If you underpay tax, the Inland Revenue Department can impose a shortfall penalty of between 20% and 150%. Circumstances that can lead to this situation range from inadvertently not recording a sale in your cashbook, claiming a GST refund for a purchase that did not include GST, failing to declare and repay depreciation when you sell an asset, estimating items for your tax return because your records are so poor you don’t have the actual figures, including personal items in your business tax deductions, and failing to pay money due to the IRD.
Penalty tax can be reduced or eliminated by making a voluntary disclosure to the IRD. This should be done carefully by a tax professional so your case, and the relevant legal and accounting position, is presented in the most helpful light. Anytime is a good time to consider making a voluntary disclosure. Doing so will eliminate the risk of a disgruntled employee or spouse reporting you to the IRD, and will give you peace of mind. Even if you have been advised that you are about to be investigated by the IRD, it is not too late; however, if you are in this position we recommend that you seek very urgent advice.