IRD Spotlight: Is Your Business Being Monitored by the IRD?

Written By Eshan Gupta

Heads up, Kiwi business owners! We've noticed a trend: the Inland Revenue Department (IRD) is sending out letters notifying businesses of closer monitoring. If you operate in retail, hospitality, beauty, fitness, construction, or the fast food industry, you might be one of them.

What's Happening?

The IRD is ramping up its efforts to ensure tax compliance, armed with increased government funding for enhanced data monitoring, pursuing outstanding tax debt, and conducting audits. This isn't necessarily a sign you've done anything wrong. It's more about the IRD keeping a closer eye on specific industries.

How Does the IRD Monitor You?

The IRD has a sophisticated system for tracking tax compliance. They compare your current returns with past submissions and industry benchmarks to identify any red flags. Plus, they have access to a wealth of third-party data, including:

  • EFTPOS transaction data: Every swipe is recorded.

  • Bank and investment records: Both local and international.

  • Property data: From Land Information New Zealand (LINZ).

  • Cryptocurrency transactions: Yes, they're tracking those too.

  • International tax information: Sharing agreements mean cross-border data.

  • Online marketplace data: Trade Me, Airbnb, and more.

Why These Industries?

The IRD is focusing on the "hidden economy," particularly sectors with high cash transactions. This includes:

  • Retail

  • Hospitality

  • Beauty (hairdressers, beauty salons, etc.)

  • Fitness (personal trainers, etc.)

  • Construction

  • Fast food

They're also conducting site visits to ensure accurate income reporting, proper employee/contractor classification, and correct PAYE payments.

What Should You Do If You Receive a Letter?

First, don't panic. Receiving a monitoring letter doesn't automatically mean an audit is imminent. Think of it as a nudge to ensure your records are in order.

Here's what we recommend:

  • Review your financial records: Ensure all income and expenses are accurately reported.

  • Maintain detailed records: Keep invoices, cash sales records, receipts, and vehicle logbooks.

  • Seek professional advice: Talk to your accountant. They can help you navigate tax compliance and address any concerns. If you have received a letter from the IRD, be sure to inform your accountant immediately.

  • Contact Us: If you receive correspondence directly from the IRD and have any questions, please let us know via phone or email info@taxprofessionals.co.nz.

Key Takeaways:

  • The IRD is using extensive data to monitor tax compliance.

  • Industries with high cash transactions are under increased scrutiny.

  • Maintaining accurate records and staying informed is crucial.

In essence, this is a reminder to stay on top of your tax obligations. Being proactive now can save you potential headaches down the line.

Remember, at Tax Professionals, we're here to help you navigate these changes. Don't hesitate to reach out if you have any questions or concerns.

Eshan Gupta
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