- April 29, 2024
- Posted by: legaleseblogger
- Category: Related News
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Hi there, first time posting on reddit but even doing this is making me feel sick to my stomach. In 2022, I took the leap and went into business for myself as a tradie. At first, things were going well, but towards the end of that same year, a series of unfortunate events took a toll on me. I became physically burnt out, broke my sobriety, experienced a mental health crisis (including a suicide attempt), and felt utterly hopeless.
With all these challenges weighing me down, I made the difficult decision to put my GST number on hold. A few months later, I landed a job in a different field, working on wages to regain some stability and routine in my life. However, this new job brought its own set of challenges, including workplace bullying that worsened my mental health and led me to develop alcoholism as a way to cope.
As I spiraled deeper into depression, I neglected my responsibilities regarding my business and simply tried to make it through each day. Recently, I made the decision to leave that toxic work environment, hoping to finally address all the issues I’ve been avoiding. I plan to return to my previous trade field to earn a better wage and start fresh.
Unfortunately, I don’t have any family in New Zealand to turn to for advice, and my accountant was unavailable when I needed him most. This has left me feeling lost and unsure of where to begin sorting out my financial and legal obligations. While my GST is up to date, I had to dip into funds set aside for income tax and ACC to cover expenses related to my work vehicle just before everything unraveled.
I can’t help but wonder if things would have turned out differently if I hadn’t pushed myself to the point of burnout. Despite the shame I feel for letting things get this far, I know that I need to take action and make changes. For now, I’ve decided that I no longer want to be self-employed and would prefer to work under someone else.
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Ah man that sucks, sounds like pretty average run of experiences you’ve had to go through.
Firstly, there’s zero reason to pile on the guilt – this stuff happens to the best of us. Being mad about the situation is totally valid, but know that this is something you can work through and not the end of the world (even though it can feel that way). I had to deal with similar years ago where I was months behind on lease payments, loans and IRD payments and felt frozen.
What ended up getting me moving again was to just call everyone I owed money to and explaining my current situation, emphasising that I had every intention of honouring my financial commitments and would it be possible to delay payments for a bit, or failing that go on a payment plan, while I found my feet and got a job.
People will generally appreciate the honesty and your attempt to proactively deal with the situation.
Ignoring or delaying things will only make it worse.
Once you’ve made the calls to start the process with your current, or new, accountant and IRD the first step is to put all your energy into looking after yourself and your wellbeing. That could be taking some time to get your head in a better place, or applying for jobs, or reaching out to friends/family for support.
Just know you’re not a bad person! Honestly, from what you’ve described, it sounds like you can definitely get it sorted out, even if it takes a few awkward or embarrassed conversations.
I’m sure other folks on here might have more specific advice around what to ask IRD etc, but just wanted to say you’re definitely not alone!
Props for talking about your struggles
Reach out to IRD and explain the situation. You will be surprised how supportive they are. I had a family member experience a mental burnout and he just didn’t face his tax liability for years and kept digging that hole.
When things came to light and he talked to IRD they were incredibly supportive about working out a way forward. They will also often remove some of the penalties and interest if you’re actively working with them to resolve it. Be open about your mental space so they understand you’re struggling to face your obligations because you feel buried by them and not because you’re trying to defraud them.
You’ll be surprised how quickly that mental burden you’re carrying lifts once you just pull off the bandaid and start talking openly and honestly with everyone involved about what’s happened.
IRD will always work with you to sort out the situation if you (or your accountant) approach them. Don’t wait for them to chase you, they will eventually and it will end up ten times worse. So that should be your first step.
Hopefully you feel well enough to go back working. Then you can pay off the debt and get everything sorted.
Have you spoken to a counselor for your personal struggles? Might be a good starting point there.
Accounting and tax wise, talk to an accountant who can also talk to ird on your behalf. If you don’t like the relationship with your current, can find or get recommendations for someone local.
Setup payment plans with ird, they are happy to help with those especially if you stick to them. Accountant can help you there. Penalties likely to be reversed, still likely to be interest though.
Where are you located?
One thing to note (depending on what year your tax related to) – if your accountant is your IRD tax agent you get an extension on when you have to file your tax return. Your accountant is also the best placed to walk you through when that return will fall due plus when you will actually have to pay the amount due. And negotiating with the IRD is also best done by them, they do it all the time!
Overall there are worse orgs to owe money to than the IRD, they are pretty good at working out payment plans that are reasonable and won’t leave you destitute. You’ll be okay but first step is to confront the problem. Talk to your accountant, it’s what you pay them for.
Good on you for posting!
Ird can seem really scary and full on, but if you are upfront and honest they honestly are great to work with and you can work out a plan with them for anything owed.
Congrats on making steps to make your life better, you’ve got this.
Alcohol will continue to fuck up your life. That’s probably the first thing you need to wrestle hold of. You may be amazed that if you quit the alcohol, and don’t keep coming up with excuses to hit it, that a lot of things in your life will sort themselves out.
All other advice will not be that useful until you start being honest with yourself about the alcohol.
I fucked up big time years ago as a sole trader, and didn’t pay income tax for over 10 years. I know how hard it is to take the first steps to sorting stuff out when your mental health isn’t the best. I was severely anxious, having panic attacks and eventually had a nervous breakdown due to a personal situation that involved severe bullying and intimidation. I was also self medicating.
So good on you!
Like you I was up to date on my GST, which is possibly why I flew under the tax radar for so long. Not paying your GST does seem to get the IRDs attention much faster than not paying income tax.
What I did was find a good accountancy firm. When I met the guy who got me sorted, I said ‘I think I might be the worst client you have ever had’ he laughed and said ‘don’t flatter yourself!’
He stepped in and sorted out my mess, filed my returns, negotiated the waiver of penalties and worked out a payment plan with IRD. His accountancy firm also did a payment plan for their fee, which was sizeable as I had made such a fuckin mess of things. They treated me with such great respect and were so kind.
It took a year to pay everything off – I spent absolutely nothing, worked my nuts off, sold off crap and ate noodles.
Once I had a plan in place the relief was immense. When I made the last payment l literally floated in a non drug induced happy haze for a week!
The other thing I did was community college courses in accounting as I realised I had no idea how money worked which had made me fearful of the ‘system’, so to speak.
I discovered I really liked it and I’ve ended up doing financial management as a job. Back when I was a hot mess I would have never dreamed I’d find contentment in a well written spreadsheet.
Just wanted to say that is tough for a lot of small businesses right now. We have a business in the trades and people are not paying bills and so we are struggling to pay ours. We have had to get a payment plan with IRD for tax. Things will get better, try and think positive and take it one step at a time.
I’m in a similar situation, having caught Long Covid while running a business. I have contacted IRD and ACC to arrange payment plans. IRD was very easy as it was done all online. ACC, not so much as would chang the conversation and let it go to their collection agency. In saying that, the ACC collection agency is very good at allowing for payment plans.
Best bet is to reach out to IRD and ACC as soon as possible.
I’ve done the same thing for similar reasons. Best advice I can give you is to engage an accountant to help you reach a plan with the IRD and use tax pooling services. The worst thing you can do is hide. I know that’s what you feel like doing. It’s what I did until I got the help of an accountant. Then once you have a plan, use whatever resources you have to find out how you ended up in this position so that you never have it happen again. The only reason I say that is that life is too short to feel this stressed about tax. The worst thing that can happen is that it will make you sick with the stress and you won’t be able to work to pay it off. So number one goal is mental health and face it one bite at a time. Best of luck. And final point ..it is NOT a character flaw.
I can’t help you with tax.
But here is my advice: the rough patch will stop, eventually. Even if it does feel overwhelming and shit at the moment, none of this will last forever and there will be good times again.
Don’t be ashamed, this shit is hard and not getting it right is ok.
Try to stay away from the bottle.. if it doesn’t work: try again tomorrow.. one day it’ll work. Addiction is not a personal flaw, it doesn’t make you less of a person.
Get another Accountant if you can.. 3 months away from clients who depend on him? Not the best service I reckon. My very uneducated guess is that you probably can pay any of the outstanding tax in installments… these kind of problems usually have a humane solution.
Hi OP, I’m an accountant and I’ve helped out a lot of clients in some kind of mental distress over the last four years.
Find an accountant you feel comfortable with and let them deal with the IRD for you. Don’t sweat that stuff, it’s what you pay the accountant for. I recently got a client up to date with five years of filing. She had suffered a head injury and ongoing anxiety. We put a plan in place with the IRD that all contact would run through me. We got everything up to date and then when filed, an approach was made to the IRD and they agreed to write off all interest and penalties, once the core tax was paid in full. It was a six figure write off.
Asking for help is always the first step, and if you put in place a good support network, an accountant, a therapist or counsellor, and you have a desire to move forward, you’re already on your way.
Good luck. You’ve got this. We all believe in you.
As others have said, approach the IRD. If in a position to do so, I would approach via an account and/or tax lawyer simply as that gives you a bit more protection, but ultimately the IRD is typically appreciative when approached proactively. Don’t wait for them to chase you up. Front up and explain what has happened and then work to get a payment plan (there are also some tax laywers/accountants who seem to be pretty good at getting debt written off by the IRD – but that’s not something I have any first-hand experience with).
At the end of the day they don’t want to bankrupt you or send you to jail or whatever. Why? Because that’s not the most effective and efficient way of getting what they are owed (or what they believe can realistically be recovered). If every business that got a bit behind on tax was shut down and the owners subjected to massive penalties, we probably wouldn’t have a functioning economy as so many businesses would shut up shop.
The big penalties are usually for egregious behaviour, e.g. taking PAYE deductions from staff and then not passing that on (which is ultimately theft) or repeatedly falsifying documents to inflate expenses/reduce taxable income. Even then, I personally know a guy who withheld collected GST and PAYE for several years, and his punishment was basically having to liquidate his personal assets to pay down the debt (requiring him to ‘start again’) but he faced no criminal penalties or reputational issues.
They do not want to see you out on the street, or behind bars, unless you have been doing really naughty stuff that is fundamentally dishonest/criminal. If you’ve just fallen behind because business hasn’t been so good, or cashflow is tight, you’ll be able to work something out and they won’t be “horrible” to you about it, but you need to front up and show proactivity and a desire to fix the problem.
There is so much helpful advice in these comments.
I want to add that in my experience things are going to only be better from here. In two years you are going to be so proud of yourself and glad you were brave and took that first step. I went through a similar struggle three years ago and today my life is exponentially better beyond belief.
A lot of people have advised talking to IRD/your accountant. As an accountant, definitely do this, IRD are good if you’re open about your situation. While it may feel bad if you’re only behind on 1 year of income tax and ACC IRD will be able to make an arrangement to pay over a year or two ease the burden.
As a fellow person, the NZ govt funds 5 free counseling sessions per year. You need to talk to your GP to get a referral, but this could be helpful. Your work may also be a part of EAP which is anonymous counseling funded by your employer.
Personally, I spoke to an EAP counselor today to talk about my work issues. This helped me even if it’s another person to listen to me ramble.
I once owed 18k in income tax which I didn’t have due to spending it when my mother in law was dying and my wife needed time off along with having a baby at the same time, shit just happened. If you ring IRD they put you in touch with their crisis team which you can explain your situation, they’ll ask you to go on payment plan and it’s normally what you owe / 24 (2 years) and that’s what you will owe monthly on the payment plan. Note that they will tack on 10% interest or some shit which personally I think is wrong. But the first thing to do is talk to them. I was luckily enough to land a big contract to pay my bill in time but I was (and IRD) were prepared for a payment plan. Not gunna lie though I kinda felt suicidal alittle when I had no way of figuring it out and IRD just said yeah you gotta pay it still and interest on top. No wonder it’s so hard to start businesses here in NZ. Like it’s no skin off their nose if they just wiped 10k if you’re a first time offender 🤷♂️.
GST is the most important, income tax just call them and set up a payment arrangement
As long as your paying something it’s fine, you can drag that out for a while
Pay it off with an arrangement over three years no probs
Straight up, call IRD and come up with a payment plan for your outstanding debt. They are generally pretty nice about it. Just see what you can afford to put towards it per pay and see if they agree. Don’t beat yourself up on your decisions mate. You sound like someone who will have no trouble kicking back into gear and becoming successful. All the best.
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Hey I’m sorry to hear you’ve been really burnt out.
The great news is you’ve recognized how you are feeling and now need some positive support networks in place to help you lead a calm and happy existence.
Google budget services nz and there are different centre’s in most towns/cities that provide free budget/financial services with budgeting, organizing a pay back plan to ird, free accounting etc. I think this would really help you ♥ it’s never too late, it might just take a little time, but youre doing great. Be encouraged
https://budgeting.co.nz/
Hamilton Advisory Budget Trust ♥
Worry not about ACC, you remain covered and they are prohibited from listing debts as credit defaults- pay them last [but pay them]
IRD will generally waive all penalties, once a repayment arrangement is made, so long as they do not suspect a wilful attempt to deceive them.
The IRD like you to become compliant moving forward, irrespective of the size of the historic problem- this is an easy step.
You can expect to pay interest on any historic debt [fair] but the rate is low as IRD only seeks interest to cover their costs.
I have delivered wholesale ineptitude over the years [always eventually catching up] and the IRD have been nothing but pragmatic and accomodating.
I am now self-registered for PAYE using an online service that handles paying both me and the IRD- the best $96 I spend each year.
Exceptions aside, when I see people ripping on the IRD for oppressive treatment in the media I can’t help thinking they are unlikely to be revealing the whole truth.
Mate yeah same happened to me. Had an expensive vehicle repair and had to use tax money I put away to fix it. IRD have a pay by instalment plan there sonewhere. I done that trick last year. Helps majorly when starting out. Expenses pile up everywhere.
“Most businesses fail because of poor cashflow.”
Going through all this since last september. Talk about a hole!! Wheres me shovel. O sold that too