It’s a sad fact that tax is a big part of being in business. Not only do you have to pay over a large chunk of your money to the IRD in various taxes, but like it or not, you also have to act as tax collector, as well as working unpaid for other Government agencies, whether it’s collecting court fines or child support.
Unfortunately some businesses owners and self-employed people never seem to be able to cope or get to grips with income tax, and it just becomes an insurmountable, frightening problem that leads to financial ruin for many.
If you want to succeed in business the first key to success is acceptance. Do whatever you need to do - go and lie down, have a triple-shot coffee, or relax with a glass or two of your favourite glass of wine and let it embrace you. It’s just inevitable - you cannot run a successful business without suffering, and that’s that!
Plan For It
Having accepted you need to pay, the next thing to do is to plan for tax. Find out when you have to pay and how much. That means getting a good accountant and having your accounts and tax returns prepared early. Ask the accountant to let you know about future tax instalments. Knowing what you have to pay and when is absolutely vital so you can either allocate some money or start saving for the inevitable.
Don’t Sit Back and Do Nothing
Many seem to think that if you ignore tax it will just go away and that you can spend your money on more important personal things. If only - but no, that just means the amount you owe just grows and grows as each instalment date passes by and the IRD just pile on interest and penalties by the bucket load. It’s nigh on impossible to pay current taxes as well as tax arrears so avoid this situation at all cost!
Of course in business there are many uncertainties and despite best intentions there will inevitably be times when many business owners can’t pay their tax, so here are a few things you can do until your situation improves:
IRD Arrangements. It’s normally very straightforward to make an arrangement with the IRD as this can be done over the telephone or online. Yes they still do charge you interest but their interest rates are not too bad and they let you off the nasty penalties. You can have up to two years to pay the debt which is pretty generous after all.
Remission of Tax Debt. In certain circumstances it’s possible to get the IRD to write off all your Income Tax debt. For example, I recently managed to get $95,000 worth of Income Tax debt written off for a client. Unfair in many ways I know to those of us who pay their taxes but nonetheless effective!
Tax Pooling. Another effective way of paying taxes late, tax pooling can be used to pay Provisional Tax late or Terminal Tax up to 60 days of the Terminal Tax due date. It’s very useful because firstly, the interest rate charged is less than that charged by the IRD, and secondly, it removes any possibility of penalties because it’s treated as being paid on the original dates it was due.
Most important of all is to do something and take action, even if it is taking advice. It sure beats putting your head in a bucket of sand whilst the amount you owe gets larger and larger!