Individuals are ultimately responsible for their own tax, and each person is responsible for determining whether they are required to file a tax return.
Many people don’t realise this, as they assume their employer or their investment provider, like their bank, is deducting the right amount of tax.
However, even people with quite straightforward sources of income can end up with tax to pay or a refund at the end of the year. This happens, for example, if the person does not work a full year, or has a second job during the year and isn’t taxed at the correct rate.
Individuals who have had more than $200 taxed at the wrong rate or not taxed at all do need to file a return. Many people don’t realise this. The $200 threshold for filing can equate to up to $66 of tax to pay for that person.
However, people who do file a tax return must pay any tax owed as a result of the return.
A person who is not required to file a return can choose to file a return, for example, if they are due a refund.
Although Inland Revenue does help people during the year to get their tax right it doesn’t have full visibility quickly enough of an individual’s complete tax affairs. For example, it may be several months before Inland Revenue can see that an individual has a second job and, by that time, the individual could already have under or overpaid tax, meaning there will be tax owing or a tax refund due at the end of the year.
A special tax code is a tax deduction rate worked out to suit your individual circumstances. You may want one if the regular tax codes will result in you paying not enough tax or too much – for example if you have two jobs.
Currently if a person wants to use a special tax code, there is a paper form to be filled in. When the use of a special tax code is approved by Inland Revenue, the individual has to inform their employer to change the tax code.