Tax refund customers caught out

Casey Kaumatule thought she was being sensible and saving money when she decided to take matters into her own hands and do her partner’s tax return herself, online.

She opted to use the Inland Revenue Department website rather than pay a tax refund company.

‘‘We got a good amount that was owed to us. But when I checked, I noticed it was paid to a different bank account. I rang IRD and the tax return money had been sent to Savvy Tax Agents. They did my partner’s tax return before and their account wasn’t removed.’’

She spoke to the firm, which agreed to waive the fee it would normally charge to release the money that had been sent to it. Kaumatule said it was her mistake not to have checked the details, but it was still frustrating.

People who sign up to have a tax refund company prepare their tax returns usually agree to have those firms act as their tax agents from then on, with their bank accounts set up to process future refund payments.

That means, even if they do their return themselves in future, the agent can end up with the refund.

Consumer NZ spokeswoman Jessica Wilson said it was something her organisation had received complaints about.

Many companies charge a fee to release tax refunds that have been put in their banks accounts in error.

‘‘Problems arise when people aren’t aware they’re giving the company the authority to act as their tax agent – and it remains so until the arrangement is cancelled,’’ she said.

‘‘There’s an onus on tax refund companies to keep their customers informed the arrangement is still in place. If a company hasn’t done so and receives the refund as a result of a return the customer has filed, we think it shouldn’t deduct a handling fee.’’

NZ Tax Refunds, or Woohoo, charges a $25 handling fee when it pays out money that has been sent to it in error.

But managing director Gabrielle Purchas said her firm’s systems were set up to automatically push money back to Inland Revenue when a client had not completed the return with the company.

She said it was an administrative burden for her organisation to have to deal with and was something that could be overlooked. ‘‘We send it straight back to IRD if we can see it hasn’t been requested.’’

Savvy Tax Agents said it would do the same but would not charge.

An Inland Revenue spokesman said it was clear on its MYIR online service whether a person’s account was linked to a tax agent.

‘‘The best advice would be that if you have used a tax refund company in the past then you should check all your details are correct on MYIR before you start applying for a refund yourself.

‘‘Once the customer has reached the My Tax Agent tab on MYIR, they can see who their tax agent is but to de-link they would need to give us this instruction by phone or through secure mail in MYIR.’’