The top tax tips you really want to remember

There are ways to avoid frustration, delays, penalties, or overpaying on your tax.
Check the pre-populated information on your return; it isn’t always correct. You could be paying more tax than necessary. Image: Moneyweb

Acting chief executive at the Office of the Tax Ombud, Gert van Heerden, says tax is a very emotive issue and often by the time complaints reach the ombud, the consumer is already very frustrated.

Here’s what you need to know when dealing with Sars:

1. Sars can appoint third parties to recover money from you

The Tax Administration Act allows the South African Revenue Service (Sars) to issue third party appointments to employers, banks and other parties to recover money that you owe the taxman. However, before this happens, Sars must send you a final letter of demand and then issue a letter of appointment to the third party.

“Often taxpayers tell us they didn’t know about it or didn’t receive a final demand and only became aware when there was a deduction from their pay slip or their bank account,” says Van Heerden. However, he points out that if you use eFiling, Sars can post a final demand on your eFiling profile and that serves as a legal notice.

Note that third party appointments are not limited to banks and employers but any third party that is giving you money. For example, your mother or your spouse can be commissioned by Sars to pay over money on your behalf. Sars has the right to ask your bank to share your bank statements to interrogate where you are receiving funds from. “This is international best practice,” Van Heerden explains.

A starting point to avoid this situation is that you should not ignore any communications from Sars. Also, ensure that your contact details are updated, particularly if you have changed tax practitioners or are no longer using a tax practitioner.

2. Make note of time frames for tax objections

There are legally prescribed time frames within which you can file a tax dispute. James Coutinho, senior manager for group corporate and client tax at Liberty, says taxpayers don’t often question their assessments after they have filed their tax returns.

“You not only have the right to request a correction but also have the right to lodge an objection to the assessment if you are not happy with [it]. This can be done electronically via Sars eFiling,” he says.

“Ideally, the moment an assessment is raised and you don’t agree, you should file a dispute,” says Van Heerden.

He adds that most people are either unaware of the time frames or their tax practitioner fails to file the dispute on time. For example, you can file an objection within 30 days that will have a maximum time frame of three years. If the time frame lapses, you must make an application to go to tax court.

“Tax court is not free and will cost you money,” says Van Heerden. “While you can represent yourself, it is advisable to use a lawyer as there are very specific timelines and procedures that you must observe in tax court. The longer the delay before you object, the more serious your case is expected to be.”

Van Heerden notes that you can request an extension if you are filing an objection, but you must motivate for the time extension, and you need to show cause why it should be granted.

Once the three-year cap for lodging an objection has passed, you lose all rights to dispute that tax assessment.

3. Make use of the ‘Calculate’ tool

Coutinho notes that the ‘Calculate’ tool on eFiling is useful because it shows you what tax you can expect to pay on assessment. “If you’re not expecting to pay more tax or receive a big refund, the tool will give you a chance to ensure you have completed your return correctly before you file it,” he says.

4. Submitting your supporting documents

When filing your return, or in some cases once you have done so, you may be required to submit supporting documents. If you are using eFiling, the size limit on documents that can be uploaded is 5MB. “If you have more documents than that, which is often the case, it is advisable to go into a Sars office with your documents so they can be scanned and returned to you. Or you can make copies of all the documentation and have it delivered to a Sars office,” says Van Heerden.

5. You may need to keep your supporting documents for longer than five years

While it is well known that you need to keep any supporting documents for five years for tax purposes, Van Heerden points out that there are two scenarios where Sars can request documents going back more than five years:

  • If you file your tax return late, the five-year period only starts when you file that return. If, for example, you file your 2018 tax return in 2020, the five-year period will expire in 2025 and not 2023.

  • If you have no documentation, you can enter an “agreed assessment” where Sars examines the information you are able to provide. This is an audited process that Sars undertakes.

6. Double-check your pre-populated information

Sars eFiling pre-populates the information from your IRP5, medical aid and retirement annuity tax certificates on your tax returns. “Taxpayers often forget to check whether the pre-populated information on their tax return corresponds to the tax certificates issued to them by their employers or financial institutions,” says Coutinho.

“It often helps to ‘refresh’ your tax return by clicking on the ‘Refresh Data’ button,” he adds.

However, if that doesn’t happen and there are discrepancies, you should contact your employer or financial institutions before you submit your return so that all the relevant information can be updated by Sars on the eFiling system.

He says one of the more common mistakes is to overlook the number of medical aid dependents pre-populated on a tax return, which could result in the taxpayer losing out on medical tax credits they are entitled to.

7. Changes to tax exemption for foreign employment income

“The most contentious tax change from last year is probably the change to the tax exemption for foreign employment income,” Coutinho says.

From March 1 this year, South African tax residents who spend more than 183 days in employment outside South Africa will be subject to tax in South Africa on remuneration exceeding R1 million.

Read: Tax D-Day looms for South African expats

“This change has a significant impact on South African tax residents working abroad and expatriates who have not financially emigrated,” says Coutinho.

Read: Checklist: Things to do before the end of the tax year

 

Listen to Nompu Siziba’s interview with Sars Commissioner Edward Kietswetter:
 

 
 
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What irks me about SARS is that for the last 4 years I have been subjected to an audit – yet the covering notification clearly says that audits are done on a random basis – 4 years in a row is hardly random.

You must have received refunds. They have audited me since 2014 without stop. The reason? I have been refunded since 2014 every year.

Its the deductions you claim… Home office = audit, additional medical expense = audit….

Graham:

When you say audit do you mean the whole enchilada (involves a gastroscope) or just them asking for supporting stuff and maybe a second round of questions?

If you have been fully audited 4y in a row you probably have an enemy or ex-wife working at SARS.

Lots of middle income people being audited. They have too many people with nothing better to do.

I’m also audited every year without fail. Right now I am owed a refund and SARS has the cheek to question whether the entities I am due a refund for will make a profit in the future? The government and SARS collapse the economy, and then are surprised when their tax revenue is down due!

Yes… Sars watch their golden geese like hawks.. They always make me feel like a semi criminal even though I pay my dues, plus, honesty. Their 5Mb upload limit is ridiculous. You can act without ethics, etiquette etc etc in parliament and nothing happens, but man,just try to dodge your taxes and they treat u like a crim… Enough said. Awaiting the usual audit also awaits me… Well, so few citizens pay tax, so audit is the norm.. Lol.

So your Mom or wife can be forced to extract funds from you for SARS!
Another great service to you from the ANC’s tax collectors.

Also, remember to check carryforwards in assessments, such as excess RA contributions, excess S18A donations, capital losses, especially if there have been revised assessments.

Cheetah:

I have yet to figure whether and where and how SARS keeps track of the disallowed foreign tax credit of year X. It is supposed to carry forward for I think seven years?

The disallowance is shown as a separate line in the assessment notes so I assume they are tracking it. I have never seen the disallowance recovered in practice, so I don’t know, for example, whether recovery is applied FIFO. If the numbers justify it I would ask them for the current position !

They do track things for decades in some cases, lump sum payments the obvious example.

sars have audited me 7 years in a row -always had to pay in, so never received a refund. I also submitted multiple 5GB files via efiling – don’t have to visit your local Sars branch.

I am not a tax practitioner but have done my fair share.

Have your own complete pro forma spreadsheet ready when you start, down to penny.

Nr 3 is key. The software changes every year and half the time I find that I missed something compared to the spreadsheet. If I had submitted with error it would have been nightmare.

For supporting documents my habit is that each line in the spreadsheet already has the PDF ready when I press submit. SARS invariably asks for supporting, so it is nice to respond in 2 minutes with the whole batch.

What I must get right is filing my annual early or as soon as I have all the stuff and SARS owes me. I am shell-shocked with January annuals and February provisionals. Mine, my wife’s, my daughter’s, my mother’s, the companies’.

Good luck for the Provisional Tax weekend boys and girls, the banks sent out their provisional packs this week so it will probably be a busy weekend

Nr 3 works for you ? I usually get a message to the effect that calculation is unavailable because the assessment requires manual intervention, so I work in the dark.

Cheetah : I am glad somebody has more trouble than me! 😉

The foreign tax credit calculation with a mix of foreign and local income and mix of local and foreign capital gains and RA and medical credits and that extra medical has my spreadsheet looping! I am sure I will get audited and then they can try explain.

I have NO idea how a non-CA navigates this as I battle and have had three different explanations about foreign tax credit from guys that only do tax.

Now imagine you are the SARS employee on the other end of an irate ordinary caller! I sometimes have sympathy for them

Johan, have you tried ‘Interpretation Note No 18’ ? which is a mere 140 pages of explanation.

Interpreting the law is one thing, finding the right box in the return to get the intended result is another…

End of comments.

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