What to Do If You Can’t Pay IRD Tax on Time
: If you cannot pay IRD tax on time, the most important step is to contact Inland Revenue early. Filing returns on time, arranging a repayment plan, and communicating financial difficulty can prevent enforcement action and reduce penalties.
What to Do If You Can’t Pay IRD Tax on Time
Many individuals and businesses in New Zealand face periods where paying tax on time becomes difficult. Cash-flow challenges, seasonal income fluctuations, unexpected expenses, or business slowdowns can all affect the ability to meet tax obligations. The key point to remember is that Inland Revenue generally expects communication rather than silence.
File Your Tax Return on Time
Even if payment is not possible, filing your return on time is essential. Late filing penalties can apply separately from late payment penalties, meaning delaying submission often increases the total amount owed.
Filing on time demonstrates compliance and improves the likelihood of being offered flexible repayment options.
Contact Inland Revenue Early
Early communication is one of the most effective ways to avoid escalation. Inland Revenue often works with taxpayers who engage proactively rather than those who ignore notices or reminders.
Official guidance can be found here:
IRD Debt and Insolvency Guidance
Consider an Instalment Arrangement
Many taxpayers manage short-term financial difficulties by setting up a repayment arrangement that spreads payments over time.
Learn more:
What an IRD Instalment Plan Is
How to Apply for an IRD Instalment Plan
Understand Penalties and Interest
If tax is paid late, penalties and use-of-money interest may apply. These charges can increase the balance over time, which is why acting early often reduces overall costs.
IRD Penalties and Interest Explained
Avoid Ignoring the Situation
Ignoring tax debt can lead to enforcement action such as deductions from bank accounts or legal recovery. Understanding this process helps taxpayers take early steps to prevent escalation.
What Happens If You Ignore IRD Tax Debt
Common Mistakes to Avoid
- Ignoring IRD messages or reminders
- Failing to file returns
- Waiting until enforcement begins before contacting IRD
- Setting unrealistic repayment amounts
These mistakes often reduce flexibility and increase financial pressure.
When to Seek Professional Help
In more complex situations, such as large tax debts, multiple overdue returns, or ongoing cash-flow problems, seeking professional advice may help. Advisors can assist with repayment proposals and communication with Inland Revenue.
For example, firms such as DFK ORB360 Chartered Accountants provide accounting and tax advisory services to individuals and businesses managing IRD obligations.
Why Early Action Makes a Difference
The earlier you act, the more options are available. Taxpayers who engage early often avoid enforcement, reduce penalties, and maintain better financial stability.
Related IRD Guides
- What an IRD Instalment Plan Is
- How to Apply for an IRD Instalment Plan
- IRD Penalties and Interest Explained
- What Happens If You Ignore IRD Tax Debt
- What Happens If You Default on an IRD Instalment Plan
Conclusion
Not being able to pay tax on time is more common than many people realise. The most important step is to act early, communicate clearly, and explore repayment options before penalties and enforcement escalate.