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Do you need to register an ex-employee for tax to comply with IRP5 rules?

by , 29 May 2014
Picture this: You've reached the end of the tax year and you're trying to sort out your employees' taxes.

You realise some of the employee who left before the end of the tax year earned above the R60 000 income tax threshold for the year but didn't register for tax.

What do you do? Do you register them or not? The Practical Tax Loose Leaf has the answer and it may surprise you.

Avoid costly tax issues

The Practical Tax Loose Leaf answers this question about IRP5s

According to the Practical Tax Loose Leaf, IRP5 rules say, when you employ someone it becomes your responsibility, to ensure you comply with the Tax Act.
To do so, you must issue IRP5s once a year to your employees. You can't do this if your employees don't have a tax number.
So if you employ someone who isn't registered, then you must register that person for income tax. Otherwise, you won't be able to comply with the Tax Act at year end.
But, this is the part that may surprise you: It's not your responsibility, as the employer, to register your employees for income tax. 
Ultimately the responsibility always rests with your employees, but it'll become a problem for you when you need to issue IRP5s if your employees don't have income tax numbers. It's your responsibility to comply and to do so you need to have your employees' tax numbers. 
This doesn't mean you have no further responsibilities if the employee has already left though. There's one more thing you should do.
Avoid 200% tax penalty

You have one more responsibility when it comes to your ex-employees taxes

The Loose Leaf does say you should still gather all the information SARS requires for the IRP5s from your income tax filing. This information is vital when you complete your employer IRP5 certificates. 
This information includes:
1. The employee's personal details;
2. Their earnings and payslips (salary income, a bonus, a fringe benefit or anything else);
3. The amounts taken off their salary (deductions such as medical aid and pension); and
4. The tax paid or PAYE (Pay As You Earn), which you automatically deducted from their taxable income each month to pay over to SARS. 
So there you have it. Your responsibilities are simple when it comes to your ex-employees and their taxes. You don't really need to do anything other than keep hold of your records. 

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