Did you know you can file your own tax return online?
And if you don’t, you may be missing out on potentially thousands of dollars in tax refunds?
Filing your own tax return is not difficult, and is an important skill to learn when taking charge of your personal finances.
In this post, we’ll go step-by-step through the process of filing a return yourself using the IRD internet portal.
Do you need to file a return?
Many people are not required to file a return.
The IRD states:
If you received any other income apart from salary, wages, schedular payments, interest, dividends, and/or taxable Māori authority distributions, you must complete an IR3 return.
This means if you’re only income was your salary, interest from the bank and maybe some dividends from some NZ stocks, you don’t need to file.
However, that doesn’t mean you can’t file.
It can still be of benefit for you to file, as you may be entitled to a refund.
How To File Your Own IR3 Tax Return
Step 1: Register with IRD
To file your return, you’ll need to register on IRD’s website.
Simply head to the IRD homepage and click Register:
You are going to need your IRD number and email address.
If you don’t have your IRD number, you should find it on your payslips.
As you’re an individual, you should be creating a personal account using your personal IRD number, as shown below:
Go through the registration process and fill in your details as usual:
You can see screenshots of the full registration procedure in the IRD guide here.
Step 2: Collect Your Records
The IRD now collects more information during the year from the institutions that pay interest and dividends, so it should already have your dividend and interest information and will include that in your return for you.
However, it is possible you have received interest and dividends the IRD doesn’t yet know about, so make sure you have those documents with you too.
You will also need the details of any self-employed income and overseas income you have earned so you can include that too.
Also, remember that the tax year is different from the calendar year.
The tax year in NZ runs from 1 April to 31 March.
When working out your business income, self-employed income, overseas income etc, make sure you calculate your income for the “year” using these dates.
Step 3: Complete Your Return
IRD actually has a thorough guide for completing your tax return here.
It’s detailed, but not hard to follow for anyone who cares enough to learn the process.
There’s a misconception that you need an accountant to file tax returns.
IRD actually gives you all the instructions you need to file your own.
It might be time-consuming the first few times, but it’s generally a simple process that anyone can learn.
First, head to the “Return and Transactions” screen and go to the latest tax year.
Click “File Return”:
You will be taken to the cover page.
Make sure you are filing an Individual tax return (known as an IR3):
It will then ask you what types of income you have earned that year.
As I said earlier, IRD will already have a lot of your information, because a lot of your income is automatically reported to them.
For example, when your employer pays your wages, he has to deduct taxes and that information gets sent to the IRD.
When banks pay you interest, the tax they deduct is forwarded to the IRD.
Therefore, you will find the IRD already knows what types of income you have.
If there are other types of income you have not already checked by IRD, make sure you tick them on the list:
It will ask you if you have any secondary forms you want to submit.
If you own a rental property, you will need to file an IR3R (follow IRD’s instructions on completing IR3R forms here).
In the next slide the IRD will list special situations that may affect your return.
Check any that might apply to you:
The next section is for disclosures.
If you have over $50,000 of foreign stocks, you may be required to file a FIF disclosure.
If you have sold a property during the tax year, you will need to file a Property Sale Disclosure.
The next section is where you declare your income.
You need to declare all the income you earned during the tax year.
As I said, some of these sections will already be filled out for you (usually the NZ interest, NZ dividends and NZ wages/salary).
If you have overseas income (this includes overseas dividends from Australian, US companies etc), IRD probably won’t have this information. You will need to include it.
Obviously in the example below I’ve just plugged in some dummy figures, but it will look something like this:
A reminder here that you cannot include Australian franking credits, BUT you can include withholding tax on dividends and tax paid on foreign interest on your overseas dividends where we have a double tax agreement (DTA) with that country.
Even if we don’t have a DTA with the country, you may still be allowed the tax credits if they are a basic withholding tax like we have in NZ:
You can read more about this on the IRD website here.
The next slide is for you to include your expenses.
If you have other expenses like the ones IRD has listed above as examples, include them here.
This can include fees to your accountant, or interest paid to IRD.
If you have already included these items in the previous slide (such as part of your self-employed income) then you shouldn’t include them here again.
This next section is where IRD might claim that the income you have declared differs from their records.
This might be if you have wages or salary they didn’t know about, or added in extra dividends or interest.
This is where you should attach documents showing the additional income you’ve declared.
These attachments might include dividend statements, interest statements, or a set of financial accounts.
It’s up to you how much additional information you provide, but you want to provide enough that IRD can be satisfied that your claims are genuine.
Just make sure you’ve provided your true income to the best of your knowledge, and provided the documentation to show that.
IRD will contact you if they need more info.
In the next slide, the IRD will work out how much tax you need to pay:
In the example above, you can see I’m owed a refund of $1,059.
Once I file my return, IRD will check that it’s accurate and then process my refund.
I can choose to have this sent directly to my bank account:
If you have tax to pay, IRD will give you instructions on how to pay it.
Most banks will have an option to make payments to IRD built into online banking.
For example, here is ASB:
Simply select IRD Payment, choose income tax (INC) and send your payment through.
You’ve now filed your own tax return.
Questions? I cannot answer tax questions specific to individuals, but I will do my best to answer general questions on IRD guidelines. Leave them below!