Whether you’re an employee or a contractor, it’s easy to fall behind on your taxes. With all the paperwork and distant deadlines, tax season may be over before you’ve even realised it arrived.
Luckily, there are ways to resolve your outstanding taxes. JustMoney found out what you need to do if you owe the South African Revenue Service (SARS) money.
Tip: Try out our tax calculator to see how much income tax you owe this tax season.
What should you do if you owe SARS money?
According to Bradley Woolridge, managing director at Burns Acutt Accountants, you should update your tax returns and disclose your income if you’re running behind on your taxes.
“If you don’t do this, you run the risk of SARS doing it for you and then the penalties and repercussions come into play, which can be severe. You’ll also be able to live without a guilty conscience which is carrying the weight of tax avoidance,” says Woolridge.
Zubair Kharva, managing director at Niche Consulting, agrees that it would be best to submit your tax return as soon as possible to avoid monthly interest and penalty charges.
He adds that you should consult a tax practitioner who can expedite this for you. A tax professional will be able to minimise your liability to SARS as well as advise you on the most appropriate tax strategy.
If you suspect you owe money to SARS, you should do the following:
- Find out how much you owe: Get in touch with SARS and request a statement of your account. Make sure you have your tax number or ID number on hand, and be prepared to follow an authentication process.
- Settle your outstanding debt: Once you’ve confirmed how much you owe you can make a payment to settle your account. After you’ve done this, you’ll no longer be in debt to SARS.
Kharva confirms that in order to settle your debt to SARS, you would need to contact the SARS contact centre. The payment can then be made using the various banking channels for payments.
What if you can’t settle your debt immediately?
In some cases, your outstanding debt to SARS will be too large to settle in a single payment. If you find yourself in this position, you can reach out to SARS and try to negotiate a payment plan.
“The balance would be repayable over a number of months without incurring further interest and penalties, provided the taxpayer is diligent with payments,” says Kharva.
On its website, SARS explains that a compromise may be requested on your outstanding tax debt. However, SARS highlights that you will need to discuss your financial position openly.
In addition to this, SARS points out that:
- SARS have the option to decline your request.
- Interest will accrue on any unpaid debt.
- If you don’t adhere to the conditions of the payment arrangement, the payment agreement will be terminated and normal collection proceedings will resume.
The penalties you’ll face for outstanding tax debt
Kharva explains that penalties can range from R250 to R16,000 per month, depending on the taxable income and excluding interest.
“It’s not the ideal way to spend your hard-earned money, as it could be used to fund your retirement or spoil yourself for working so hard,” says Kharva.
According to Woolridge, penalties to SARS do range but it can be up to 200% of the tax due.
“There is also a Voluntary Disclosure Programme (VDP) which can be considered. Depending on the quantum and reasons for the non-disclosure, this avenue may be beneficial and can result in no penalties, therefore it’s potentially highly advantageous,” says Woolridge.
How to avoid being in debt with SARS
Woolridge suggests locking the tax dates into your diary or getting a professional support structure from a tax advisor. A tax advisor can assist with managing and meeting key dates, but also in the calculation and minimisation of your tax liability.
Similarly, Kharva says that his top tip is to utilise the services of a reputable tax practitioner who’ll guide you in making the appropriate business adjustments to ensure that you’re always compliant with SARS and lawfully minimising your tax liability.
He adds that freelancers should register as provisional taxpayers, as this will certainly assist in avoiding interest and penalties.
According to Ken Brown, master franchisor at SME.Tax, you should keep a schedule of your income and expenses and then declare these on your IRP6’s returns in August and February each year.
“This way you’ll always be up to date with SARS,” says Brown.
If you’re struggling with your debt, fill in the form on this page to get help today.