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The tax season is swiftly approaching. For many people, it is a time of the year that they dread. When it comes down to it, tax can become a complicated mess that involves a lot of math and calculations that just does not come naturally to most. For those of us who do not have PhDs in accounting or mathematics, crunching the numbers and factoring in a variety of different income sources can be tough.

In 2020, the tax season looks quite a bit different from previous years where taxpayers could start filing electronically in July. One of the main reasons for the delayed tax season is the emergence of COVID-19 and the desire to keep as many people as possible from having to submit a tax return in person, which means that SARS has taken measures to increase electronic channels of filing tax returns. This year, the income tax filing season starts on the 1st of September and ends on the 31st of October (for those filing manually in-branch) or the 16th of November (for those using e-filing).

Because of the often complicated nature of tax, there are a few measures that SARS has taken to ease the burden on taxpayers, although some of these measures are not necessarily accurate or act in the best interest of the taxpayer.

This year, for instance, SARS is sending out a large number of auto-assessments, where they assess your tax-data for you and give you the simple option of-

  • accepting their assessment or
  • going ahead and filing your tax-return as usual.

Notifications of auto-assessments will be sent via SMS, and individuals can then use eFiling or SARS MobiApp to view, edit, or accept the proposed assessment.

Take note:

For these auto-assessments, SARS only base their evaluation on the data that they have received. This means that if there are outstanding tax certificates or third-party data related to your taxable income, you need to make sure to get all your documents in order as incorrectly reported or undeclared income could make you liable to penalties and interest on outstanding tax amounts. Some examples of claims not included on your assessment, and not part of the 3rd party data the SARS receive is home office expenses, travel claims against your own- or employer provided vehicle and additional medical expenses incurred that does not reflect on your medical aid certificate. If this is the case, you will need to submit your tax-return as per usual.

Conversely, if the assessment does not take into account outstanding documents or other factors that preclude some of your income from being taxable, you should not accept the auto-assessment as you would be losing out. SARS bases the automated assessments on data received from employers, financial institutions, medical schemes and retirement annuity fund administrators.  If the data was not submitted correctly, this can have an impact on your assessment. The bottom line here is that before you accept SARS’s auto-assessment you need to make sure the assessment reflects any and all of the aspects that have an impact on your taxable income.

Another measure comes in the form of Pay-As-You-Earn (PAYE), which is the monthly amount that your employer pays as a tax deduction on your behalf, based on your income-tax bracket. It is nice because it means that you as an individual are covered for the most common tax that comes from earning a salary. The not-so-nice thing about PAYE is that it is a crude calculation and does not factor in the parts of your income that are not taxable, or the different parts of your income that are subject to different tax levels.

For this reason, some young employed people, earning from only one stream of monthly income are exempt from submitting a tax return, but are actually losing out. Most of the time this option will not work in their best interest, as they will be freely paying tax on non-taxable income to SARS.

For other taxpaying individuals, they will need to take into account a variety of income streams (including taxable interest, rental income, capital gains, medical aid schemes, retirement annuities, allowances, tax-deductible donations, to name but a few). If you are subject to many of these tax variables, doing your own tax return becomes a hassle.

While you could go ahead and piece together the puzzle of your annual individual tax return on your own, it is advisable to make use of a registered tax practitioner. A tax practitioner will be able to do the complex calculations on your behalf so that you come out of the tax season with your sanity intact. This means you will likely have more money in your pocket than if you had blindly accepted an auto-assessment or neglected certain aspects of your tax-calculations.

Reference

https://www.sars.gov.za/TaxTypes/PIT/Tax-Season/Pages/default.aspx

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice.  Errors and omissions excepted (E&OE).