Stuff reported this week that Inland Revenue has announced a crackdown on real estate agents who under-report their income, or overstate their expenses, to pay less tax than they should.
The tax department said the industry was the next focus of its ongoing enforcement work to target the “hidden economy”.
IRD analysis has shown that “real estate agents have been claiming high level of expenses relative to their income,” IRD spokesperson Richard Owen said.
“Inland Revenue believes the issue is widespread and we must act. People are claiming private expenditure but not keeping logbooks or other business records to support the claim.”
Owen said that if IRD had concerns someone was over-claiming expenses, they would receive a letter requesting they proved the expenses claimed, for example by providing bank statements, invoices, or a logbook.
Owen said IR was working with the Real Estate Authority and the Real Estate Institute of New Zealand (REINZ) to “engage and educate their members”.
“We would far rather encourage customers to do the right thing from the start,” he said.
IRD know exactly how much real estate agents earn in commission income. Their agency is required to declare commission income paid to its agents. Therefore, it is simple for IRD to match the commission income shown by the agency with the amount declared by the agent.
If you are concerned that IRD may contact you, contact us today. We can perform a voluntary disclosure on your tax position. A voluntary disclosure means that you generally won’t be penalised or face prosecution. A voluntary disclosure also gives us the ability to negotiate any tax to pay.
It is better to be up front and declare any under or over-reporting prior to IRD investigating and a voluntary disclosure can protect you from any other potential action IRD may take.
For further information or advice, call us today.