Protect your refund
‘ If the calculator tells you that you owe money, do nothing. There won’t be any IRD goons in jackboots busting down your door at midnight.’
CALCULATOR in hand, I fired up my laptop and opened a few tabs. After 15 minutes, I closed the lid again. A couple of weeks later, $196.46 landed in my bank account, courtesy of the fine folk at the Inland Revenue Department. Easy as pie.
I always look forward to tax season. Because of the way the system works, most of us end up overpaying throughout the year for various reasons. Refunds are common, and you never know how much you’ll get. In a good year, it’ll be chunky enough to cover a few weeks’ rent, or splash out on something nice.
That’s only if you manage to steer clear of the parasites. Every year, a host of tax refund companies crawl out of the woodwork. ‘‘Don’t worry your pretty little head,’’ goes the usual sales pitch. ‘‘We’ll take care of everything, and if there’s no refund, we won’t charge a fee!’’
Once they’ve latched on, they won’t let go unless you tell them direct. They’ll automatically process your refund, keeping their proboscis in your wallet from now until the end of the time.
The reason there’s so many refund companies is that it’s money for jam. Most people put tax returns in the too-hard basket, but it’s actually dead easy for ordinary wage or salary earners. I’ve done my own return every year, and have never run into a moment’s trouble.
Companies tend to charge a flat fee, a commission of 12 to 20 per cent, or a combination of both. In the past five years, my refunds have totalled about $1200, and I’ve kept every cent. After running the numbers I found I’d be poorer by anywhere from $145 to $235 today if I’d employed the services of the refund firms.
That 15 minutes of work saves me, on average, about $50 in tax agency fees each year. Who could turn up their noses at the equivalent of a $200 hourly wage?
The first thing to do is register for an online account with the IRD, if you don’t have one already. There you can find a stepby-step calculator which tells you whether you’re owed money. Use your last payslip for the year to check whether the salary and tax details in the system are correct. If you have any other sources of income, like bank interest or dividends, you’ll be prompted to enter them along the way.
If the calculator tells you that you owe money, do nothing. There won’t be any IRD goons in jackboots busting down your door at midnight – this is actually what they recommend. If you’re due a refund, congratulations! You’ll be prompted to apply for a ‘‘personal tax summary’’, and once you’ve confirmed the details, a sweet wad of cash will land in your bank account.
If you have complex tax affairs, don’t try to be a hero. A good accountant will almost certainly save you more than the cost of their fees. But for the majority of us simple salary and wage earners, the DIY approach works out just fine.
The reason people are so complacent about tax refunds is they regard them as free money. This is, of course, an illusion. It’s cash you earned through your hard work that was mistakenly taken from you. Don’t be fooled into paying another ‘‘tax’’ just to recover what’s rightfully yours. Got a money question you’ve been struggling with? Want to send a bouquet or a brickbat? Email Budget Buster at meadows182@gmail.com or hit him up on Twitter at @MeadowsRichard.