People tell me all the time that they associate doing their tax with the level of excitement that I associate going to the dentist. And as someone who has been avoiding going to the dentist, I can relate to people who get behind in their tax returns.
I help people all the time who are way behind. This year I’ve helped a number of people who last lodged tax returns in the 1990s. Wow. I was in high school back then.
Avoidance is nothing new and people avoid pain all the time. However, avoiding a problem doesn’t solve it, and if you have been avoiding filing your tax returns for some time my question for you today is simple: Is it worth it?
After all, avoiding tax could mean:
1)You are missing out on a significant tax refund. The biggest refund we have seen for an overdue lodger was about $80,000 although $30,000 is more typical.
2)You are carrying a stress burden that is not helping you. Clients tell us all the time about the “burden” that lifts when they lodged their returns and got up to date.
3)You are living in fear that you owe more tax than you really do. We often find that the tax position of late lodgers is not as bad as they feared. In fact, refunds for later years often offset the tax paid in the initial years.
4)You are living in fear of a penalty from the Taxation Office. I recently helped a client who registered his car in his brother’s name because of a mistaken fear that the Taxation Office would confiscate it.
5)You could be living under shame and embarrassment and fear of exposure. Many professionals risk their livelihood as they could potentially lose their employment or membership with their professional body because of their failure to lodge tax returns over many years.
6)You could be losing tens of thousands of dollars in government benefits. One client received a $10,000 refund but the family had missed out on about $30,000 in family tax payments as a result of not lodging tax returns.
7)You end up in serious trouble with the law. You could be charged hefty fines and high interest rates. The Taxation Office does prosecute people who do not lodge tax returns. You can be summoned to appear before a court, sentenced to community service, or imprisoned.
However, getting up to date is probably not as hard as you think.
1)Missing information in relation to income can generally be obtained directly from the Taxation Office. We can request this for you.
2)There are some deductions that can be claimed that don’t require receipts. As a starting point we can prepare a standard return with the information from the Taxation Office plus what you do have. Then, if you want to dig up those receipts, you can always add them later. You can amend returns for up to 2 years.
3)After an initial face to face meeting, we can prepare returns via email/phone/fax. It won’t take as much of your time as you think.
4)We can apply for the Taxation Office to waive penalties and interest. We have a very successful track record in this area. After all, we are arguing that we want to help them get people up to date – and keep them up to date – and adding fines and interest makes that harder.
5)We can negotiate repayment arrangements with the Taxation Office. For extreme debts we can also provide debt negotiation and bankruptcy advice and referrals.
While we have helped many, some people cannot be saved from themselves. And our experience shows that not everyone is able to free themselves of the burden of overdue tax returns.
Of those who do make the leap, many receive significant refunds. Many form part of our client success testimonies which we email to people with overdue returns as motivation.
Many can now look back on that time in their life when they were living in fear of what the Taxation Office was going to do about their overdue returns as a distant memory.
Some though, cannot be helped no matter how determined we are.
We have had a number of clients, some close personal friends as well, approach us for help. However, they were unwilling to commit the limited time and money to get things up to date, even though they were due tax refunds
They still have outstanding Business Activity Statements, company returns, and individual tax returns.
They still have to live with that thought in the back of their mind, is today the day the Taxation Office is going to address this issue with me? A phone call, a knock at the door, or a letter in the mail could all trigger this fear.
Our most extreme case was a client who paid for 10 years returns to be lodged, all refunds, and did not sign them, or provide a final answer to a technical question that we needed to confirm. Bizarre.
Therefore to all the people out there who have avoided lodging their income tax returns on time, whether one return or a decades worth, I have a simple question for you: Is dodging your annual tax return worth it?