earned (excluding interest and dividends), to a maximum refund of $156 for earnings of $1040-plus.
* You earned less than $9880. That may mean you are entitled to the under-$9880 rebate, which pays up to $728, depending on how long you worked and how much you earned.
* You worked only part of the year. While you were working, your employer would have taxed you on the assumption you would earn at that rate for the full year, which may mean you were overtaxed.
* You earned less than $38,000 and received dividends. Those dividends will have been taxed at 33 per cent rather than the 19.5 per cent rate that applies to incomes of under $38,000.
* Your income fluctuated during the year, or you had more than one employer.
* You want to claim expenses - the cost of income protection insurance, or interest on money borrowed to invest (if it produces taxable income).
* You have a joint account, or accounts, your partner is in a higher tax bracket and your interest payments were taxed at that higher rate. In that case you can use your Personal Tax Summary to claim a refund for the over-taxing of your share of the interest.
And who has to
You have to ask for a personal tax summary if you're in one of these categories:
* Your income in 2001-02 was $38,000 to $60,000 and you received more than $200 of interest which was taxed at less than 33 per cent.
* Your income was over $60,000 and you got more than $200 in interest or dividends which was taxed at less than 39 per cent.
* You paid child support and got more than $200 in interest or dividends - regardless of the rate at which it was taxed.
* You have a student loan, earned more than $15,132 in 2001-02 and got more than $200 in dividends or interest - regardless of the rate at which it was taxed.
Student loan worksheet (IR767)
Personal tax summary worksheet (IR746)
* To contact Personal Finance Editor Mark Fryer, write to: Weekend Business, PO Box 32, Auckland
Phone (09) 373-6400 ext 8833. Fax: (09) 373-6423
email:
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