When you find yourself in over your head with tax debt problems, it can feel like you’re drowning in owed money, confusing legal battles and possibly the threat of bankruptcy. Unfortunately, tax arears often occur because of a mistake or unforeseen circumstances, but that doesn’t stop tax debt from snowballing out of control.
Here’s our quick overview of the ins and outs of what happens when you can’t pay tax debt – and how to get out from under the piling snow.
What are tax arrears?
Simply put, tax arrears are when you owe unpaid taxes to the government. In New Zealand the tax system can be confusing for business owners unfamiliar with the jargon of the tax world. Tax debt problems arise when any of your tax payments are overdue.
The IRD has the power to recover unpaid tax debt from your bank account or pay, prevent you from leaving the country, freeze assets and liquidate your business. Tax arrears is serious business.
How does it happen?
In our experience as tax debt consultants, we understand that few people underpay taxes on purpose – most often there is a surprising situation like an injury, poor cash flow, bad advice or a shock quiet season that makes it difficult to make a tax payment.
The Snowball Effect
When you have underpaid your taxes, the IRD starts charging interest and late penalties. These penalties are high, so even a small amount of tax debt can turn in a major problem.
It’s worth noting that even though the origin of tax arrears is often innocent enough, people have a habit of running from their problems rather than face them head on. Tax debt problems get placed in the ‘too hard’ pile, which is when the snowball really gets out of control.
How not to get buried
As soon as you find you can’t pay tax debt, get in touch with Tax Debt Sorted. Waiting does no good; rather, getting professional help from tax debt specialists with experience at the IRD as soon as the tax debt problem arises is absolutely your best bet.
At Tax Debt Sorted we are not here to judge – we know that things happen and have seen it all before. Helping people get on top of their tax debt mountains is precisely why we started this business.