Question of the Month: February 2025
Hamish MacDonald, Client Solutions Expert
We're back again with another Question of the Month!
This time, we’re diving into how you can use tax pooling to help unlock a refund that Inland Revenue (IR) is applying against underpaid provisional tax.
Let’s get down to business and see how this little tip can assist your clients.
Below is February's Question of the Month.
IR is applying a client’s refund towards an underpaid provisional tax instalment for the 2025 tax year. I’m reluctant to switch my client to the estimation method to free up this refund given the potential use-of-money interest implications for them. How can tax pooling assist?
Tax pooling can certainly help you free up a refund that IR Is applying towards a client’s underpaid provisional tax instalment.
There are two ways to achieve this outcome. You can either:
- Get your client to deposit their provisional tax payment into the Tax Traders tax pool on their relevant instalment dates.
- Set up a payment arrangement for the relevant instalment date. This can be done prior to or after the instalment date has passed.
When your client deposits or puts in place a payment arrangement with Tax Traders for a given tax year, we will notify IR and a tax pooling indicator will be added to your client’s myIR account to reflect that they intend to use tax pooling to settle their income tax liability.
This means any tax credit IR is applying to an underpaid provisional tax liability will be refunded to your client, without you having to file a provisional tax estimate.
A tax pooling indicator also ensures that IR will not take any debt enforcement action against your client.
What is Question of the Month?
Question of the Month is a new segment we introduced this year.
It works like this: Every month, we answer a question that relates to tax pooling, provisional tax or the leading-edge smart tools we’ve developed to simplify your workflow.
Our aim is to provide you with useful tips or information to help you deliver the best outcome for your clients.
If you haven't done so already, don't forget to check out the answer to last month's question.
January 2025
A salaried employee received one-off income after selling cryptocurrency without tax being deducted. Will they be exposed to use-of-money interest if they did not pay provisional tax during the 2024 tax year?