We can’t avoid death and most of us can’t avoid taxes. But should you avoid tax-refund companies?
The days of filling in a form and seeing whether we owe tax or not have gone for most PAYE taxpayers. So how do you know whether you might get a refund?
You can call Inland Revenue or check its website. Or there are plenty of companies that’ll do it for you. Some charge you a pretty penny if you do get a refund.
Why use one?
Since 2006 businesses have sprung up, advertising they’ll check to see if you’re due a refund. Their hook is, no refund, no fee.
These companies generally have to be registered with Inland Revenue as “tax agents”. Some are affiliated with an accounting firm (the tax-refund business is a handy offshoot).
They’re easy to muddle up because most have at least one of the words “Kiwi”, “NZ”, “tax”, “my” or “refunds” somewhere in their name.
Each company likes to promote its “point of difference” – from claiming to beat another company’s offer by 10 percent or promising a chance to win a grocery hamper or smartphone through to loyalty discounts, Fly Buys points, or rapid processing and refund times. One now has a mobile app. The companies tempt you with testimonials from “happy customers” and claims about their “average refund amount” or the percentage of their customers who get a refund.
An appealing alternative
Tax jargon can be hard to understand at first glance. And sometimes it might seem easier to let someone else do the work – especially if you’re required to file an IR3 tax return (individual income return form) or want to claim for donations. A tax-refund company can be an appealing alternative when you don’t have the time, inclination, confidence or ability to do it yourself.
How they work
You fill in a form on the company’s website (or mobile app) with your IRD number, contact details and answers to a few questions about your income. You also need to provide evidence of ID (usually a driver licence).
Completing the form means you authorise the company to act as your tax agent. It now has access to your income-tax info at Inland Revenue. The company uses this, together with the information you provide, to calculate whether you have any tax refunds owed to you in any of the last 5 years.
If you have a refund owing, the company will request your “personal tax summary” (PTS) for the years you’re owed a refund. It won’t request one for the years you have tax to pay. (This will stop soon. See "Changes to come", below.)
The company will then confirm your PTS. Inland Revenue will pay your refund to the company, which then pays it to you – minus its fees.
What if you already owe money to Inland Revenue? Your refund can be used to cover past debts. And Inland Revenue also carries out random audits so even if the company doesn’t request a PTS you may still be contacted by Inland Revenue.
What do they charge?
Become a Gold or Silver member to find out more about tax refund company fees.
DIY tax refunds
Finding out from Inland Revenue whether you’re owed a tax refund isn’t difficult. Its website explains things well and contacting Inland Revenue with a query can be no more daunting than calling some of the companies we looked at.
Even filing a rebate claim for donations or an IR3 is straightforward. Give it a go! It’s free.
4 steps to a refund
- The Inland Revenue website has a simple “personal tax summary” calculator for each year from 2009 to 2014. (You’ll have to register with Inland Revenue’s online services to access the 2014 calculator.) Inland Revenue says it doesn’t store the information you put into the calculator.
- You’ll need income info for the calculator. For 2014 the calculator will automatically insert your income from your employer. For previous years you can get this from your “summary of earnings” (SOE), which becomes available in May each year and which you’ll need to request from Inland Revenue (you can do this by telephone). Or you can get the info by registering with Inland Revenue’s online services.
- Put your income info into the calculator, including any other income such as interest or dividends, and answer a few questions. Make sure you claim any expenses. The calculator then shows whether you have a refund owing or tax to pay.
- If you have a refund due, request your PTS and then confirm it. Once you’ve confirmed it Inland Revenue will deposit the refund in your bank account or send you a cheque. It won’t have cost you anything except your time and maybe a few brain cells!