You hand over the burden of filing your taxes to your trusted tax practitioner, and you breathe a sigh of relief. It never occurs to you that there may be risks to disinvesting completely.
We find out who is responsible if there are errors in your tax return, where you can report your tax practitioner should the need arise, and we consider how you can fix any mistakes, along with the consequences you may face.
Tip: Tax bill imminent? Consolidate your current debt to free up cash, to settle with SARS.
Who is held responsible for errors?
According to Nicoline Benzien, associate director in the individual, trust, and estate tax team at BDO, you are ultimately responsible for your income tax return – even if you worked through a tax practitioner.
“The tax practitioner acts as your representative, and assumes responsibility for completing and managing your tax affairs. However, this does not absolve you from your responsibility as a taxpayer,” says Benzien.
She explains that it’s important that you remain involved in the submission process, and that you review and sign off your tax return prior to final submission to SARS.
“You need to familiarise yourself with the content, and be comfortable that the items that the tax practitioner is declaring to SARS are true and correct,” she says.
Piet Nel, project director of professional development at SAICA, adds that you’re ultimately held responsible for your tax return because you’re the one who signs it.
He explains that, in doing so, you declare that the return is complete and true. However, he adds that if your tax practitioner signs it on your behalf, then this does not apply.
What if you’re unhappy with your tax practitioner?
Benzien says that tax legislation provides a framework to ensure that tax practitioners are appropriately qualified, and that misconduct can be addressed.
“The Tax Administration Act has made it mandatory for tax practitioners to register with SARS and a recognised controlling body. Any unprofessional conduct by a tax practitioner should be reported to SARS and the relevant recognised controlling body,” says Benzien.
She lists the active controlling bodies in South Africa:
- The Chartered Institute of Management Accountants;
- Chartered Secretaries Southern Africa;
- The General Council of the Bar of South Africa;
- The Independent Regulatory Board for Auditors;
- The Institute of Accounting and Commerce;
- The SA Institute of Chartered Accountants;
- The SA Institute of Professional Accountants;
- The SA Institute of Taxation;
- The Association of Chartered Certified Accountants;
- The Association of Accounting Technicians Southern Africa; and
- The Law Society of South Africa.
“Practitioners who are not members of any of these bodies cannot legally provide tax services to clients, whether completing and submitting a tax return to SARS, or providing advice,” says Benzien.
Ruan van Jaarsveld, manager at Hobbs Sinclair Advisory, says that if you believe that your practitioner’s conduct warrants it, you may contact the respective professional body and lay a formal complaint.
“These bodies are very serious about keeping their members accountable to their professional standards. Some of these bodies also have professional indemnity insurance ‘built into’ their annual subscription fees to assist their members,” says Van Jaarsveld.
What should you do about mistakes?
Benzien says that if the error seems to be the result of an honest blunder, you should engage with your tax practitioner and request that they take the necessary remedial steps.
“You need to remedy the mistake timeously in order to meet SARS’ requirements. Should the mistake result in additional fees or penalties, the practitioner will often reimburse the client to show good faith and accept accountability for the mistake,” says Benzien.
Nel says that the eFiling system has an option where you or your tax practitioner can request a correction to your tax return.
“The original return that was submitted to SARS will open up and the errors can be corrected. Once this is done, the new return is submitted to SARS and the problem is solved,” says Nel.
He explains that the SARS risk engine often recognises that a possible error was made in your return and then requests that you review it and make the correction.
“This is handled in the same manner as correcting a return on your own accord. But, if it’s requested from SARS, you will also have to submit documents supporting the return,” says Nel.
The consequences of incorrect returns submission
Nel says that if the mistake results in a lower tax calculation than should have been declared, SARS will impose a penalty – this is known as the “understatement penalty”.
He explains that the understatement would normally arise from an omission in a return, or an incorrect statement. Nel puts forward an example of each.
- Omission: Not mentioning the interest earned by the taxpayer on a loan account.
- Incorrect statement: When the amount of a foreign dividend is declared as an amount not subject to tax, or the nett amount of the foreign withholding tax is declared.
“If an understatement penalty is imposed, you can request remission of the penalty, but you would have to prove that it resulted from a bona fide inadvertent error in the return. SARS may then remit the penalty,” says Nel.
Outside of penalties – which could be as much as 200% of your return – Benzien says that you may also face a further fine, or imprisonment, or both in certain instances.
“A recent amendment to the tax legislation has detached the concept of ‘intention’ from certain tax offences, which means that they don’t have to prove that you willfully broke the law. You could be found guilty of an offence even if you were negligent or made a mistake,” says Benzien.
However, she adds that SARS has dismissed fears that taxpayers will be imprisoned for minor non-compliances, such as failing to register for tax or to notify SARS of a change in registered particulars. "But these still constitute non-compliance and so must be remedied,” she explains.
Benzien says that the punitive measures enforced by SARS should be a stern warning to all taxpayers that a “silly” mistake is not so “silly” after all.
If your tax return penalties land you in debt, you can get help here.