IRD Sent Me a Letter: What Common NZ Tax Letters Mean
IRD sent me a letter — what the common ones mean and what to do
The short answer: most IRD letters are one of six: an income tax assessment, a request for more information, a reminder that a return is overdue, a penalty notice, a statement showing money owed, or notice of an audit. None means you are in trouble yet. Each has a deadline and one obvious first step, and almost every bad outcome comes from leaving the letter in a drawer.
Which IRD letters does a small-business owner actually receive?
| Letter | What it means | Deadline | First thing to do |
|---|---|---|---|
| Income tax assessment | IRD has worked out your year — "the income you earned, how much tax you paid during the year and how much you should have paid" | Tax to pay is due 7 February, or 7 April with a tax agent's extension of time | Check the income against your records; missing rental or contracting income is the usual error |
| Request for more information | IRD's automatic assessment is incomplete; issued late May to end of July | Before IRD finalises the assessment | Send the missing income and expenses, or ask us to |
| Return overdue / reminder to file | IRD has not received a return it expects | File now | File. If you do not, IRD makes a default assessment — its own estimate — then starts recovery |
| Late filing penalty | First late return: a warning letter; a second within 12 months may be penalised | Pay with the tax | Check the amount against the table below |
| Statement of account / overdue amount | Tax unpaid; penalties and interest running | Immediately — interest is daily | Pay, or set up an instalment arrangement in myIR the same day |
| Audit letter | "A check of tax and business records to make sure you've paid the right amount of tax" | The date in the letter | Gather records; call us before replying — disclosure still reduces penalties now |
How much are the late filing penalties?
| Return | Penalty |
|---|---|
| Income tax return, net income under $100,000 | $50 |
| Income tax return, net income $100,000 to $1 million | $250 |
| Income tax return, net income over $1 million | $500 |
| GST return, payments basis | $50 |
| GST return, invoice or hybrid basis | $250 |
| Employment information (payday filing) | $250 per month, however many paydays were late |
What happens if I pay late?
Late payment penalties come in three stages: 1% the day after the due date, a further 4% on the remaining tax (including penalties) on the 7th day, then 1% every month it stays unpaid (IRD notes the monthly penalty does not apply to GST, income tax including provisional tax, or Working for Families). On top, use-of-money interest runs daily at 8.97% (rate from 16 January 2026).
Two softeners: for a first late payment in two years IRD "may give you a grace period", and it may waive a penalty where the reason "was beyond your control" — but "we cannot waive a penalty because of your financial circumstances." Short of cash is not a reason; in hospital is.
What if I cannot pay?
Do not wait for the next letter. IRD's advice: "if you are struggling to pay what you owe, get in touch with us as soon as possible," and you can "set up an instalment arrangement in myIR to make small, regular payments." An arrangement stops escalation; a cash-flow forecast shows what instalment the business can carry.
What does an audit letter mean?
An audit is a records check, not an accusation. The exposure is a shortfall penalty if tax was underpaid: 20% for not taking reasonable care, 20% for an unacceptable tax position, 40% for gross carelessness, a penalty equal to the shortfall for an abusive tax position, 150% for evasion. Telling IRD about an error before any audit notice cuts the penalty by 75% up to the full penalty; after notification but before the audit starts, by 40%. So the first call after an audit letter is to your accountant, not IRD.
FAQ
How do I know if an IRD letter is real? Log in to myIR; genuine letters are stored under your account. They quote your IRD number and never ask for bank passwords. If it is in myIR, act on it; if not, do not click anything.
I have an accountant — do I still need to do anything? Forward it the day it arrives. As your registered tax agent we receive most IRD correspondence, but assessment and debt letters sometimes go to the taxpayer only, and the deadline runs from the letter date whether or not anyone read it. Companies Office letters about the annual return are separate — see company and trust compliance.
Can IRD remove the penalty if I explain? Sometimes: for a first late payment in two years, a genuine one-off mistake, or a cause beyond your control. Not because you could not afford to pay. Ask promptly, in writing.
What is a default assessment? When a return is not filed, IRD estimates your tax itself and charges that, plus late filing penalties and interest. The estimate is usually higher than the real figure. Filing the actual return replaces it, so the fix is always the same: file, even if late — including rental property returns.
Can I reply to IRD in Chinese? Correspondence with IRD is in English. If English is the barrier, that is what a bilingual tax agent is for — we read the letter with you in Mandarin and reply in English on your behalf.
Talk to us
Received a letter you do not understand? Bring it to a free 15-minute consultation: call 021 202 4028, email info@optimalaccountants.co.nz, or use our contact page. Ted Liang, Chartered Accountant (CA ANZ), IRD-registered tax agent, Optimal Accountants Limited, Level 3, Candida Building, 4/61 Constellation Drive, Rosedale, Auckland. English and Mandarin. See tax and GST returns and all services.