How do I make it right - years of unpaid taxes

November 3, 2009 6:30 PM

I haven't paid taxes since Feb 2007, how do I make it right? I'm Australian.

Despite good intentions, I never got around to paying my taxes this year... or the year before... since Feb 2007 when I went out on my own as a web designer. I've travelled a fair bit and haven't made a great deal, but this has always been in the back of my mind. I need to make it right - start afresh. I'm Australian - What do I need to do?

I've scanned, OCR'd and imported all of my banking statements into an online money manager, which tells me what I've spent and how much I've earned. Then I calculated how much I would have had to pay (not including tax write-offs & if I paid on time) to give me a rough idea. This doesn't take into account late fees of course. Which I'm freaking out about.

I assume my next step is to take all of these figures to an accountant? Will they need anything else? Am I better off putting this off until I have significant reserves in my bank account? How harsh are the late fees going to be? How much should an accountant charge to submit these?

Thanks for your time - I appreciate it :)

posted by simplesharps to Work & Money (12 answers total)

I did this last year, catching up on more years than that. That said, I'm not self-employed. The first step is to go to the accountant. Remember, they work for you, so get them to give you the details before they lodge - so you can be sure that your buffer is good enough. When you're already a few years late, a few weeks won't make a difference. The late fees I copped (can't recall off the top of my head) weren't too bad - basically ended up eating up the refund I was due, which wasn't a lot.

So anyway, yeah, for the question "Am I better off putting this off until I have significant reserves in my bank account?", I'll say "no". Find out the info from the accountant. Lodge when you know you can deal with it.

This is absolutely not financial advice.
posted by pompomtom at 7:24 PM on November 3, 2009

Two years ago I caught up on more years than that too. The accountant handled it all - $80 per year (tax deductible the next year). I didn't have to pay any late fees but I was sternly warned never to be late again because I wouldn't be so lucky.
I was talking with my accountant just recently and his business was going well because a lot of people had been catching up on their back taxes so that they could claim their $900 Rudd Money™. The bad news for you is that I think you have missed the deadline for your Rudd Money™ (check with your accountant though, you never know).
posted by tellurian at 7:56 PM on November 3, 2009 [1 favorite]

3rd-ing pompomtom & tellurian. I had the same thing a few years ago, with considerably more overdue returns than a couple of years worth. In my case (PAYE), the penalties were surprisingly minimal - IIRC, overall they were less than what the accountants fees were - and I came out a few thousand ahead once I got the returns back.

Mine cost me ~$120/year, because there was considerably more work than normal - they had to do a lot of it manually because their software didn't go back far enough!

Find a good small biz / tax accountant (i.e. not just ITP / H&R Block; the one I used is no longer around, but was recommended to me by a friend who did temp work for ITP at tax time after all the small local accountants I tried knocked me back). They'll want all your original documentation - invoices, banking statements, whatever records you've got - not just your figures. Trust me, they've seen worse than you if pompomtom, tellurian, and I are anything to go by ;-)
posted by Pinback at 8:05 PM on November 3, 2009

I was self-employed back in the late nineties, and didn't file (among other things) my payroll taxes properly. The penalties, accruing interest at 12.5%pa, forced me to sell my car *and* take out a small personal loan to pay them off.

Go to an accountant. If they need more data, they'll ask for it. Go sooner rather than later, because penalties accrue interest all the time. If you don't owe anything, it'll be cheap; if you do owe, it's only going to get worse.
posted by nonspecialist at 8:06 PM on November 3, 2009

I had a few years undone, took it to the accountant for $100 per tax return. Tax department had a big bill for us, and started adding interest. They sent a letter of demand. I rang up nearly crying. They promised to let us pay it off at an agreed upon rate. They were actually pretty reasonable. There was a bit of a hiccup in the middle when the system I'd been going through demanded to see my attempts to get a loan from the bank to pay them (yeeek!) but really, they can't get blood from a stone. Don't miss any payments, I was warned, or it will all fall due, and they would go to extraordinary lengths to get it back. Make sure as soon as you get the notice, you ring up and are very polite and nice. It makes a difference.
posted by b33j at 8:13 PM on November 3, 2009

February 2007? 2007?

Don't worry about it. Just go to an accountant. He/she will look on your not-quite-three years of well-organized records and smile with appreciation that you are not yet another ten years out of date sole trader bearing a well-scrambled shoebox.
posted by aeschenkarnos at 8:49 PM on November 3, 2009 [2 favorites]

Oh and also, as a business owner your focus needs to be on generating more income and cashflow for yourself. Recording it is something you can pay people to do. A bookkeeper will cost you $30-$50 per hour and probably take 3-5 hours a month to sort out your accounts. This is worth it.
posted by aeschenkarnos at 8:53 PM on November 3, 2009

Nth'ing that it's not that big a deal. I caught up with about five years worth at one stage and the way I remember it was a small penalty for years I owed *them* money, and no penalty for years they owed *me* money. I came out a few thousand bucks ahead, the tax agent just took his fee out of my return. I just went to ITP, I think and the $80 bucks a year quoted above seems about right. Might be more for small business though.
posted by t0astie at 10:21 PM on November 3, 2009

Best answer: What everyone else has said, don't worry too much about it.

I am also self-employed & got a few years behind. (To be totally honest, I've fallen a number of years behind twice, the most recent time as self employed. What's worse is that I used to work as bookkeeper for a chartered accountant so I DO know better.) Finally I got motivated & went to see the accountant & we got it all up to date and lodged. I then got a fairly sizable outstanding bill from the ATO for 2 years worth of tax. I rang their automated system and poked a few buttons on my phone and organised a monthly payment plan which was approved without needing to speak to any humans.

They didn't hit me with any late lodgement fees and usually won't unless they have sent you a demand to lodge or you've caught their eye in the past for similar issues. I think I may even have got off without accruing any interest, because I sorted out the payment plan prior to the due date, but I'd have to check the following years's assessment to be positive.

Also, if you do accrue any interest, you can claim the interest as a business expense in your next return.

There are people out there with much larger outstanding issues than you and as long as you get the returns lodged & pay when you're told/agree to, the ATO are happy. They've always been pretty friendly & easy to deal with whenever I've had to contact them.

As far as your specific questions:

I assume my next step is to take all of these figures to an accountant? Will they need anything else?

Yes. Mine is happy with the P&L statement I print out from Quickbooks. Make a list of all your business equipment with date of purchase & cost so they can sort out your depreciation. They'll also probably require your most recent previous return.

Am I better off putting this off until I have significant reserves in my bank account?

DO IT NOW The earlier you get it done the earlier you will know exactly where you stand & get a payment plan worked out. The earlier you will have peace of mind

How harsh are the late fees going to be?

Who knows until a professional has looked at it?

How much should an accountant charge to submit these?

Will vary by how complicated it is. Being self employed will probably cost more than what people have quoted above, also depends on how much liason the account does with the ATO on your behalf.


Good luck.
posted by goshling at 11:01 PM on November 3, 2009

If your tax affairs are fairly simple and you'd rather do this yourself, you can. Call the ATO and get them to send you the Tax Packs for the years you missed, then fill them in, then lodge them. In my experience, ATO phone service people are friendly, helpful and knowledgeable.
posted by flabdablet at 11:49 PM on November 3, 2009

This year I finally put in my tax returns for three years - no problems, but I was also in the black with respect to the ATO through PAYE & various kinds of deductions.

But yeh, get onto it ASAP. If you owe them money or if there are fines involved, these tend to increase over time, and their interest rate is (from memory) higher than market rates. Getting your position sorted out now lets you know where you stand, and if there is money owing, you can organise a repayment plan.

Like any kind of creditor, they're generally happier to have you on the radar & under some kind of agreement than not knowing where their money is, or when it might be trickling in.
posted by UbuRoivas at 1:38 AM on November 4, 2009

PS - I don't think it could hurt to package up your returns with a letter containing any old BS you can think of to justify your belated forms. Relationship breakdown, depression, whatever. It's not very likely that govt bureaucrats would bother following up in any way to verify what you say. At worst, they'd just ignore it.
posted by UbuRoivas at 1:41 AM on November 4, 2009