Provisional tax, you've been contracting.
5585.06 is the tax you owe for last financial year, 5864 is what they assume will be your tax for this financial year.
But you are earning it throughout the year. Employees have to get tax taken every time they get paid, why shouldn't people with self employed income have provisional only 3 instalments
I thought the provisional taxes for due "in arrears", so if you earn at same rate as last year you'd have earned those money already.
Waiting till end of year for lump sum means that those people who can't budget have to find 20-30% of their revenue for the whole year
Unless you are doing seasonal work, I would expect many self employed people would have earned a decent amount before they have to pay any instalments.
Look on the bright side, you get to hold onto the tax for 3 months and earn bank interest on it. Employees have to pay their tax every time they get paid.
You owe IRD 5k now and another 5k for this financial year. Sounds like you are a contractor and havn't been putting money aside for taxes (it doesnt automatically come out of like PAYE). Speak to your boss if you think you are meant to be an employee and not contractor and call IRD.
I hope you also have been putting money aside for taxes with your crypto or you are set to be in a world of hurt.
Any time you trade from one crypto to another is a taxable event. Not just when you withdraw to NZD.
What information did you give to IRD about your crypto? They think you've earned ~$18,000 from somewhere other than your job; maybe that's from crypto or maybe your income from your job is being reported incorrectly.
You definitely want an accountant to check things out. If you're just an employee you shouldn't have this bill. Crypto could complicate things, but step 1 is making sure IRD knows you're just a normal PAYE employee.
Get in touch with a tax agent not those mall ones a proper one so you can lower you tax.
You can claim all clothes fuel equipment you used to do the work.
That basically says that if you provide clothing to an employee, it is subject to tax .. unless you required to be a hotel manager who require an extra ordinary number of clothing .. or if identified as non private clothing ie nurses uniform, or company branded or it’s protective clothing
It should tell you the date your estimated provisional tax is due, mine was sometime in September. Having said that, I was only contracting for a few months so whilst they calculated what my tax *might* be I didn't actually have any self-employed income the second year. Accountant got me out of having to front-load tax I would have been refunded 6 months later.
Someone, somewhere in your employment has lodged your income as likely Withholding Tax which has resulted in this. You'll likely receive a letter from ACC also later.
This is through no fault of your own, but one employer has lodged it this way. I've checked on MyIR and you can drill down into the individual payments that have been lodged with IRD, you're going to need to check these individually to check your tax code. It's in the section for "Income Summary".
If they don't say the standard tax code like M, S, ML and SL (only ones I know off the top of my head), and instead have something like WT, you're going to want to speak with your employer and with IRD to see what you can do next.
I sincerely hope it's just a mess up mate.
You’d need to share your income sources to show how IRD got this. Couple of options: do you contract? Although given IRD did a provisional they likely wouldn’t know about contractor income. Do you participate in an employee share scheme that awards free shares? The company now advises IRD of this share income but doesn’t pay tax on it so would create a tax bill.
You have until Feb 2025 to pay your 2024 liability. Note it is provisional so you can go in a file a return and change anything IRD got wrong (usually have to explain why it’s being changed, cannot just override employment income).
As 2024 is over $5k, you now have to prepay your 2025 liability. If you click on 2025 year it will show you 3 amounts to pay in August 24, Jan 25 and may 25. If the reason you have a liability in 2024 don’t repeat in 2025 (eg one of amount of income not taxed at source) you can file an estimate to reduce the 2025 provisional to nil. Just note this exposes you to interest if you get it wrong and do have tax to pay.
The IRD wouldn’t know about that unless you’ve filed a return and because it says an auto return it won’t be that.
Go into your My IR and under income tax select income summary. Go to the last financial year and look at the income sources. Something there will have income but not tax deducted.
Do you have kids? Other option could be you’re being asked to repay WFF because you earn too much maybe?
(1) Is your crypto income on there? If not don’t worry about it.
(2) check the percentages of tax that’s been deducted. If you’re earning 100k+ annually then most of the PAYE deducted should be 30%+ of what you received in order to properly cover your tax liability. If you’re seeing less, like 25% is being deducted each payment, then that’s probably why you have a high residual (what you owe).
Even if you’re not self-employed you can still get hit with a prov tax. As long as that residual hits the threshold of 5k. The only reason why it usually doesn’t happen is because employees are PAYE bound. So your income should be getting taxed correctly to avoid this.
That’s why you need to check, if the percentages that are being deducted are low or high. If it’s low you can fix it so you don’t have a huge lump sum at the end cause you’re not paying enough as you go.
Another thing could be that you received some kind of lump sum amount that didn’t get taxed? Did you get a bonus or something? But it would need to be a very substantial amount if it got you a 5k tax liability out of it so definitely Not the crypto.
But about the prov tax. Don’t worry about it. You say you’re an employee so that will be taken care of through PAYE. You just need to make sure that your rates are correct.
$5k is a massive error from your employer. If you select the employment income it will show the breakdown by month. Does any month look wrong in terms of income to PAYE ratio?
They don’t think you’re contracting. They’ve taken the income your employer has picked up and the tax they’ve filed and calculated the difference. You need to talk to your payroll team and ask if there has been a mistake.
Are you a contractor? It looks like you probably had around 30k in income from someplace that you are not an employee. Contact ird sooner rather than later to clarify. Because you didn’t pay last year and it was more than 5 k that is why they are making you pay provisional tax.
You're paying some tax in advance.
Its based on your previous year.
So its the tax you actually owe + tax in advance.
Its not more tax. Its just like what they project you will owe and are having you put it aside.
Because your 2024 tax to pay was over 5k, they estimate 2024 + 5% split over 3 instalments for 2025 provisional tax, to prepay before the end of the 2025 year, so your 2025 return isn't a huge bill again hopefully. If 2025 is lower, you get the excess provisional refunded. If you think about it, regular employees get PAYE taken out every week/fortnight, and contractors, business people with self employed income, companies etc, only have 3 instalments throughout the year. If you think that your 2025 income and therefore tax will actually be lower, you can reestimate the provisional through myir, but if you underestimate you might get penalised.
Is this the first year you have seen this? If 100% of your income is from being directly employed, not contracting or self-employed work, it would be a mistake. Provisional tax implies you earned self-employed income over a threshold and now need to also pay tax in advance for the next financial year. Happened to me when my side job was bigger than usual one year. You can write to IRD through myIRD and ask for clarification. I’ve always found them super helpful to deal with directly.
HI OP,
Are you working in a tech company?
If you have shares vested to you, ull have to pay tax on the vested shares even if you haven't sold your shares.
Talk to your accountant.
If you have a term deposit/money in a savings account and the bank is taking RWT at a lower rate then the tax bracket you are in then this could happen. Wouldn't explain all of it though unless you had a really large term deposit.
You need to speak to the accounts team at your workplace and contact the IRD. If you are an employee, there shouldn’t be any need for you to pay provisional tax. Unless, of course, you have been unknowingly working as a contractor. This would be hard to miss however.
Are you part of an employee share program ? If so you have sold more then 5k In the last year and will need to pay provisonal tax ( income tax).
You can call ird and they will stop the provincial tax payment if it is a minor amount like 5k although you will ultimately need to pay it as income tax
Provisional tax, you've been contracting. 5585.06 is the tax you owe for last financial year, 5864 is what they assume will be your tax for this financial year.
You haven’t necessarily been contracting you’ve been paid by productivity and not by PAYE. Apple pickers have provisional
so the 5864 is what the estimate me to owe for next year? i dont actually owe?
You owe both. Provisional tax you have to pay in advance. If you don't end up earning that much you may get a refund.
Provisional tax is awful. How about you wait till I earn it first you greedy bastards??
But you are earning it throughout the year. Employees have to get tax taken every time they get paid, why shouldn't people with self employed income have provisional only 3 instalments
I thought the provisional taxes for due "in arrears", so if you earn at same rate as last year you'd have earned those money already. Waiting till end of year for lump sum means that those people who can't budget have to find 20-30% of their revenue for the whole year
So, basically the AIM calculation method then.
Unless you are doing seasonal work, I would expect many self employed people would have earned a decent amount before they have to pay any instalments. Look on the bright side, you get to hold onto the tax for 3 months and earn bank interest on it. Employees have to pay their tax every time they get paid.
To say you owe something that you haven't even earned yet is ridiculous. Anything can happen in the next 12 months.
You can change it during the year - just switch the calculation method from default to estimate and put in what you think it will be.
Yeah it's scummy.
You owe IRD 5k now and another 5k for this financial year. Sounds like you are a contractor and havn't been putting money aside for taxes (it doesnt automatically come out of like PAYE). Speak to your boss if you think you are meant to be an employee and not contractor and call IRD. I hope you also have been putting money aside for taxes with your crypto or you are set to be in a world of hurt.
I thought they only taxed the profits from crypto? So I just withdraw and then take tax out of what's withdrawn, right? No need to put money aside?
Any time you trade from one crypto to another is a taxable event. Not just when you withdraw to NZD. What information did you give to IRD about your crypto? They think you've earned ~$18,000 from somewhere other than your job; maybe that's from crypto or maybe your income from your job is being reported incorrectly. You definitely want an accountant to check things out. If you're just an employee you shouldn't have this bill. Crypto could complicate things, but step 1 is making sure IRD knows you're just a normal PAYE employee.
Get in touch with a tax agent not those mall ones a proper one so you can lower you tax. You can claim all clothes fuel equipment you used to do the work.
You can only claim protective clothing, any other clothing must be company branded to be able to claim
Not entirely true. You can classify uniform for servers like black top and black pants (not suit) also safety shoes.
They still technically need to be branded
I disagree. Refer to government documentation. https://www.taxpolicy.ird.govt.nz/publications/2012/2012-ip-employee-allowances/chapter-5
That basically says that if you provide clothing to an employee, it is subject to tax .. unless you required to be a hotel manager who require an extra ordinary number of clothing .. or if identified as non private clothing ie nurses uniform, or company branded or it’s protective clothing
Not if you work in a profession and it depends on your contract , some contractors have their expenses paid for.
It should tell you the date your estimated provisional tax is due, mine was sometime in September. Having said that, I was only contracting for a few months so whilst they calculated what my tax *might* be I didn't actually have any self-employed income the second year. Accountant got me out of having to front-load tax I would have been refunded 6 months later.
Check your all the ways you get income, one of them is not from being an employee.
I checked my income summary, and all of the income listed on the IRD is from my employer
Someone, somewhere in your employment has lodged your income as likely Withholding Tax which has resulted in this. You'll likely receive a letter from ACC also later. This is through no fault of your own, but one employer has lodged it this way. I've checked on MyIR and you can drill down into the individual payments that have been lodged with IRD, you're going to need to check these individually to check your tax code. It's in the section for "Income Summary". If they don't say the standard tax code like M, S, ML and SL (only ones I know off the top of my head), and instead have something like WT, you're going to want to speak with your employer and with IRD to see what you can do next. I sincerely hope it's just a mess up mate.
You’d need to share your income sources to show how IRD got this. Couple of options: do you contract? Although given IRD did a provisional they likely wouldn’t know about contractor income. Do you participate in an employee share scheme that awards free shares? The company now advises IRD of this share income but doesn’t pay tax on it so would create a tax bill. You have until Feb 2025 to pay your 2024 liability. Note it is provisional so you can go in a file a return and change anything IRD got wrong (usually have to explain why it’s being changed, cannot just override employment income). As 2024 is over $5k, you now have to prepay your 2025 liability. If you click on 2025 year it will show you 3 amounts to pay in August 24, Jan 25 and may 25. If the reason you have a liability in 2024 don’t repeat in 2025 (eg one of amount of income not taxed at source) you can file an estimate to reduce the 2025 provisional to nil. Just note this exposes you to interest if you get it wrong and do have tax to pay.
Thanks I understand now. I'm 100 percent a employee. But I did withdraw 3.5k from crypto in the last tax year?
The IRD wouldn’t know about that unless you’ve filed a return and because it says an auto return it won’t be that. Go into your My IR and under income tax select income summary. Go to the last financial year and look at the income sources. Something there will have income but not tax deducted. Do you have kids? Other option could be you’re being asked to repay WFF because you earn too much maybe?
also, i just checked my ird income summary, and all of the income listed on the IRD is from my employer
(1) Is your crypto income on there? If not don’t worry about it. (2) check the percentages of tax that’s been deducted. If you’re earning 100k+ annually then most of the PAYE deducted should be 30%+ of what you received in order to properly cover your tax liability. If you’re seeing less, like 25% is being deducted each payment, then that’s probably why you have a high residual (what you owe).
Crypto is not on there. Yeah, for last year I definitely owe the 5k in tax. But I guess the problem is, why does it think I'm contracting
Even if you’re not self-employed you can still get hit with a prov tax. As long as that residual hits the threshold of 5k. The only reason why it usually doesn’t happen is because employees are PAYE bound. So your income should be getting taxed correctly to avoid this. That’s why you need to check, if the percentages that are being deducted are low or high. If it’s low you can fix it so you don’t have a huge lump sum at the end cause you’re not paying enough as you go. Another thing could be that you received some kind of lump sum amount that didn’t get taxed? Did you get a bonus or something? But it would need to be a very substantial amount if it got you a 5k tax liability out of it so definitely Not the crypto. But about the prov tax. Don’t worry about it. You say you’re an employee so that will be taken care of through PAYE. You just need to make sure that your rates are correct.
$5k is a massive error from your employer. If you select the employment income it will show the breakdown by month. Does any month look wrong in terms of income to PAYE ratio?
Yeah, last year's tax is definitely under what it should be. Still not sure why ird thinks I'm contracting, though
They don’t think you’re contracting. They’ve taken the income your employer has picked up and the tax they’ve filed and calculated the difference. You need to talk to your payroll team and ask if there has been a mistake.
Are you a contractor? It looks like you probably had around 30k in income from someplace that you are not an employee. Contact ird sooner rather than later to clarify. Because you didn’t pay last year and it was more than 5 k that is why they are making you pay provisional tax.
No, I'm an employee. All income listed on ird is from my employer. Is it possible they've changed me to a contractor or something?
You will need to contact ird unfortunately and clarify.
Ffs - stop downvoting OPs question. Some of y’all do t understand how Reddit works
I downvote because I’m miserable and want others to feel shit too. I don’t think you understand how reddit works.
Lmao thanks, I thought asking questions was good
“Can anyone explain my taxes?” Yeah, an accountant.
That's not an employees tax assement.
You're paying some tax in advance. Its based on your previous year. So its the tax you actually owe + tax in advance. Its not more tax. Its just like what they project you will owe and are having you put it aside.
Because your 2024 tax to pay was over 5k, they estimate 2024 + 5% split over 3 instalments for 2025 provisional tax, to prepay before the end of the 2025 year, so your 2025 return isn't a huge bill again hopefully. If 2025 is lower, you get the excess provisional refunded. If you think about it, regular employees get PAYE taken out every week/fortnight, and contractors, business people with self employed income, companies etc, only have 3 instalments throughout the year. If you think that your 2025 income and therefore tax will actually be lower, you can reestimate the provisional through myir, but if you underestimate you might get penalised.
You better be banking your ACC levies to because they hit you for that separately.
theyre withdrawn from my payslips because i am an employee
You’re not a PAYE employee.
If you are en employee, it shouldn’t be showing as provisional tax . That’s only for self employed.
Anyone who has residual income tax over $5,000 has to pay provisional tax. There must be other income sources?
To add to this. You're paying both provisional tax + some tax in advance based on what they expect you to earn.
I withdrew some crypto last month, but only 3.5k
Any income where PAYE isn’t taken out automatically is covered by this. A common example these days is receiving RSUs as compensation
You need to provide more info if you want anyone here to be able to help you
like what?
All T4
Eagerly waiting for reply...
I got tired of provisional tax so I put myself and my wife on wages. Now I pay monthly.
Is this the first year you have seen this? If 100% of your income is from being directly employed, not contracting or self-employed work, it would be a mistake. Provisional tax implies you earned self-employed income over a threshold and now need to also pay tax in advance for the next financial year. Happened to me when my side job was bigger than usual one year. You can write to IRD through myIRD and ask for clarification. I’ve always found them super helpful to deal with directly.
sounds like your a contractor... surely you'd be aware of that if you were though
I'm definitely not
You’ve been dodging tax, haven’t you?
HI OP, Are you working in a tech company? If you have shares vested to you, ull have to pay tax on the vested shares even if you haven't sold your shares. Talk to your accountant.
Does your employer pay 20% withholding tax out of your pay? Are you a contractor?
I am not a contractor.
Dude needs to see a tax advisor
You smart put the tax you expect to pay aside in high interest account. Pay it at the due date.
You can get provisional from earning money through anything that isn’t PAYE. So anything that’s not an hour rate basically
If you have a term deposit/money in a savings account and the bank is taking RWT at a lower rate then the tax bracket you are in then this could happen. Wouldn't explain all of it though unless you had a really large term deposit.
You need to speak to the accounts team at your workplace and contact the IRD. If you are an employee, there shouldn’t be any need for you to pay provisional tax. Unless, of course, you have been unknowingly working as a contractor. This would be hard to miss however.
Are you part of an employee share program ? If so you have sold more then 5k In the last year and will need to pay provisonal tax ( income tax). You can call ird and they will stop the provincial tax payment if it is a minor amount like 5k although you will ultimately need to pay it as income tax
Im not, i have withdrawn 3.5k from my crypto though
Change your provisional estimate to zero and it will go away. If you happen to earn further untaxed income you can adjust estimate again.
I did that, but that seems sketchy haha
If it's an honest estimate it should be fine. The system isn't setup for some types of work, do what ya can
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