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Thread ID: 89603	2008-05-05 21:34:00	Advice on Accountants?	side79 (13706)	PC World Chat

Post ID	Timestamp	Content	User
666275	2008-05-05 21:34:00	Hey all, a little advice appreciated here from anyone in the know. I recently started working as a contractor, so this is the first year I'll be putting in a personal tax return. I decided to get an accountant to help with this (I know I can probably do it myself, but I have little time or patience for that sort of thing, so am set on having a professional help with it - so no point really in arguing this :) ) I just received their terms of engagement and notice a clause in there which I'm not 100% sure about. Basically what it says is that if I have any outstanding invoices owing to them, they can bank my IRD cheques from tax returns\etc and deduct what's owed to them before sending the balance on to me. Now this doesn't sound too bad to me I guess, but not knowing much about this sort of thing, I just wanted to get some more opinions. Any thoughts? Any accountants or tax lawyers out there? Or just contractors who've done this before? :D	side79 (13706)
666276	2008-05-05 21:49:00	Hi and welcome to PressF1! The accountant wants to be able to bank any of your GST and/or income tax refund* cheques into their trust account. They then deduct any amounts you owe them and pay you the difference. Basically they don't want to give you your refund and then wait for you to pay them - they want to jump the queue of when they get paid. *You can get an income tax refund if your income level is such that you paid too much tax. How? Let's say you were on a salary for 6 months and then went into self employment. Assuming you make a loss or break even for the 2nd 6 months (entirely possible if you aren't selling your time), then the PAYE deducted will be too high for the income earned and you will get an income tax refund. The same applies to GST - particularly in the start up months you could spend more than you earn (especially if you are buying equipment, but not if you are an IT contractor) and you can end up with a GST refund. Andrew	andrew93 (249)
666277	2008-05-05 21:57:00	Thanks for the welcome. Yeah, I understand basically what the clause means. I just wanted a sanity check on whether it was "standard" before signing it. I'm probably fairly unlikely to get a refund TBH, but still worth checking. I take it from your reply I shouldn't be worried about it? :)	side79 (13706)
666278	2008-05-05 22:09:00	It's pretty standard. If you don't think you will get a refund then it doesn't really matter. So yes - I wouldn't worry about it too much. Have you got a fixed fee arrangement? If not, I recommend you explore that option - you want to know how much you will be up for. Say no to 'stat accounts' or 'statutory accounts' - they add no value and cost quite a bit extra. Basically make sure you find out what they will do and how much they want to charge. Take control of the process wherever possible. Are you a sole trader or do you trade using a limited liability company?	andrew93 (249)
666279	2008-05-05 22:24:00	Great, thanks again mate. I don't have a fixed fee arrangement, but will definitely look into that. I'm operating as a sole trader at the moment.	side79 (13706)
666280	2008-05-05 23:14:00	Great, thanks again mate. I don't have a fixed fee arrangement, but will definitely look into that. I'm operating as a sole trader at the moment. Also have a look at Public Liability Insurance. PJ.	Poppa John (284)
666281	2008-05-05 23:24:00	I'm operating as a sole trader at the moment. Provisional tax. Read up on it - find out what it is and how it works. Starting here: www.ird.govt.nz In a nutshell : given you won't have any PAYE deducted, you are going to have to pay your own tax - this is where 'prov' tax comes in to it. Set aside a percentage of your monthly earnings for your tax and don't be tempted to spend it on a new jetski or something like that. Oddly enough the hardest year from a cashflow perspective is the 2nd year of being profitable because you end up paying 2 years of income tax ni the one financial year. Strange, but true! But, you can (legally) avoid the pains of provisional tax by forming a company and becoming an employee of your own company. Advantages? You pay your tax as you go via PAYE, you have an earnings history if you ever need to make an ACC claim, you can get out of the provisional tax regime, you can entertain tax management practices (not tax avoidance), and by taking control of the process you have less reliance on your accountant (and less fees in theory). Disadvantages? You have to pay to set up a company ($70 from memory), but you can do the whole thing online yourself in less than a day (see www.companies.govt.nz), there is some extra administration (annual return to the companies office - free online but you have to do it), filing monthly PAYE returns (not a biggie) and loss of the tax money on deposit earning interest (the potential loss of interest is piffle compared to the potential fines for not paying your tax on time). Accountants tend to not support these sorts of arrangements - they would rather see you on the provisional tax treadmill which means the ongoing need for their service. Good luck! Andrew	andrew93 (249)
666282	2008-05-05 23:26:00	Also have a look at Public Liability Insurance. PJ. Good point but speak to an insurance broker - there is a big difference between public liability and professional indemnity insurance. Let them tell you what you need to avoid taking an ineffective policy. Andrew	andrew93 (249)
666283	2008-05-05 23:56:00	I dont like the sound of the accountants getting their fee before you get your money. Thats sounds like cash on delivery to me......Many firms have cash flow issues and the sooner they get their fee the better, however most firm operate with 20th next month. In my opinion, I'd tell them you arent happy with that and find another accountant. Problem is, you dont have control on their charges and once the fee in paid, its harder to get back any disputed charges....	SolMiester (139)
666284	2008-05-06 00:05:00	Agree with Andrew, he has given you excellent advice . The deducting of fees is normal and not something to be concerned about . Accountants often get left in the lurch not being paid for their work . Registering a new company involves fees of $160 - did one a few days ago . While I agree with Andrew that you could do PAYE etc yourself, I'd suggest that at the beginning you get the accountant to start things off on the right foot . Like most people, you simply may not be interested in the stuff . It will cost you for their work so be flexible - do what you can yourself . I don't know whether you have gone to a big accountancy firm or someone working out of his kitchen . My experience is that for small businesses, the guy in the kitchen is cheaper, very keen and efficent - but will lack wider legal and tax knowledge . Doesn't matter most of the time .	Winston001 (3612)
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