Baqir Hussain

then what can happen is the employer is underpaying the IRD and maybe overpaying you as an individual.

And so what that means at the end of the year when the IRD squares up, adding up all the taxes that

should have been paid versus actual payment, you can end up with a tax bill.

When it comes to families, a big reason for getting a tax bill is because of the way the working for families tax system works.

What I mean by that is there are usually two methods to get the working for families tax payments.

You could go with a lump sum payment at the end of the year based on whatever your entitlement is, versus you could choose to get regular payments, whether that's weekly, fortnightly payments.

Usually the tax bill arises when you're on regular payments.

Because the amount that the IRD gives you is based on an estimated annual family or household income that you have.

And so if the actual income at the end of the year is different from that, if it's higher, that the IRD has already paid you some regular payments, that's when you end up with the tax bill because they say, oh, we've overpaid you because your actual entitlement is

maybe $100 and you've already paid your $200.

And so my suggestion to most people is if you can afford it and if you can manage the cash flow side of things, then always go with the lump sum option.

It's just that you get at the end of the year, but think of it as a bonus.

Look at it as a forced saving of sorts versus even if it's a dollar to pay, no one likes to get a tax bill at the end of the year.

I think there's a big misconception there.

Firstly, a tax refund is, in essence, technically not free money.

A tax refund is your own money you're getting back.

from the IRD.

So what has happened is you've overpaid your taxes.

And so one example of that is if you're a salary earner and if you're doing a regular job, then you can get a tax refund if your employer has overpaid your taxes.

And that can normally happen.