IRD can tell your bank to pay them first. What to do before the money disappears
- Haley Reyners
- 20 hours ago
- 6 min read
If you have unpaid tax and go quiet on IRD, they do not just give up. More and more often, they are telling banks and employers to send money to Inland Revenue before it gets to you. For some people, that has meant logging in to their account and finding that hundreds of dollars have already been taken for old tax debt.
It sounds harsh, but from IRD’s point of view this is what happens when reminders, calls and offers of payment plans have all been ignored. The good news is that there is a window of time before it gets to that point and what you do in that window makes a big difference.
This article explains what is happening, why IRD is suddenly using deduction notices so much more and what to do if you are worried your bank account might be next.
Can IRD take money from my bank account for IRD debt in New Zealand?
Short answer, yes. If you have unpaid tax and do not respond to IRD, they can use a deduction notice to collect money directly from your bank account.
What has changed in 2025 is how often they are doing it. Since mid June 2025, IRD has sent around 16,500 notices about planned bank deductions, about 25 percent more than in the whole of the previous year. Between mid June and the end of September, they completed more than 8,000 deductions, recovering millions of dollars, with thousands more deductions in progress.
For many people, that shift has turned IRD debt from a background worry into real money disappearing from their account. The sections that follow unpack how that works, what triggers it and what you can do before it gets that far.
What is an IRD deduction notice and how does it work?
A deduction notice is IRD’s way of saying, “We have tried to help, now we are going to collect the money ourselves.”
In IRD’s own words, most taxpayers pay on time, and when people struggle, they do everything they can to help and often set up a payment plan that fits the person’s budget. Only when those offers of help are not taken up do they collect the amount by sending a deduction notice.
Here is what happens:
You have unpaid IRD debt and have not engaged in a meaningful way
IRD issues a deduction notice to someone who owes you money, usually your employer or your bank
That notice legally requires them to pay money to IRD instead of to you
They must make those deductions and send the money to IRD or they themselves can become liable and even face prosecution
The notice keeps going until the full amount is paid or IRD writes to tell them to stop
So if IRD has not heard from you and has decided you are refusing to pay, they can skip past you and go straight to your income or savings.
How many deduction notices are going out now?
This is where the wake up call part really lands.
Recent figures show:
16,500 notices of planned bank deductions between mid June and late September 2025, 25 percent more than the whole previous year
8,181 bank deductions completed in that same short period, pulling in 17 million dollars, plus 6,026 deductions in progress recovering another 5.5 million dollars
Over the latest full year, 88,367 section 157 deduction notices were issued for overdue debt, 19 percent higher than the year before
Those are not niche little numbers. Notices are going out in their tens of thousands.
That is why stories are now popping up of people having hundreds or even a thousand dollars a week taken from their accounts and feeling completely blindsided.
How much can IRD take if a deduction notice is in place?
There are rules around this, although if money is tight it may not feel very comforting.
For most tax debts, such as GST, income tax or student loans, IRD’s standard practice is that for salary and wages they can require deductions up to the lesser of:
10 percent of the tax debt, or
20 percent of your gross wages on payday
The minimum deduction is usually 10 dollars a week and this is on top of normal PAYE and other usual deductions.
For bank accounts, deduction notices can be used to take either a lump sum or ongoing amounts, depending on the notice. If the bank does not follow the instructions when there is money in the account, IRD can treat the bank as owing that money instead.
This is how some people have ended up with large weekly amounts being taken, even where they feel it is unworkable in real life.
What happens if you pick up the phone instead?
This is the encouraging part. IRD’s own wording is surprisingly human once you get past the scary bits.
On their deduction notice guidance, they say:
“We understand life happens”
“We’ll do everything we can to help the taxpayer get back on their feet”
“We often work with taxpayers to arrange a payment plan that fits their budget”
Deduction notices are described as what happens when those offers of assistance are not taken up.
So if you contact IRD before they escalate, you have a much better chance of:
Setting up a payment plan that suits your cashflow
Keeping deductions at a level you can live with
Avoiding a deduction notice altogether, because your debt is already covered by an arrangement
That can feel scary, especially if you have not opened the mail for a while, but it is still far better than watching IRD pull money out of your account without a proper conversation.
Will IRD ever write off IRD debt?
IRD debt writeoff does happen, but it is not a magic erase button.
In cases of serious hardship, genuinely uncollectable debt or after formal insolvency processes, some tax debt can be written off. IRD’s recent focus, though, is on doing the opposite by using data and extra funding to recover more of what is owed, not less.
If you think you might qualify for a writeoff or a significant reduction, it is usually best to talk to an accountant or advisor. You will need to be upfront about your full financial situation and be prepared for a bit of paperwork.
The main thing is not to sit back and hope IRD will quietly give up. That is not the direction things are heading.
How My Two Cents can help if IRD debt is hanging over you
If all this sounds a bit close to home, you are not the only one.
We often meet people who:
Have a mix of overdue GST, PAYE and income tax
Have used tax money to cover other bills when cashflow was tight
Have stopped opening IRD mail because it feels too stressful
By the time a notice of planned bank deduction arrives, it can feel like there is no way back. The reality is, there are still usually options, but you need to move quickly and you do not have to do it by yourself.
At My Two Cents we can help you:
Work out what you actually owe and how it breaks down
Talk to IRD with you, or for you, about realistic payment plans
Help push things back from “IRD is taking money from my bank account” to “we have an agreed plan and a bit of breathing room”
Put better systems in place so GST and PAYE are ring-fenced in future, not used as a short term fix
We are based in Mangawhai and work with small businesses and individuals across New Zealand, especially in rural communities and small beachside towns where cashflow can be up and down.
If you are worried IRD might start dipping into your bank account or they already have, reach out. A conversation now can be the difference between feeling blindsided and feeling like there is a clear plan to get back on track.
Quick IRD debt and deduction notice FAQs
Can IRD take money from my bank account without telling me?
IRD sends notices about planned bank deductions before money is taken, but if you are not opening mail or checking MyIR, it can feel like it has come out of nowhere. Since mid June 2025, thousands of these notices have gone out, well above last year’s total.
Can I stop IRD taking money once a deduction notice has started?
You cannot cancel a deduction notice yourself. Only IRD can tell your bank or employer to stop. What you can do is talk to IRD about your situation and work with them, and your advisor, on a plan that may lead to changes over time.
If I set up a payment plan, will IRD still issue deduction notices?
IRD’s standard practice is not to issue deduction notices for arrears that are already covered by a proper instalment arrangement that you are sticking to. That is another good reason to pick up the phone early and get a plan in place.
About the Author
Haley Reyners is the founder of My Two Cents Accounting & Advisory and a Certified ICNZB Master Bookkeeper® — one of the highest recognitions in New Zealand’s bookkeeping profession. With over 20 years of experience, she’s passionate about helping small business owners find clarity, confidence, and calm in their finances. Haley leads her team with personality and purpose, breaking down complex accounting talk into everyday language that makes sense.
