1. The tax debt spiral – how to get out of it
Alistair McAlpine interviews tax debtconsultant/Accountant Imran Kamal.
If you have accumulatedsignificant tax arrears, andyour penaltiesare compounding,youmayfeel
youare losingcontrol of yourfinancial future, andthatthe IRD is suckingyouand/oryourbusiness
intoa black hole.
Is there a way out? Or is it too late already?
Today we talkwith AccountantImran Kamal ofTax Debt Management,a Wellington-basedtax
negotiationandsettlementservice,aboutwhattodo if yourtax arrears andpenaltiesare
threateningyourfinancialfuture. Canyouextractyourselffromthismessbyyourself?Orshouldyou
ask forhelp?
For the record, Tax DebtManagement settlescases worthover$20 milliondollarsannuallyfor
taxpayersandbusinessesall over NewZealand.ImranKamal knowsall toowell the pitfallsNew
Zealandtaxpayerscanencounterif they lose theirwaynavigating ourcomplicatedTax system.
Don’t turn your back on tax arrears
“Neverignore anotice fromthe IRD – itcan have veryseriousconsequences”,insists ImranKamal
He saysthat there isalwaysa judiciouswaytoaddressyourtax arrears,appease the taxmanand
stay afloat.“It’snevertoolate to confrontyourtax debt,butyouneedto act now,and act swiftly.
Ignoringitwill only make mattersworse.”
Imran saysthat it’snot uncommonfordebtorsto turn theirbacks ona seeminglyoverwhelmingand
accumulatingdebt.
“So if you feel likeburyingyourheadinthe sand,you’re notalone.The bigger atax debtbecomes
the more likelydebtorsare toignore itand hope itgoesaway.The issuesaroundcompliance and
penaltiesbecome toocomplex,andare furthercomplicatedbytheirdeterioratingrelationshipwith
tax authorities.It’snotuncommonforabusinessownerwithmountingtax debttoworkharderand
longerat theirbusiness;doingwhattheydobest inthe hope theycan earn enoughtotrade their
wayout of the problem. Thisisnota good idea.”
Imran Kamal saysthat, whentax debtors become desperate and tryto confronttheirissues with
IRD, everythingturnstocustard because theyare so emotionallycharged.
“Thisis absolutelyunderstandable. Whenyouare caughtina downwardspiral of tax arrearsand
penalties,it’snoteasytothinkclearly;especiallyasthe stressmountsonyou,on the business,and
oftenonyour family. Inthese circumstancesseekingadvice fromsomeonewithaclearheadcan
make all the difference;andinitself takesalotof the stress outof the situation.”
Tax debt D.I.Y. and the 1st rule of management
I readsomewhere thatthe firstrule of managementisdelegation.Don’ttryanddo everything
yourself because youcan’t.

2. “Many tax debtors inNewZealand trythe kiwi DIYapproach to tax negotiations.Thiscanbe
stressful,time consuming,andunhealthy,ineverysenseof the word;because we all know thatif
your tax debtissues are notaddressed,the IRDwill catchup withyouin the end”,saysKamal. “You
mightresolve yourtax debtsonyour ownif youowe IRD a few thousanddollarsbutanythingmore
than that andyou shoulddefinitelyconsidergettingadvice froma tax professional.”
“In particular,youwill needtocheckthatyour original tax returnsare correct and that youwill be
able to affordanypaymentplanyou setup. If you owe the IRD over,say,$10,000, then you should
definitelybe workingone-on-onewithanexperiencedandqualifiedtax professional.There’stoo
much at stake and youneedtocome outof this,notjustfiscallyafloat,butwithahealthyongoing
relationshipwithIRD.”
Imran saysthat tax arrearscan be so legallycomplex andfinanciallydifficultthatif youdon’tget
advice fromsomeone whoknowsthe ropes,you’re notlikelytogetmuch traction.
“Andall the while penaltiesare bleedingyouraccounts.Representingyourself maynotaccomplish
the bestoutcome and we have foundthatit oftendoesnot;especiallyif yourrelationshipwiththe
IRD has alreadysoured.”
A Tax Pro in your corner adds weight to your case
Imran Kamal pointsoutthat a tax professional workingfull timeinthe field,buildsamore solid
relationshipwithIRDthana single taxpayertryingtopushhis or herownbarrow.
“We have foundthathavingan independent,professional organisationadvocatingonyourbehalf
adds weighttoyourcase.To come outon top youwill needtobe able to negotiate onsignificant
points,provide accurate financialstatements,andbe able tocome up witha paymentplanthatis
acceptable tothe IRD, but isrealisticforyou.That’swhat we doday-in,day-outandIRD know that
we will be creativelylookingforawin:winsolution.And,believeitornot,InlandRevenue dowant
youto stay afloat,soyou can keeppayingtaxes;they justwanttorecoveras much of your unpaid
debtas theycan. There isusuallyacreative waythroughthat satisfies bothsides,butthe best
resolution foryou isnotlikelytocome fromIRD.”
“We are able to assure the InlandRevenue thatwe have lookedatyourbooksand yourbusiness,
and are satisfiedthatyourtax debtwill be satisfactorilyresolved, andyourtax andcompliance
obligationswill be metinfuture.Theyknow thatwe are stakingourreputationonit,whereasthey
may notbe so accommodatingif youare battingon yourown behalf.
Developing a tax debt game-plan
Imran Kamal pointsoutthat an individual workingwiththe IRDtotackle theirtax arrears,oftengets
distractedbythe routine dataentryand paperworkinvolved.
“You may feel asif youare doingsomething positiveandmakingprogress,butwithoutan
overarchingstrategy foryournegotiationswithIRD,youare notlikelytofindthe bestoutcome.The
paperworkandIRD forms are justpart of the processand will not substantiallyreduceyourdebtor
put youina betterbargainingposition.”

3. If you are notan experiencednegotiator oryourfinancial future isatrisk,or yourrelationshipwith
IRD isnot 100%, then,Imran’sadvice is todefinitely considergettingatax professional onboard as
soonas possible.
- AlistairMcAlpineis a commercial Web-writerand Broadcaster.