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Integrate PAYE into payroll software

What should the approach be to correction of errors?

Even where payroll software connects directly to Inland Revenue, PAYE errors will still arise, and will need to be corrected. 

It is proposed that payroll software which connects directly to Inland Revenue will be able to advise Inland Revenue of error corrections when the employer’s payroll is updated. There are two ways this could be done:

                1.  the correction could advise what was actually paid and deducted, and what should have been paid and deducted, for each period in which the error occurred; or

                2.  the correction could simply advise of the changes required to each pay period in which the error occurred.

There is currently no PAYE equivalent of section 113A of the Tax Administration Act 1994 which provides for the correction of minor errors in subsequent periods. The Government is interested in feedback on whether section 113A needs to be extended to cover minor alterations to the tax position employers take when they return PAYE information.

Questions

1.  If your payroll software could calculate the information required to correct errors and you could use it to send that information to Inland Revenue when you amend your payroll records would that increase or reduce your compliance costs?  If you can quantify the effect please do so.

2.  Do you prefer one or other of the two options outlined above for the information to be provided when PAYE information is amended?

3.  Do you think there is a need for legislation to explicitly provide for the correction of minor errors in a subsequent pay period?  If so, at what $ value should the threshold be set?

Comments

Haydn J
1. I think this is a good feature. It would save time advising any corrections. 2. Simply advising the amount of the change seems simplest, but if it is all automated I don't suppose it matters what is advised. 3. Yes, an explicit allowance to correct minor errors without penalty would be useful.

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8 months ago
Software training contractor
1. Yes. 2. I'd be plumping for the 2nd option as long as the aggregate changes could be detailed in the event of an audit. 3. I think a grace period of 2 times the payment schedule would be ok with a value limit being unhelpful due to the vat wage disparities that exist.

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8 months ago
Lyn
I would agree with this comment.

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8 months ago
michele hunt
for those not on a payroll system i think it should be sufficient to inform PAYE of what the changes for each payroll period should be and preferably online. The paper forms are laborious particularly as only one pay period per form can be entered.

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8 months ago
Suzanne Ashton
1 & 2. Any online correction method would be a timesaver. Either via our payroll software or Inland Revenue's Online Services area. At the moment IRD Secure Mail is a good but not timely solution. One time we accidentally put the wrong month ending on our PAYE schedule and it took almost 4 months to have this corrected via secure mail / telephone calls to IRD, wasting hours and hours of unnecessary admin resulting from this one small error. We couldn't enter the next period until this error was fixed, on and on went the saga. I would have loved to be able to simply get online to edit and resubmit the IR345. 3. A grace period of two times the payment schedule plus a discrepancy threshold up to two hundred dollars seems reasonable.

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8 months ago
Bernadette
Automated corrections would be great.

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8 months ago
Martin Etherington
In practice, once staff (and IRD) have been physically paid for a pay then that pay should be 'locked' and any corrections made in a separate pay or a subsequent pay. Ideally between completing a pay (and filing the information to IR) and the staff, etc. being physically paid, a pay should be able to be corrected and the information refiled/submitted. (This would require a unique identifier for the pay). The next best thing would be to be able to see the information in myIR and manually edit and update the previously filed/submitted information. I don't like the idea (as used with the current IR344 process) of (re)submitting the original information and submitting the new information. Most payroll software doesn't keep the original information, as it gets overridden when making changes. It is common practice (even if it isn't legislated) to make corrections in a subsequent or a separate pay. Most corrections are not due to incorrect tax calculations (e.g. wrong tax code) but due to changes in earnings which of course have an effect on the taxes, etc. Once a pay has been paid it is generally impractical (and potentially impossible) to amend the original pay. Therefore I would support a change to section 113A to be extended to cover minor corrections/alterations to the tax position employers take when they return PAYE information. Sometimes corrections made (especially in a separate pay rather than incorporated in a subsequent pay) result in negative amounts. e.g. An employee was paid for a full month, when in fact they had left early in the month. If a separate pay is run to reverse some of the earnings and pay out any remaining leave etc., the pay may be negative requiring the employee to repay the employer. These negative amounts need to be able to filed. In this case a refund would be expected from IR.

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5 months ago
Angus Ogilvie
I think similar rules should apply to PAYE errors as they do for Goods and Services Tax. Errors of any amount should be able to be rectified in the next return or by NOPA if discovered later. This should be an online service. The secure mail service is simply too slow and inflexible, particularly when complex data needs to be disclosed.

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5 months ago
Noel Reid
If implemented well, it would be great; esp if IR344s were totally eliminated in the process. Option 2 please.

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5 months ago
Chris Mar
Once a pay has been approved and paid it should not be changed in payroll records as that is a historic record of what was originally paid. To make amendments, it is cleanest to show the reversal of the wrong payment and the replacement with the correct pay. From an audit perspective this makes it very clear as to what has occurred. This argument would tend to support the first option suggested for making amendments. Whatever option is adopted, the current restriction on not being able to report -ve amounts must be removed. With regards to question 3, I am in favour of making changes to section 113a if it was to result in less adjustment processes. Despite payroll software streamlining the process, this will still no doubt be more cumbersome than simply making corrections in the following pay.

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5 months ago
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