Individuals Tax Checklist U.S by vpd18472


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									                                                                                         1.     Prepaid expenditure
                                                                                                Certain expenditure can be incurred in
                                                                                                advance of the 2010 year end and,
FOR THE YEAR ENDED 31 MARCH 2010                                                                provided it is not capitalised to the
                                                                                                balance sheet, may be claimed as a tax
                                                                                                deduction in your 2010 financial

Contents                                                                                        Some expenses can be prepaid
                                                                                                regardless of the amount or period being
                                                                                                prepaid, for example:
Year end tax planning checklist                                          1
                                                                                                 Stationery
General tips on minimising tax                                           3
                                                                                                 Subscriptions for papers or journals
Help us to process your records efficiently
and quickly                                                              4                       Vehicle registration and road user
Help yourself – keep your records                                        5
                                                                                                 Postal and courier charges
Penalties regime                                                         5
                                                                                                 Rates
Current taxation rates                                                   6
                                                                                                 Audit and Accounting fees.

                                                                                                Other expenses can be paid in advance
                                                                                                only up to a certain limit, for example:

                                                                                                                                                Max         Max No
The end of the financial year is now                                                                                                           amount         of
approaching. This is an appropriate time to                                                                                                      $          months
consider your tax position for the year ending                                                     Rent (if prepayment more than              23,000          6
31 March 2010 and consequently your 2011                                                           one month)
provisional tax.                                                                                   Rent (if prepayment less than                Any
                                                                                                   one month)                                  amount
This checklist will enable you to consider                                                         Rent or bailment of livestock              23,000          6
what options are available, as well as
                                                                                                   Consumables                                58,000         N/A
informing you of current and future taxation
rates.                                                                                             Insurance (where each
                                                                                                   premium is no more than                       N/A          12

Year end tax planning checklist                                                                    Professional or Trade
                                                                                                   Association subscriptions
                                                                                                                                                 N/A          12
                                                                                                   (where each subscription is no
Below is a checklist of matters relevant to all                                                    more than $6,000)
business entities which you should consider                                                        Accommodation or travel                    12,000          6
before 31 March, some of which may help
                                                                                                   Advertising                                12,000          6
you reduce the amount of tax you have to
pay for 2010.                                                                                      Other periodic charges                     12,000          12

                                                                                                   Other services                             12,000          6

                                                                                                The legislation regarding allowable
                                                                                                prepayments is complex and we
                                                                                                recommend clients discuss with us any
                                                                                                plans for prepaying expenses prior to
                                                                                                committing to any expenses.

The information contained in this checklist is of a general nature and should be used as a guide only. We recommend to clients that they consult a senior
representative of the firm before acting upon any information contained herein.
                                                                                        5.     Valuation of trading stock (not
      Other prepaid expenditure
                                                                                               including livestock)
      Prepaid expenditure on items other than
      those covered above is only tax                                                          Trading stock is required to be valued
      deductible to the extent the services                                                    using a cost valuation method. Market
      have been performed or goods provided.                                                   selling value may be used only when it is
      Therefore a payment for repairs made                                                     lower than cost. Formula write downs no
      before balance date will generally not be                                                longer apply although the market selling
      tax deductible unless the repairs have                                                   value may be used in this case. There is
      actually been carried out.                                                               also no provision for the write off of
                                                                                               obsolete stock. Therefore, to reduce the
                                                                                               value of these items in stock on hand,
2.    Holiday pay and bonuses for                                                              they should be physically disposed of or,
      employees                                                                                alternatively, valued at market selling
                                                                                               value, which will presumably be lower
      Amounts payable to employees at                                                          than cost.
      balance date for holidays or bonuses are
      deductible in the year to 31 March 2010                                                  Replacement price and discounted
      if paid to the employee within 63 days of                                                selling price may be used to approximate
      balance date. If they are not paid within                                                cost if these methods are also used for
      63 days of balance date then the                                                         financial reporting purposes. Please
      deduction can only be claimed in a later                                                 contact your PricewaterhouseCoopers
      income year.                                                                             advisor if you require more information
                                                                                               on the valuation methods.
3.    Discount reserve
                                                                                        6.     Repairs and maintenance
      A deduction for a discount reserve, such
      as a prompt payment discount, should                                                     Generally no deductions are allowed for
      be allowed if debtors are customarily                                                    a repairs and maintenance reserve. It
      entitled to this discount. In the first year                                             may be worthwhile undertaking repairs
      a deduction of the discount percentage                                                   and maintenance prior to 31 March to
      is allowed and in subsequent years                                                       obtain a full deduction. Deciding
      adjustments are made which maintain                                                      whether expenditure on an asset is
      the discount level at the approved                                                       deductible as repairs and maintenance
      percentage of the debtors. However if                                                    or should be capitalised is often a
      the credit period offered to customers is                                                difficult decision – your
      more than 93 days different rules will                                                   PricewaterhouseCoopers advisor can
      apply.                                                                                   assist you.

4.    Guarantee / warranty provisions                                                   7.     Bad debts

      A warranty provision is deductible in the                                                To claim a deduction for a bad debt in
      year that defective goods are sold                                                       the year to 31 March, the debt must be
      provided that a definite commitment is                                                   bad, and must actually be written off
      able to be established and the amount of                                                 during the year.
      the liability can be calculated as at
      balance date. Please contact your                                                        Whether a debt is ‘bad’ is a matter of
      PricewaterhouseCoopers advisor who                                                       fact, but there must be no reasonable
      will be able to assist you if you are                                                    expectation of recovery.
      considering claiming a deduction for
      guarantee or warranty provisions.                                                        There must be evidence to verify that a
                                                                                               debt has been written off.

     The information contained in this checklist is of a general nature and should be used as a guide only. We recommend to clients that they consult a senior
                                          representative of the firm before acting upon any information contained herein.

                                                                                               and interest) no PAYE needs to be
8.    Retentions
                                                                                               deducted. However ACC levies are
                                                                                               payable in respect of wages paid.
      Retentions on building contracts are
      generally taxable in the year the
      contractor becomes legally entitled to                                            3.     Tax deductions available to wage
      receive them. Therefore if retentions are                                                earners
      outstanding at year end, they usually do
      not form part of your income for tax                                                     Deductions available include:
      purposes for that year, and are therefore
      only taxed when they become due. This                                                     fees paid for the preparation of a tax
      can result in a significant deferral of                                                    return
      income.                                                                                   premiums for income continuance
                                                                                                 insurance, where income is a relevant
General tips on minimising tax                                                                   factor in determining the amount
                                                                                                 insured. The proceeds of such
                                                                                                 policies are taxable income.
1.    Splitting your income
                                                                                        4.     Tax rebates and tax credits available
      Depending on your business structure it
      may be possible to split income between                                                  Common tax rebates and tax credits
      yourself and your spouse or children to                                                  available are:
      obtain the benefit of lower tax rates. For
      example, in a partnership, the net                                                        child taxpayer rebate - not taxed on
      income of the partnership is split                                                         the first $2,340 of income in certain
      between the partners based on their                                                        circumstances
      agreed share of the partnership. Inland
      Revenue is entitled to revise the split in                                                housekeeper / childcare rebate
      certain circumstances.                                                                    from 1 April 2008 individuals can
                                                                                                 claim a tax rebate of 33 1/3% of all
      Savings may be achieved by splitting                                                       charitable donations made up to the
      income with your spouse, depending on                                                      total of their taxable income and
      the other income earned by your spouse.                                                    companies are entitled to claim a
                                                                                                 deduction for charitable donations up
2.    Wages                                                                                      to the company’s net income.

      Wages can be paid to your spouse, your                                                   From January 2010, individuals who
      children and relatives who work in your                                                  make charitable donations by way of
      business, but Inland Revenue can make                                                    Payroll Giving (i.e. deduction direct from
      adjustments if payments are considered                                                   salary or wages) will get the benefit of
      excessive.                                                                               the donation rebate immediately as a net
                                                                                               reduction in PAYE deductions.
      If self employed, before making                                                          Claims for the housekeeper / childcare
      payments to your spouse you must                                                         rebate and the donations rebate (on
      obtain approval from Inland Revenue                                                      donations other than Payroll Giving)
      and you must be able to show that your                                                   must be made on a separate rebate
      spouse will be working and that the                                                      claim form. Inland Revenue will forward
      wage is commensurate with the work                                                       claim forms to every taxpayer (or their
      done.                                                                                    agent) who has claimed either of these
                                                                                               rebates in the last two years.
      Where your children are working for you
      or your business, we recommend that                                                      The low income earner rebate has not
      you draw cheques in relation to work                                                     been available since 31 March 2008..
      done on your business account and pay                                                    This rebate is now reflected in the
      them into your child's account at                                                        marginal tax rates applying from that
      appropriate times during the year.                                                       time.
      Remember that if children earn less than
      $2,340 in a year (excluding dividends

     The information contained in this checklist is of a general nature and should be used as a guide only. We recommend to clients that they consult a senior
                                          representative of the firm before acting upon any information contained herein.

      Working for Families assistance                                                               Revenue rates (the current rate is
      payments for low income families may                                                          70c/km). You must keep a record of
      be available in certain circumstances for:                                                    all business journeys to substantiate
       Family tax credit                                                                           your claim.
       Minimum family tax credit                                                              (ii) Keep a logbook for 90 consecutive
       In-work tax credit (or Child tax credit)                                                    days recording all journeys. Based
       Parental tax credit                                                                         on the business use percentage from
                                                                                                    the logbook, you can claim this
5.    Home office expenses                                                                          proportion of all vehicle expenses.
                                                                                                    You can continue to use this
      If you use an area in your home                                                               percentage for three years, provided
      principally as an office or storage area                                                      that the actual business use in any
      for your business, then you may be able                                                       month does not vary by 20% or more
      to claim part of the overall costs of                                                         from the percentages established by
      running your house as a business                                                              the logbook.
                                                                                               (iii) Actual records of all business use,
      Floor area is the most common base
                                                                                                     distances and costs.
      used for calculating the portion
      claimable. For example, if the area you
                                                                                               Option (i) can be particularly useful if a
      use amounts to 10% of the house's total
                                                                                               private vehicle is only used occasionally
      floor area, then you can claim 10% of
                                                                                               for business use. There are also GST
      expenses such as annual rates, house
                                                                                               implications to be considered.
      insurance premium, power, mortgage
      interest, and house depreciation. It may
                                                                                               Note: Similar rules govern the rates at
      also be possible to claim a portion of
                                                                                               which an employer may make tax free
      your home telephone rental.
                                                                                               reimbursement to employees (including
                                                                                               shareholder-employees) who use their
6.    Farmers’ dwelling expenses                                                               private vehicles for work purposes.
                                                                                               These include use of mileage rates
      Inland Revenue allows farmers to claim                                                   published by a reputable independent
      25% of all of their dwelling expenses,                                                   source (eg Automobile Association).
      where that dwelling is situated on their
      farm, because of their need to run their
                                                                                        8.     Scrapping unused assets
      farming business at home. These
      expenses will include:
                                                                                               A taxpayer may write-off a depreciable
                                                                                               asset where the cost of disposing of an
       Domestic power                                                                         asset is expected to be greater than the
       Dwelling repairs and maintenance                                                       proceeds from its sale.

       Dwelling depreciation
                                                                                        Help us to process your records
       Household insurance
                                                                                        efficiently and quickly
7.    Claim your vehicle expenses                                                       By completing the Business Checklist we
                                                                                        send to you before your balance date, you
      If you have a vehicle (not a company                                              can ensure that all the information needed to
      vehicle) which is used for business and                                           complete your accounts is provided to us
      private purposes, there are several                                               before we begin.
      options for claiming the business portion
      of expenses:                                                                      Some further items which may help us are:
      (i) If your business running in the vehicle                                                GST returns and worksheets -
          is less than 5,000 km per year, you                                                     including these with your annual
          can use pre-determined Inland                                                           information ensures that we can follow

     The information contained in this checklist is of a general nature and should be used as a guide only. We recommend to clients that they consult a senior
                                          representative of the firm before acting upon any information contained herein.

        up any GST issues during the process                                                    all tax invoices and receipts for
        of completing your accounts                                                              purchases, insurance, power, phone
                                                                                                 and all other costs incurred
       highlighting any repairs and
                                                                                                bank statements
        maintenance costs over $500 and
                                                                                                cash books or computerised
        noting on your records what the
                                                                                                 accounting records
        payment was for eg ‘repairs to cash
                                                                                                wage records for any employees
        register’. Asset purchases and sales
                                                                                                interest and dividend payments
        must be separately recorded on your
                                                                                                a list of business assets and liabilities
        Fixed Asset Schedule
                                                                                                statements of year end trading stock,
       identify in your records any                                                             and stocktake records
        entertainment costs. Generally                                                          credit and debit notes
        expenses are 50% deductible if they                                                     motor-vehicle log books
        are enjoyed by staff at a staff function,
        but are subject to Fringe Benefit Tax if                                       Keeping records in order makes good sense.
        available for enjoyment at staff                                               If you are investigated by Inland Revenue
        discretion                                                                     you should be able to justify all your claims
                                                                                       with a minimum of time and effort.
       where a vehicle is not a company
        vehicle liable for FBT, expenses
        relating to vehicles used partly for                                           Penalties regime
        private use should be separately
        highlighted in your records to enable                                          Under the current penalties regime, tax
        us to calculate the total expenses for                                         shortfalls may result in:
        that vehicle, and the respective non-
        deductible portion.                                                                     use of money interest charged from
                                                                                                 the original due date to date of
Another area often overlooked by clients is                                                      payment
overseas investments. Investments in                                                            possible penalties depending on the
foreign superannuation schemes and life                                                          taxpayer’s conduct
insurance policies can be taxable in New
Zealand, even if you are no longer                                                     Penalties are levied if Inland Revenue
contributing to them, or receiving income                                              consider the taxpayer’s circumstances
from them.                                                                             amount to:

Any investment of share capital in a foreign                                           Seriousness of Issue                                      Penalty
company (or unit trust) can also result in                                             Lack of reasonable care                                    20%
New Zealand tax, even if no dividends are                                              Unacceptable tax position                                  20%
received, although there are significant                                               Gross carelessness                                         40%
exemptions.                                                                            Abusive tax position                                      100%
                                                                                       Tax evasion                                               150%
Please ensure you advise us of any overseas
                                                                                       Reduction of these penalties is possible in
investments, to enable us to confirm their tax
                                                                                       some circumstances (eg voluntary disclosure
status. The penalties for non declaration of
                                                                                       to Inland Revenue). These penalties also
overseas income are severe.
                                                                                       apply to all other tax types including GST,
                                                                                       PAYE and FBT.
Help yourself – keep your records
                                                                                       It is therefore particularly important for you to
To prove your deductions are legitimate you                                            ensure that all relevant issues are brought to
must keep all relevant records for at least                                            our attention when we are preparing your
seven years and they must be in English.                                               financial statements, to reduce any risk of
The following records, which are not an                                                penalties. We are able to review your
exhaustive list, must be kept:                                                         systems if you wish to ensure that you are
                                                                                       paying the correct amount of tax or wish to
       all income received (copies of invoices                                        reduce any risk of penalties.We can provide
        issued etc)                                                                    you with more information about penalties if

    The information contained in this checklist is of a general nature and should be used as a guide only. We recommend to clients that they consult a senior
                                         representative of the firm before acting upon any information contained herein.

                                                                                       20% could be imposed if Inland Revenue
                                                                                       considers that insufficient care was taken in
Current taxation rates                                                                 arriving at the estimated figure.
Income Tax                                                                             Use of Money Interest (UOMI)
Income                            2010/11               2009/10                        UOMI is payable by:
Income Tax – Individuals                                                                        all companies and trusts with RIT
0 - $14,000                          12.5%                 12.5%                                 greater than $2,500
$14,001 - $48,000                      21%                   21%                                all taxpayers who estimate their
$48,001 - $70,000                      33%                   33%                                 provisional tax
$70,001 or more                        38%                   38%
                                                                                                individuals with RIT greater than
Income tax – other entities                                                                      $50,000

Companies                               30%                   30%                      Depending on your situation, interest will be
                                                                                       calculated on any terminal tax due (ie after
Complying trusts                        33%                   33%                      provisional tax payments are taken into
                                                                                       account) from the due date of the provisional
Resident withholding tax                                                               tax payments to the date the terminal tax is
                                                                                       paid - your PricewaterhouseCoopers advisor
From 1 April 2010:                                                                     can give you further details.
    The RWT rate on dividends is 33%.
    On interest, individuals can elect to                                             UOMI received is taxable income and in
     have RWT deducted at 12.5%, 21%,                                                  some instances is tax deductible when paid
     33% or 38%.                                                                       by taxpayers, including businesses.
    The company RWT rate on interest is
     33% (unless the payer chooses to use                                              Recent UOMI rates applying to tax
     a 30% rate).                                                                      overpayments (Cr) and underpayments (Dr)
    The non-declaration rate is 38%.                                                  are as follows:

Provisional Tax Basis – 2011 Provisional                                                        8 March 2007 to                            6.66% Cr
Tax                                                                                              28 February 2009                         14.24% Dr
For taxpayers who are not using the GST
ratio method for calculating provisional tax                                                    1 March 2009 to                            4.23% Cr
instalments, the methods for calculating 2011                                                    28 June 2009                               9.73% Dr
provisional tax are:
                                                                                                from 29 June 2009                          1.82% Cr
       If the 2010 tax return has not yet been                                                  (current)                                  8.91% Dr
        filed and the instalment is the first or
        second instalment, based on 2009 RIT
        plus 10%;
       If the 2010 tax return has been filed, or
        if the instalment is the third instalment,
        based on 2010 RIT plus 5%.

RIT = Residual Income Tax: The net amount
of tax payable for the year, after deducting
source deducted tax (eg PAYE or RWT), but
not provisional tax.

Provisional tax can be estimated at any time
up to the due date of the final instalment. A
lack of reasonable care shortfall penalty of

    The information contained in this checklist is of a general nature and should be used as a guide only. We recommend to clients that they consult a senior
                                         representative of the firm before acting upon any information contained herein.


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