31 March 2020 marked the financial year end for the year 2020 – which also means that it is now time to file taxes! For those of you who are on salaried wages, this is automatically done for you as you would be on a PAYE (pay as you earn) wage and your employer would have already paid your taxes for you. This guide is for all of those who have a side-hustle or are 100% self-employed.
Filing tax online is super easy. First of all you need to login to myIR – head over to the IRD website and get yourself a login! Once you’ve logged in, you will arrive at your home screen. So the first thing you want to do is to add a self-employment income type. To do that we first need to click into our ‘Income Tax’ Window. It’s this one right here:
Once you clicked through you should see a small box in the lower right-hand corner which says current income types. Now – if you haven’t added in self-employment as a source of income, this box will be empty. If it is empty – go ahead and click on manage.
Clicking manage will bring you to this menu. In this example here, self-employment is already added as an income type. If you haven’t already added self-employment as an income type, you can usually find it at the bottom of the list. Find it and click ‘add type’. This will bring you to a window asking you when you started earning the self-employed income and a declaration that you are providing correct information. Click submit on that window and then head on back to your income tax screen.
Once you are back on your income tax screen, find this box in the upper right hand corner and click ‘more’:
Once you’ve clicked ‘more’, scroll all the way to the bottom and click ‘file return’ that will immediately bring up a window asking you which period you want to file it for. It is the end of the 31 March 2020 financial year so click on ‘File Now’ for 31 March 2020:
After clicking ‘file now’ you will be brought to the first page of the file return process:
Yup, you can quickly read through this page, then press next. That will bring you to the second page here:
In most cases, you would leave it as no. If you are unsure if you were a non-resident at the time of filing – then that’s a more complicated issue that we won’t discuss in this post. Hit next and continue.
It is important to note that you ARE a tax resident if you have meet one of the following criteria (taken from the IRD website):
You are a tax resident in New Zealand if you:
- are in New Zealand for more than 183 days in any 12-month period and haven’t become a non-resident, or
- have a ‘permanent place of abode’ in New Zealand, or
- are away from New Zealand in the service of the New Zealand government.
Please note that tax residency has nothing to do with permanent residency and/or citizenship. That means that even if you are holding a temporary visa and are still deriving income in NZ and meet the criteria above, you HAVE to pay taxes.
Since you are filing self-employed income, you need to add in your BIC code. It’s really easy. Hit the ‘Find my BIC code’ button – follow the instructions and then copy the code into the white box below. Click next when you are done.
Page 4 will ask you to build your return. For now, we can ignore all the other income types as we are focused on self-employed income. Note that if you have a PAYE wage/salary the NZ income with tax deducted will be automatically selected for you. Click next when done.
Page 5 will ask you what forms you want to submit together with your return. Be sure to check the IR 3B schedule for Business Income box. You can ignore the rest for now. Click next.
Page 6 will ask you if any specific situations apply to you. If this is your first year of filing a self-employed tax return, you can check that box provided that you are filing this return before July 2020. You can’t qualify for the early payment discount next year. Once you are done, click next.
Page 7 asks for disclosures – in most cases you won’t have any disclosures to make. CFC – controlled foreign company FIF – foreign investment funds. If you don’t know what either of these means – chances are you don’t have anything to do with them. IR 833 is relevant only if you have made a property sale during the year – in which case, talk to your accountant! Click next when you are done.
Page 8 asks you to declare your NET INCOME (that is the same as net profit – Income minus Expenses!) from self-employment. If you have a PAYE salary – it will be displayed above your self-employment income. Go ahead and type in your net income in the box.
UPDATED( 25 April 2020): Note that if you have received the COVID-19 wage subsidy prior to 31 March 2020 as a self-employed individual – you need to include it here as well (as it is taxable for self-employed individuals). If you received it prior to 31 March 2020, you will need to apportion the amount related to the last week of March. This means that you need to recognise your income for the wage subsidy as $585.80 (for full-time) and $350 (for part-time). DO NOT put in the full amount received. The remainder of the wage subsidy can be recognised in next year’s tax return. This is because the subsidy is meant to be paid over 12 weeks – therefore you should only recognise the first week’s income for the 31 March 2020 financial year. It’s the accrual concept remember!
If you received the wage subsidy after 31 March 2020, then you can recognise the entire amount in your tax return next year (2021).
Click next when done. Note that if your income (from all sources) is between $24,000 and $48,000 during the year, you will be prompted by a screen asking if you are eligible for IETC (Independent earner tax credits). You should fill in ’12’ in the months eligible box, unless you had been receiving a benefit or working for family tax credits during any month in the year – in which case, you should only put down the months you were not receiving a benefit as months eligible. Click next when done. For more information about IETC – check out this article I wrote.
Page 9 will calculate your tax payable for you. You don’t need to do anything here. Check the box and move on. Click Next.
Page 10 will bring you to your IR 3B business income form (remember we checked that box on page 5?). Here you will fill out your sales and all your expenses to get your net income. If you received the COVID-19 wage subsidy as a self-employed individual- be sure to list it down under ‘Other Income’ if you received it prior to 31 March 2020. If you have calculated your home office expenses – be sure to plonk in the figure in the white box next to the ‘HOME OFFICE’ expense on the form. VERY IMPORTANT – make sure that the net income figure at the very bottom of this form matches the net income you have typed in in page 8. Once you are done, click next.
Yay! congratulations! you are one step away from filing your return! If you have tax to pay – you can choose to pay by direct debit and when you click next you will be taken to the payment screen. If you have a tax refund (woo hoo!) when you click next, My IR will ask you to update your bank refund details (you should if you haven’t) and you can expect your refund in your bank account in 1 to 2 weeks time.
That’s it!
Granted it is a fair amount of pages you need to click through but it does not require any specialised knowledge apart from what you already know about your business. If you have a small self-employment or side hustle setup – you can easily do this all by yourself.
Have fun filing those tax returns! As always, if you have any questions, hit me up on my FB!
Zeira Khan
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Angela Coulson
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Nikki
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