Amending a Tax Return
We often deal with situations where a tax return has been filed and it is later discovered that this return was incorrect, due to an omitted invoice or bookkeeping error. Often their can be a realisation by a client that they have simply overlooked a claimable expense.
So how can this problem be sorted? In this blog we will briefly discuss the two options for amending incorrect returns for both underpayments and overpayments of tax.
Option 1 – Notice of Proposed Adjustment
If the error is found within four months of filing the relevant return, a person must correct the error by filing a Notice of Proposed Adjustment (NOPA) under section 89DA of the Tax Administration Act 1994 (TAA).
An NOPA issued within the four month response period to correct a previous taxpayer assessment will be accepted by Inland Revenue, and the adjustments will be made with no further question. The only exception to this being adjustments of a technical nature or where the law is not clear.
Once Inland Revenue accepts the NOPA, they will make the required adjustments and issue amended assessments.
Option 2 – Section 113 Adjustment
If an error is discovered outside the four-month period outlined above, a person will have to rely on section 113 of the TAA.
Section 113 allows Inland Revenue to amend an assessment at any time to ensure its correctness. However in the case of a credit adjustment (a refund), Inland Revenue cannot be compelled to amend an assessment and will not amend assessments that are the result of a non-genuine error or a regretted choice.
Generally speaking, 113 requests can be relied on to amend most credit errors made in Income Tax and GST returns filed. As long as the adjustment requested is clear and is supported by relevant documentation.
If the error identified is a debit (tax to pay) adjustment, a person will have to complete a voluntary disclosure and send this to Inland Revenue with the adjustment request. A voluntary disclosure should outline the reason for the error and provide any supporting documentation to be considered full and complete.
One of the advantages of making a voluntary disclosure of any tax shortfall identified before Inland Revenue find out is that they may reduce any shortfall penalties imposed to nil.
We are more than happy to assist clients with amendment requests and voluntary disclosures. You should always take action if you identify an error. We are experts in dealing with Inland Revenue to have any additional refunds released or when managing the voluntary disclosure process.
If you think you may have a problem, please contact us for a no-obligation discussion about how we can help.
For more information about amending assessments, you can refer to Inland Revenue’s Standard Practice Statement SPS 07/03 – Requests to amend assessments at www.ird.govt.nz.