Tax filing season officially opened on Monday 1 July. If last year’s tax filing season made you stressed and scrambling to make the deadline you may want to follow our top seven tips to ensure that this year is more organised and that your paperwork is all correct.
1. Diarize these dates
Tax season opened on 1 July and will run until 22 November 2013. During this period, salary earning taxpayers are expected to complete their 2013 income tax returns (an ITR12 form) and submit them to SARS. The 2013 tax return covers income earned for the 2013 tax year from 1 March 2012 to 28 February 2013.
2. Submit your return through the proper channels
Tax returns can be submitted in person at a SARS branch near. However, Marc Sevitz, co-founder of online virtual tax assistant, TaxTim, warns that you must be prepared to be patient when you submit your forms at SARS offices. A quicker option would be to complete your forms online via SARS eFiling.
3. Submit your return on time
“Failing to submit your return on time can result in penalties of R250 per month and interest on any amounts owing. Add to this the fact that SARS will withhold any refunds due to you if penalties are outstanding, it makes sense to submit early and on time,” says Sevitz.
He adds that any mistakes made on your return can result in penalties of anywhere between 50% and 200% of the tax value of the mistake being charged against you.
“If you are unsure, find proper assistance and do things correctly from the start,” says Sevitz.
4. Double check the facts
Professor Sharon Smulders, head of tax policy and research at the South African Institute of Tax Practitioners (SAIT), says you should verify that the amounts prepopulated on the tax return by Sars is correct. “Don’t accept that all income from employment and other taxable income is 100% complete. When you submit your tax return, either personally or with a tax practitioner, confirm that all income has been declared in full,” she adds.
You should also keep your own proper tax records, such as out-of-pocket medical expenses, for the required five-year period. Smulders says you are primarily responsible for your own tax affairs, even if you use the services of a professional.
According to Tony Barrett, senior wealth advisory relationship manager at RMB Private Bank, an increasing number of people mistakenly omit certain details when completing a tax return, especially where Capital Gains Tax (CGT) is concerned.
“It’s important to note that CGT affects anyone who owns an asset. If the asset has grown in value between the time of purchase and point of sale, CGT will apply to the capital gain. CGT is not applicable on items that are for personal use, such as clothes, a car or jewellery. For example, CGT will apply when one sells a second home that had been bought as an investment, a percentage of the profit made from sale of the asset will be taxed,” adds Barrett.
5. Don’t forget about your offshore assets
Barrett points out that assets held offshore such as shares, property and investments are not treated any differently and must be declared to SARS for CGT purposes as profits made from selling offshore assets is taxed on two levels – the actual gain and the exchange rate gain made on current exchange rate movements over which the asset was held. South African tax residents are taxed on their world-wide income and capital gains even when the money was not repatriated back to South Africa.
6. Find out if your practitioner is compliant
Smulders warns that the focus of the 2013 filing season is on the regulation of tax practitioners.
“Ensure your tax practitioner is tax compliant in his/her personal capacity. Sars knows which tax practitioners are delinquent in their personal capacity, and that reputation may expose you,” says Smulders.
Smulders says you should ensure your tax practitioner is a member of a professional controlling body. From 1 July 2013, all tax practitioners must belong to a professional body and follow strict standards to protect taxpayers.
“Also do not offer a contingency fee to your tax practitioner calculated as a percentage of the refund paid by Sars. This practice is not allowed and may expose you to either under-declaration of income or inflated deductions,” says Smulders.
7. Ensure you have all the correct documents
• IRP5 - this shows your income earned and the tax already paid to SARS as a result of it. Sevitz says this should have already been received from your employer, and if not you can demand it.
• IT3b and IT3c - these are investment certificates given to you by your bank and other financial institutions that describe interest or dividends you earned. If you did not receive these you can ask your bank for copies.
• You will also need your medical aid certificate as well as all copies and proof of payment of any "out of pocket" medical expenses prescribed by a medical practitioner that you paid.
• Donations certificates made to registered PBOs (charities). “Only donations to PBOs that are accompanied by a certificate will count as a tax deduction,” says Sevitz.
• Finally, you should ensure that you receive certificates for contributions made to your pension fund, retirement annuity and income protection funds.
If you have any doubts about your tax affairs, it’s best to consult a professional advisor. “SARS has developed into a highly efficient arm of government and taxpayers are warned not to be penny wise and pound foolish. If necessary, one should seek professional advice when completing a tax return as certain aspects of this process can be quite complex,” adds Barrett.