Starting in September, the South African Revenue Service (SARS) kicks off tax season and individuals have a window during which they need to submit their tax returns.
But not everyone has experience in doing this. Every year, new employees and contractors enter the job market. So, what do these tax newbies need to know? JustMoney decided to find out.
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The four phases of tax season
According to Danielle Luwes, tax manager at Hobbs Sinclair Incorporated, the tax filing season, as seasoned taxpayers have known it, has changed. The deadlines they were used to have been spanned out through a new phased process implemented by SARS.
This four-phase plan already kicked off, and the first phase ended at the start of June. Luwes explains what happens during each of the four phases:
Phase 1 – This phase is reserved for employers and other third-party data providers, such as medical schemes, retirement annuity funds, and banks. The deadline for this was 31 May 2020.
Phase 2 – SARS validates third-party data, follows up on employers and others who have failed to file their data to SARS on time.
Phase 3 – Known as the “auto-assessment” process, this will commence on 1 August 2020, where a significant number of taxpayers will receive draft assessments from SARS, which they then need to confirm and submit. SARS will rely on all the third-party data that was successfully submitted and confirmed. This is most relevant to taxpayers who typically just receive one source of income and have a medical aid and/or retirement annuity and they may receive interest on their bank accounts.
Phase 4 – The fourth phase opens on 1 September, where the remaining taxpayers, with more intricate tax returns and those that have not accepted or received an auto-assessment, can be submitted.
The assessment year in which this applies to runs from 1 March 2019 to 29 February 2020, and Luwes points out the following noteworthy deadlines:
- Non-provisional taxpayers who file electronically (eFiling): 1 September to 16 November 2020
- Provisional taxpayers who file electronically (eFiling): 1 September 2020 to 29 January 2021
- Taxpayers who cannot file electronically: 1 September to 22 October 2020
Which documents should you be familiar with?
According to Nicci Courtney-Clarke, head of tax at Tax Tim, depending on your unique circumstances, you should have a look at the following forms and documents:
- Investment certificates (IT3b/IT3c)
- Medical tax certificates
- Retirement annuity tax certificates IT3(f)
- Donation tax certificates (s18A)
- Tax-free savings certificates (IT3s)
- Logbook for business travel (if applicable)
- Income statement (for sole proprietor/freelancer)
“Keep detailed records of your income and expenses, as well as all supporting calculations for your deductions, for example travel, and wear and tear,” says Courtney-Clarke.
“Keep a detailed logbook, with opening and closing odometer readings, if you travel for business, and qualify to claim a travel deduction. If you’re an employee, you must receive a travel allowance coded to 3701 or 3702 in order to claim a travel deduction,” she explains.
“Keep all proof of expenses, such as invoices and receipts, as supporting documents should SARS request proof. Safely store all your tax certificates to submit to SARS if they are requested. For example, your medical expense receipts, interest certificates, RA certificates, and IRP5/IT3,” she urges.
Traditional or provisional taxpayer
According to Ken Brown, master franchisor at SME.Tax, it’s important to know whether you’re registered as a traditional or provisional taxpayer because there are different submission requirements and deadlines:
- Traditional taxpayer – Employee with a single source of income
- Provisional taxpayer – Multiple sources of income
“People must make sure they have taken all their income and expenses into account – that side hustle making a profit or loss could have a serious impact on your taxes if you don’t,” says Brown.
He recommends making use of a tax practitioner if you have multiple streams of income and you’re unsure of the expenses you could claim against them.
What else to keep in mind?
Bradley Woolridge, managing director at Burns Acutt Accountants, offers the following tips to those who are new to submitting tax returns:
- Tip 1: There are more deductions available than you may realise. The chance that you’re leaving money on the table is high.
- Tip 2: The cost of an expert might not be offset by the value they add, but it could be dwarfed by what they uncover.
- Tip 3: Details are important, as are supporting documents. Have an admin plan to cover these two crucial areas. This will prevent additional assessments, penalties, and interest from SARS.
- Tip 4: Planning is the secret to tax efficiency. You cannot control what’s already transpired but you can guide what will be and you can make sure that guidance is in your best interest.
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