Filing your taxes can feel completely overwhelming, especially when it’s your first time. Mistakes are commonly made, and these can result in an audit and/or penalty from the South African Revenue Service (SARS).
We contacted two tax specialists to learn about the common mistakes first-time tax filers make, and how these can be avoided.
Tip: Use this calculator to work out how much you owe SARS.
Overlooking, ignoring, and trusting
According to Paul Slack, registered tax practitioner and owner of Fasttrac Financial Services, many taxpayers don’t fully understand their own tax affairs.
They often overlook items they should have included, such as profit earned from renting out their home during the holidays, or receiving a distribution from a trust.
“Most people believe tax stops at their salary, but this isn’t true when they also earn an income from other sources,” says Slack.
Slack has found that the biggest mistake first-time taxpayers make is to ignore their taxes completely.
“Most of my new clients are a few years behind because they simply didn’t want to think about their taxes,” he says.
He has also found that clients assume their accountants do their taxes, but they don’t check on submissions. This can cause them to fall significantly behind.
Omitting and miscalculating
According to Charmaine Prout, director of Chartered Tax at Chartered Wealth Solutions, taxpayers often omit interest earned on their tax returns.
This information can be found in an IT3(b) certificate, which is completed by all financial institutions and is directly submitted to both the account holder and SARS.
“This gives SARS automatic insight into all interest the taxpayer has earned in that year of assessment,” says Prout. Therefore, SARS will know when the taxpayer’s submission doesn’t include these amounts, and taxpayers may face penalties for this omission.
Home office expenses are another area of concern, and these are under increasing scrutiny from SARS, who are known to conduct random site inspections.
To ensure accuracy when calculating home office expenses, SARS recommends using the following formula.
A / B x total costs, where:
- A = the area in m² of the part specifically equipped and used regularly and exclusively for trade (namely, the qualifying home office), and
- B = the total area in m² of the residence (including any outbuildings and the area used for trade in the residence)
- Total costs = the costs incurred that are linked closely to the premises (such as rent, rates and taxes, repairs, and electricity), excluding expenses of a capital nature.
Supporting documents: Medical and travel expenses
Taxpayers often assume that uploading their medical aid tax certificate will be sufficient for claiming out-of-pocket expenses, says Prout. However, SARS requires proof of payment for qualifying medical expenses paid out of the taxpayer’s own pocket.
“A medical invoice must be submitted together with some kind of proof of payment in order for SARS to allow the deduction,” says Prout.
When it comes to claiming a travel allowance, it’s not unusual for SARS to request more information, in addition to a taxpayer’s log book.
Prout points out that if a taxpayer doesn’t upload all of the necessary documents, an additional assessment will be raised, and the taxpayer could find themselves owing SARS money.
“Ensure that you have all your supporting documents before you complete and submit your ITR12 tax return,” she advises.
Addressing any errors
Filing taxes can be a complicated matter, and SARS recognises that taxpayers may make genuine errors when submitting their tax returns.
Prout explains that any errors need to be dealt with in one of the following ways.
- Request for correction: This is the form to be used if you have made an error or omission in your return, or if you believe SARS has captured your information incorrectly.
- Notice of objection: This is the form to be used when your information has been captured correctly, but you disagree with the assessment outcome. This must be done within period prescribed in the Tax Administration Act of 2011 (TAA), which is 30 days from the date of assessment.
Slack maintains that, in his experience, SARS is receptive to a genuine story.
“However,” he says, “I would strongly recommend that taxpayers don’t tackle this on their own. Rather use a tax practitioner because the SARS call centre is not very user friendly.
“Unless your return is extremely simple and involves only an IRP and medical aid, consider using a tax practitioner. We aren’t that expensive, and you can ensure it’s done correctly,” he explains.