Another parent handed a tax bill after incorrectly recording her relationship status for Working for Families says she has been told she now owes $47,000.
Over recent weeks, a handful of parents have contacted RNZ after experiencing the same problem.
When registering the birth of their children, they have assumed that the data they supplied for the birth certificate would be used in their application for Working for Families – and have missed or incorrectly ticked a box to say they were in a relationship.
One mother of two children, who did not want to be identified, said she applied for Family Boost childcare subsidy payments because she and her husband were living paycheque to paycheque “as New Zealand’s working poor.”
“We, like many others, have two children, one of whom is going to daycare full-time as we have no option but to work,” she said.
“Not long after applying for this, I received a phone call from a woman from the IRD who told me that I had a week to put in the dates that my relationship started.
“I had sent my son’s birth certificate in, with the same address and the same last name… I had no idea that I had not ticked a box. The Working for Families money we received was helping us pay for my son’s childcare.
“All of a sudden, after filling this supposed date in, I received around six emails, saying that I now owed the IRD $47,000 of overpaid Working for Families tax credits. I felt sick. I still do. There is no way that I can afford to pay this, and there is nobody that wants to talk to you about it.”
She said she had tried to dispute the bill but was worried she would have to use her KiwiSaver to clear it if she was not successful.
“We can barely make ends meet as it is, and suddenly, because I didn’t tick a box, I owe almost $50,000. And just like the previous mother I read about, they tell you it’s due two or three weeks. I don’t know anybody that has that amount of money. That is literally almost my entire year’s wages. My husband earns even less than this.”
Revenue Minister Simon Watts said it was an operational matter for Inland Revenue.
“I am advised that this issue affects a small number of taxpayers who have received an overpayment due to not providing IRD with the most recent information on their circumstances.”
Susan St John, economist and a member of the Child Poverty Action Group, said the problems were not with Inland Revenue’s application of Working for Families, but with the settings of the system itself.
A review launched by the Labour government did not result in any progress.
“What a complete waste of time that was. It just disappeared into the ether and no one talks about it anymore.”
Most families did not have the skills to challenge a bill, or access to legal help or an alternative voice to represent them, she said.
“There’s a problem with the way the system is designed.”
She believed the threshold at which Working for Families entitlements were clawed back was too low – at $42,700. Above this level of annual household income, payments reduce by 27 cents for every $1 earned.
Many people receive a bill when their income is higher than expected in a given tax year.
She said there could also be problems caused by relationship status. “It’s very confusing for people. IR is not set up to investigate this kind of social engagement thing.”
She knew of one case where a couple separated, and the man moved into his mother’s house.
The woman was not working. She did not go on a benefit but continued to claim Working for Families and the in-work tax credit.
“Nothing changed from a government point of view but six months down the track when the estranged partner went to IRD to try to organise something for himself, it’s found out that they’ve been separated for six months. The next thing, she gets the bill.”
The woman was told she was not entitled to the Working for Families credits she received because she did not fulfil the work criteria for the in-work tax credit (IWTC).
St John said she worried that people who lost their jobs due to the economic downturn, or due to recent natural disasters, might not realise they were not meant to receive the IWTC.
“I haven’t seen data but suspect increasing number of bills issued because of overpayment of IWTC.”
The system needed a substantial overhaul, she believed.
