Accountant Mistake ?

[cha]

Hi,
I am newbie to forum and hope that I am posting this in the correct section.
We own few rentals and go through an accountant to do our tax return etc.
Me and my wife both work full time.

Last year I worked in Aussie for 3 months and return back to NZ.
The accountant predicted that last year tax trurn was around $6000. But IRD only paid around $2000. When I asked for a an explanation the accountant said he cannot get to IRD and the call center cannot answer the question.
Finally after few reminders to him(and almost after an year) he came back with the explanation saying the amount of tax I paid in Aussie cannot be fully taken into account in NZ (which I don't understand).

Question is: Can I ask some compensation from the accountant for the error ?

[speights boy]

Question is: Can I ask some compensation from the accountant for the error ?

What loss have you actually suffered ?
IE: What actions did you take, based on the accountants advise, which have caused you to be worse off ?

[cha]

I was hoping to payback part of the rental property overdraft I have. Now the account is fully over drawn and I have to pay that and additional interest of the overdraft from my own funds.

[speights boy]

Sure; but if the accountant had predicted $2,000 from the start; what would you have done differently ?

[cha]

I don't know, but I was planning to use that refund. Has your accountant done similar mistakes ?. Just want to find out that is a common thing among tax accountants ?. Now on top of this he has send me his invoice as well :-). Do you think it is time to change the accountant ?

[Rosco]

Hi Cha,

You can only predict/estimate a tax refund based on the information available. It is an estimate, so means it will often not be perfect.

Once you do the full tax return, and full calculations, then an accountant should be able to tell you the right amount of tax refund or tax to pay. But sometimes the accountant misses something, or isn't told a piece of important information, so the calculation can be wrong.

In your case, when the accountant did the tax returns, there computer system and their knowledge should have picked up that not all the Australia income tax would be claimable in NZ. ie if you pay 40% tax in Aussi, still can only claim the max in NZ of 33%.

Your accountant shouldn't have needed to contact IRD about this, but if they did, then you can always get through the same day, or really worst case the next day. So I think your accountant has lied a little on that part.

But overall your refund is what it is, just because your accountant has estimated it wrongly, doesn't mean they should pay you the difference. If they made a major mistake, ie their calculations from the full tax returns said $5k refund and you only got $2k, then I think they should pay their time to fix it, but you were still only due the $2k so they shouldn't owe you anything.

Is it a cheap and nasty accountant, or a small one man band, or a non CA firm? As it sounds like you aren't getting great advice!

Ross

[gavinc]

In your case, when the accountant did the tax returns, there computer system and their knowledge should have picked up that not all the Australia income tax would be claimable in NZ. ie if you pay 40% tax in Aussi, still can only claim the max in NZ of 33%.

Ross

Hi Rosco - I am interested in your comment above. Are you saying that someone who worked in Australia as a non resident (in Australia) is liable to declare that income to NZ IRD despite the fact that they have already had tax deducted at source in Australia?

[Rosco]

Hi Gavin,

I'm saying someone who is still tax resident in NZ, which Cha is likely to be, has to return their worldwide income in NZ. So yes, if they work in Australia on a salary, they would have to return the income in Australia and pay tax in Australia. Then in NZ they would have to return the same Australian income (in NZD obviously) and would get a tax credit for the Australia tax paid, up to the amount of NZ tax required.

The same if you are NZ tax resident and you own Australian or overseas rentals. You will have to return the income and expenses in the overseas country, plus in NZ.

Ross

[Rosco]

Hi Cha,

I also wanted to clarrify that Working for Families is a pain at the moment, and lots of accountants give an estimate, but there can be factors they are unaware of such as child support that can change the amount refunded for WFFTC.

Ross

[gavinc]

Hi Gavin,

I'm saying someone who is still tax resident in NZ, which Cha is likely to be, has to return their worldwide income in NZ. So yes, if they work in Australia on a salary, they would have to return the income in Australia and pay tax in Australia. Then in NZ they would have to return the same Australian income (in NZD obviously) and would get a tax credit for the Australia tax paid, up to the amount of NZ tax required.

The same if you are NZ tax resident and you own Australian or overseas rentals. You will have to return the income and expenses in the overseas country, plus in NZ.

Ross

Thanks Rosco - that's clear now.

[Leftette]

"I can't get to the IRD and the call center cannot answer the question"

Sounds like the lazy reply from the Junior Assistant to the Trainee Secretary's slightly more stupid daughter who's on her school's Year 8 work-experience programme.

[klauster]

"I can't get to the IRD and the call center cannot answer the question"

REALLY??
the IRD offers secure email (good for record keeping) and they IRD business centre calls me back

[cha]

Hi All,
Thanks for the replies. I think I will let it go without a fuss this time. As some of you have predicted this place is not giving good advice.
We have 2 renters (on our own name now; used to be LAQC). Is there a advantage going to an accountant rather than doing the accounts on your own - now that we are a partnership ?
Is IRD less likely do audits on people who go through accountants ?

[Rosco]

Hi Cha,

Obviously I'm always going to suggest you go to an accountant. One that specializes in property, is a chartered accountant, and medium sized (small one man bands can cause issues if they get sick or go away, large firms generally charge too much)

Yes Chartered Accountant firms do get less audits, not that this is a big issue.

Doing Trust or Company financial statements is more difficult, and it is possible to do sole trader or partnership accounts and tax returns yourself. But could you be missing other opportunities or advice, as you don't know what you don't know.

Another option is to get a review. We charge around $300 + GST to review your financial statements and tax returns. I personally review the information, look for opportunities to improve the overall situation and also look to see if there are more expenses you could be claiming.

Ross