You imagine a gun being cocked as you crouch over your tax returns. The South African Revenue Service (SARS) is watching you; monitoring every page you turn.
Sometimes tax season can feel like hunting season – especially when it’s your first time filing taxes and you are still trying to make sense of what an “ITR12” is (click here to find out).
Justmoney got in touch with two tax specialists to find out more about common mistakes first-time tax filers make, and how to avoid them.
Overlooking, ignoring, and trusting
According to Paul Slack, registered tax practitioner and owner of Fasttrac Financial Services, many taxpayers do not fully understand their own tax affairs.
They often overlook things they should have covered, like the 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 is not true when they also earn an income from other sources,” says Slack.
From his experience, Slack 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,” says Slack.
He also found that clients assume their accountants do their taxes, but they don’t check if they do. By the time they realise it wasn’t done, they may already be a couple years 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 the IT3(b) certificate, which is completed by all financial institutions and gets directly submitted to both their clients 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 contradicts the truth, and taxpayers may face penalties for this omission.
Besides this, Prout explains that home office expenses are under scrutiny by SARS – random site inspections are even done to confirm the exclusive use of a home office.
To ensure accuracy when calculating home office expenses, she recommends the following formula:
Supporting documents: Medical and travel expenses
Taxpayers often presume that uploading the medical aid tax certificate will be sufficient for the claim for out-of-pocket expenses, says Prout.
However, SARS carefully looks for the 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 is not unusual for SARS to request more information, in addition to a taxpayer’s log book.
Prout points out that if a taxpayer does not upload all 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.
Consequences from SARS
Filing taxes can be a complicated matter, and SARS recognises that taxpayers may make genuine errors when submitting their tax forms.
Prout explains that errors need to be dealt with in the following ways:
- Request for correction: This is the form to be used if you have made an error or omission on 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 your assessment outcome. This must be done within the (TAA) prescription period which is 30 days from the date of assessment.
For more details on the above, have a look at the following SARS guide.
From his own experience, Slack believes SARS is receptive to a genuine story.
“But 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,” says Slack.
“Unless your return is extremely simple (i.e. IRP and medical aid), consider using a tax practitioner. We aren’t that expensive, and you can ensure it’s done correctly,” he explains.
If you’d like to see how much it would cost you to hire a tax practitioner versus doing your own taxes, have a look at the following cost comparison.
To get started with your own tax filing, go to the official Tax Season 2018 for Individuals page on the SARS website.