Tax Refunds: DIY or Third party tax agent?
- May 21, 2014
It’s that time of the year again; and most of us are excited to see how much their tax refund will top them up! It takes about three months for your tax refund to be processed, but now comes the popular debate: do it yourself or sign up for a tax agent to do it for you?
The end of the tax year brings a whole lot of stress to some, but for other taxpayers, the exciting promise of ‘an average tax refund of $460 (according to mytaxrefunds) seems like a good reason to pay up to 30% of the refund amount (not including GST) to a third party tax agent.
The common misconception with tax refunds is that it’s ‘free money’, so lots of us don’t mind forking out some of that ‘bonus moolah’ to a tax agent to make the process easier. But really, it’s still the money we work hard for every day, so we should value it exactly the same as our pay cheques!
Lots of New Zealanders are hesitant to use the IRD as we have this view of them being difficult, time-consuming and un-user-friendly. To put it simply, lots of people prefer not to deal with the IRD because they don’t feel like they have the patience. Which is fair enough, because it does seem a lot easier to just sign up, pay the fee and have the whole tax refund sorted out by someone else for you.
The reality is that both options offer a straight forward online process, and the only difference with the IRD application is that you have to call them to activate your online account – that is, if you are not already registered. That doesn’t seem like much trouble when you consider how much more of you hard earned cash you get back!
The hugely emphasized benefit of not having your PTS (Personal Tax Summary) submitted to IRD, is what seems to have customers flocking to the third party tax agents. Although it seems like a great benefit to not end up liable for tax bills you still owe, you can also figure this out on the IRD website yourself without liability. The IRD website even says that if you haven’t paid enough tax, just to do nothing and better luck next year! However, although the questions in the IRD application are fairly simple, you can risk getting less than you should if you misunderstand anything.
In the past, third party tax agents were notorious for hidden fees and providing misleading information. Certain companies have even been warned by the Commerce Commission for failing to meet Fair Trading Act obligations, like failing to clearly disclose crucial information such as the cost of service and ongoing contractual relationships.
Although this aspect of the tax refund business has certainly improved in the past couple of years, it is still very important to read the terms and conditions to make sure you understand what you’re signing up for.
At the end of the day, whether you apply for your refund through IRD or a tax agent won’t make too much difference, it’s more a matter of choice and convenience. The most vital thing to keep in mind is to make sure that you understand the questions they’re asking and the financial terms they are using before going ahead with anything. This will help ensure you get the best value for your time and money, and then all you have left to worry about is how you’ll be spending the extra cash!