Accountants angry at Inland Revenue 'confusing' clients

Monday, 21 October 2019

Taxpayer needs to prove to Inland Revenue he's not dead.

Inland Revenue is being told to butt out and stop communicating directly with accountants' clients.

Tax agents across the country are complaining that the department is acting outside its remit by sending sometimes-confusing messages straight to their clients, which leaves their accountants 'picking up the pieces'.

In some cases, the information the department sends is incorrect or runs counter to what they have already been told.

Tax consultant Terry Baucher said it was something that accountants were feeling increasingly exasperated about.

* 'Wrinkles' with new IRD system adding up to a bigger headache, says top accounting body

* IRD is glossing over problems with its new tax system, fears Auckland accounting firm**

He said it felt like the department was trying to undermine their relationship with clients, and it was very disruptive to their businesses.

'This is something that is just causing chaos…. At some point someone somewhere is going to sue Inland Revenue.'

Accountants said it felt as though Inland Revenue wanted to get rid of tax agents.

It created extra work for tax agents who had to talk to their clients about the communication they had received, even if only to tell them that no changes needed to be made. 'Who pays for that?'

Jeff Owens, of Owens Tax Advisors, said he'd seen taxpayers being sent letters warning them of large amounts of tax due 'soon'. But it would then transpire that the debt was not due for many months and it had already been arranged for payment. 'The prime example being provisional tax not due until as late as January or May next year.'

Some people were told that a tax return had been submitted when, in fact, the department had generated one for them, not knowing they had other income that needed to be accounted for.

'Agents are equipped to sift out and correct Inland Revenue's correspondence but don't get the opportunity. At best, a large proportion of such correspondence is duplicating what the agent is going to tell their clients anyway and simply services to make clients panic and generate more unnecessary dialogue between taxpayers, agents and Inland Revenue. So much correspondence that Inland Revenue has taken senior staff off their substantive roles and allocated them to answering phones or replying to routine correspondence.'

Inland Revenue spokesman Rowan McArthur said letters that should go to accountants were being sent directly to clients because of the changes to the department's computer system.

'It's something we've been talking about with accountants for a while now and we're working on fixing it.'

Inland Revenue says problems with its new computer system are the cause of some letters being sent incorrectly.

He said some letters had always been intended to go direct to clients but some were sent in error.

Craig Macalister, tax advisory partner at Findex, said his firm experienced it regularly.

He said some small accountancy practises were too concerned to raise the issue with Inland Revenue directly.

'I get it that at times Inland Revenue need to go direct to the clients, but that should be the exception. Corresponding with a tax agent's clients directly undermines the relationship with the client. Unfortunately Inland Revenue are either oblivious to this or just don't care.'

John Cuthbertson, New Zealand tax leader at Chartered Accountants Australia and New Zealand, said it was an issue.

'While Inland Revenue are within the law to direct correspondence to the client directly, in our view tax agents play an important role in the administration of the tax system,' he said.

'In many cases, taxpayers have an agent specifically to handle their tax affairs and correspondence. Where the tax agent is linked to a client for a specific tax type, our preference would be for that communication to be directed to the tax agent in the first instance.

'We hear from members regularly that clients feel quite alarmed when they receive Inland Revenue correspondence 'out of the blue' that they were expecting to go to their tax agent to manage. Further, we hear from members that this alarm, and the additional time to investigate or source the correspondence, causes significant delays for our members, and their practice, as well as costs that the clients don't like or want to have incurred.'

A survey of members last year found that some thought that Inland Revenue was trying to phase out tax agents. That survey showed that two-thirds of public practice accountants had had their clients contacted directly by Inland Revenue.