Q: Some of the employees for a client we do payroll for received a tax bill from IRD last year. They get paid weekly and there were 52 weeks in the year, so one theory is that it is due to the time in lieu cash up payments/bonuses/cashing up annual leave that have been paid out and taxed as a lump sum. We have been asked if these types of payments can be taxed at the employees higher tax rate to prevent a bill. If that is ok with the employee, is that an acceptable thing to do? Is there a legal reason we can’t do it?

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A: An employee can always ask to be taxed at a higher rate (just not lower).  The employee should provide this as written consent so the deduction is covered if questioned at a later date.