Less than 40% of people paying self employed schedular tax are claiming expenses which means since 2005 this group has been overtaxed at least $230 million.

Information from the Inland Revenue Department (IRD) shows that for the year to March 2008 94,576 taxpayers were making schedular payments and only 37, 171 people claimed expenses against their income, leaving 61% who claimed no expenses. The figures from 2005 to 2007 are similar.

NZ Accounting director Michael Fresnel took these figures and estimated how much people were being overtaxed.

"Working off my client's records that are at a similar level of turnover to the IRD average of $21,226, I estimated that those people could be paying an average $975 per person more in tax than they should be a year," Mr Fresnel said.

He estimates that this equates to overtaxing of at least $233 million since 2005, given 239,310 people did not claim expenses.

The figure could be a lot higher given that rates for tax on scheduler payments can go as high as 48% if no tax code declaration form has been filled out.

With a tax code declaration the rate ranges from 15% to 33%.

Fresnel says this overtaxing is really unfortunate for the group of people who pay schedular tax as they are often working harder than most for less than minimum wage at times.

A wide range of people pay schedular tax including freelancers, entertainers, models, gardeners, cleaners, salespeople, telemarketers and agricultural workers.

"Sure these are not all glamorous industries but as individuals these people are contributing taxpayers and a part of the national economy, like anyone else."

Fresnel says the group of people making schedular payments needs to be better informed so they know the full picture, even if it's a simple measure like a brochure or booklet sent out.

"In my opinion the IRD are not doing anywhere near enough to inform this large group of almost 100,000 people."

The IRD says information for people regarding schedular payments, their entitlements and obligations is readily available on its website and through a variety of channels, including tax agents, articles in publications and through peak season advertising.

Fresnel however says he tried to search the IRD website using schedular payments as a search term and found it hard to come upon anything useful as a taxpayer.

"The only info readily available is for the benefit of the employer who deducts schedular payments."

http://www.netprophet.co.nz/news/tax/self-employed-overtaxed.html