Last month, my team saved a client thousands of dollars without claiming a single extra expense.
IRD charged a four-figure late payment penalty, plus interest.
Most taxpayers would have simply paid it.
Instead, we reviewed the circumstances, prepared a case, and negotiated with IRD on the client’s behalf.
The result?
- Penalty remitted.
Now before everyone rushes off to ask IRD to waive their penalties, it’s important to understand that not every case qualifies.
There are rules.
For example:
- The underlying tax generally needs to be be paid first.
- Your compliance history matters.
- The reason for the late payment matters.
- The way the request is presented matters.
Many taxpayers don’t realise that IRD has discretion in certain situations.
The problem is that most people either don’t know the rules or don’t know how to make a compelling case.
In this article, I’ll walk you through
- 6 ways that may improve your chances of having an IRD penalty removed.
- 3 common myths about IRD penalty remissions
- Why having the right adviser in your corner can make all the difference
1. Show You Had A Reasonable Cause
One of the most common grounds for penalty remission is being able to demonstrate that circumstances outside your control caused the issue.
Examples may include:
- Serious illness
- An accident
- A natural disaster
- Significant emotional distress
- Other unexpected events that prevented you from meeting your tax obligations
The key point is that IRD generally wants to see that the failure wasn’t simply due to negligence or a deliberate decision not to comply.
You also need to show that the circumstances directly contributed to the late filing or late payment.
The stronger the evidence, the stronger your case.
2. Fix The Problem As Soon As Possible
Many taxpayers make the mistake of ignoring the issue and hoping it will go away.
That approach rarely ends well.
If you’ve missed a filing deadline or payment date, take action immediately.
This may include:
- Filing outstanding returns
- Paying outstanding tax
- Contacting IRD promptly
- Gathering supporting evidence
When IRD reviews remission requests, they often look at what happened after the mistake occurred.
Did you act quickly to correct the issue?
Or did you leave it unresolved for months?
Taking prompt action demonstrates good faith and can strengthen your position.
3. Pay The Core Tax First
This is one of the most important points and one that many taxpayers overlook.
In many situations, IRD is unlikely to consider penalty relief while the underlying tax remains unpaid.
Think about it from IRD’s perspective.
Their primary concern is collecting the tax that is actually owed.
The penalty is secondary.
One of the first questions I ask clients seeking penalty remission is:
“Has the tax itself been paid?”
If the answer is no, that’s often the first issue that needs to be addressed.
In our client’s case, ensuring the underlying tax obligation was dealt with formed an important part of the overall strategy.
4. Demonstrate A Strong Compliance History
Not all taxpayers are viewed the same way.
Someone who has consistently filed returns and paid tax on time for years will generally be in a stronger position than someone with a long history of non-compliance.
A good compliance history helps demonstrate that you take your tax obligations seriously and that the issue is unlikely to happen again.
Factors that may help include:
- A history of filing returns on time
- A history of paying tax on time
- No previous penalty issues
- A good overall relationship with IRD
Your track record matters.
The stronger it is, the easier it becomes to argue that the current issue is an exception rather than the norm.
5. Show It Was A Genuine One-Off Mistake
A strong compliance history helps.
But it’s not enough on its own.
You also need to show that the specific incident was a genuine oversight rather than part of an ongoing pattern.
In our client’s case, the missed provisional tax payment wasn’t part of a recurring problem.
It was a genuine one-off mistake.
That distinction matters.
IRD is generally more willing to consider relief where the circumstances suggest:
- An honest oversight
- An administrative error
- A misunderstanding that has since been corrected
- An isolated lapse in an otherwise good compliance record
The easier it is to demonstrate that the issue is unlikely to happen again, the stronger your position becomes.
6. Make A Properly Supported Submission
This is where many remission requests succeed or fail.
Most taxpayers focus on what happened.
IRD also wants to understand why it happened and whether there is a valid basis for relief.
A strong submission should include:
- A clear explanation of the circumstances
- Relevant supporting evidence
- The steps taken to correct the issue
- The steps taken to prevent it from happening again
Supporting documents might include:
- Medical certificates
- Hospital records
- Insurance documents
- Evidence of exceptional circumstances
- Correspondence relating to the issue
Simply saying “I forgot” or “I couldn’t afford it” is unlikely to be enough.
The facts matter.
The evidence matters.
And the way the case is presented matters.
Common Myths About IRD Penalty Remissions
Myth #1: If I Can’t Afford To Pay, IRD Will Waive The Penalty
Not necessarily. Financial hardship alone is generally not a valid reason for penalty remission. While IRD has various debt relief options available in certain circumstances, penalty remission is assessed under specific criteria.
Myth #2: My Accountant Made The Mistake, So IRD Must Remove The Penalty
Not necessarily. The fact that an adviser made an error does not automatically mean a penalty will be remitted. Each case is assessed on its own facts.
Myth #3: Every Penalty Can Be Challenged
Different penalties have different rules. For example, late payment penalties are treated differently from shortfall penalties. The options available depend on the type of penalty involved and the circumstances surrounding it.
Why Having An Adviser In Your Corner Matters
One of the biggest benefits of working with an experienced tax adviser is having someone who understands both the legislation and the practical realities of dealing with IRD.
An adviser can help:
- Assess whether you have a realistic chance of success
- Identify the strongest grounds for remission
- Prepare supporting documentation
- Communicate with IRD on your behalf
- Present the facts in a way that addresses IRD’s requirements
Not every case will succeed.
No adviser can guarantee that.
But having someone who understands the rules and the process can significantly improve your chances.
If you’ve received an IRD penalty, don’t automatically assume the decision is final.
Some penalties can be remitted.
Others cannot.
The key is understanding your options before simply paying the bill and moving on.
Every situation is different, and professional advice should always be tailored to your specific circumstances.
Need Help?
Have you received an IRD penalty and want to know whether it can be challenged or remitted?
Book a call, and my team and I will review your situation, explain your options, and let you know whether there may be grounds to approach IRD.