Chartered Accountants & Tax Specialist
General update by IBBZ Accounting on latest tax news, business growth and technology tips.
IRD has recently launched an audit campaign on traders of Trademe. Together with Trademe, they are seeking and exchanging information of trademe traders who are ignoring their tax obligations. The most common problem we have seen is that traders started as a hobby, but with regular pattern of selling this was transformed into a business.
The IRD wants to ensure the fairness and neutrality of the tax is maintained, and everyone pays their fair share of tax. Therefore, the purpose of this audit campaign is to target those traders who are not paying their share of tax. Normally, the IRD review the financial affairs and financial position of the traders and their close family members. They will investigate your bank statements, Trademe accounts, assets, debts and credit cards. IRD will interview you and you have to supply all information required by them. The audit process can become very long and stressful for the traders.
Therefore, we are here to help clients that are in an audit with the IRD. We will represent our client in an audit. We start with studying your business. For traders on Trademe, we will check if the activity is business or just a hobby of the taxpayer. We will determine the activity based on tax laws and cases relevant to the taxpayer’s activity. If it is a hobby, it is fine and the taxpayer does not have to pay taxes. However, if the result is that the taxpayer is carrying out a business activity, we will continue on the second step. We will assess the situations and verify the amount of tax owing to the IRD. We will represent you in the process and supply all documents required by them on your behalf. By doing that way, we are trying to reduce the penalties and taxes for you to a more reasonable amount. Having us dealings with the IRD also helps you to remove stress and anxiety in the audit.
We were recently approached by one of the trademe trader, his tax affairs were under audit and investigations. He was very nervous and stressful and did not know how to present financial information to the IRD. According to him the activity of selling items on trademe was his hobby.
He was selling unrequired items from his personal collections on trademe. Firstly, we determined whether his activity on Trademe was hobby or business. After carefully going through the facts, we concluded that “he was carrying out” a business activity on Trademe. We looked at the scale of his operation, regular pattern, dependency on the income, commitment in the activity.
We acted on his behalf and represented him in all dealing with the IRD. We collected all information and worked out the amount of tax he had to pay to the IRD. We submitted everything required by the IRD and satisfied the tax requirement. The audit ended and our client had to pay back a reasonable amount to the IRD. He was very happy with our help and the outcome.
Conclusion: Facing an IRD audit is a very stressful experience. Therefore, we are here to help. We will help you to pass through the IRD audit with least amount of stress and justified amount of tax to pay. We strongly advise you, do not deal with the IRD alone and seek professional help. For trader on Trademe, if the scale is big, you should register as a company and pay correct amount of tax to avoid the IRD audit.
Information provided above is of general use only. If you intending to rely on above information consult us or seek professional advice. IBBZ Accounting or any of its employee is not responsible should the information above result in any kind of loss to you directly or indirectly.