But, the truth is, for both individual and corporate taxpayers, filing your annual tax return is just one step in what can be a very long and arduous process.
Very often, a few days after filing your return, you'll receive notification from SARS that you've been selected to submit your supporting documentation for inspection. Or even that SARS has chosen you for a full-blown audit. And sometimes, you don't even receive a notification. SARS expects you to keep logging into to your eFiling profile continuously to double check your 'inbox' to make sure you haven't missed anything.
So how can you be sure you've actually met all your obligations, either for yourself as a taxpayer, or for your client if you're a tax practitioner?
There are a few procedures I recommend to help you on your way. Let's have a look…
Five steps you can take to minimise your risk of a SARS audit
Step #1: Prepare all your supporting documents before you submit your return
It's vitally important you keep all supporting documentation to substantiate the deductions you claim on your returns. The process of submitting your supporting documents and schedules to SARS can be completed in a few minutes by uploading your scanned documents on the eFiling system and clicking 'submit to SARS'. But this is only if you're prepared.
If you're not, the process is one of hunting down documents, drafting supporting schedules, late night panicking, or even convincing yourself that if you ignore SARS' request long enough, it will just go away. Guess what? It won't.
What's very interesting in my experience is many taxpayers are under the impression that failure to submit your supporting documents to SARS is no big deal. If you claim a deduction against a fringe benefit where the only supporting evidence of the claim is your memory, the worst SARS can do is simply deny you your deduction.
That's not entirely true. SARS can and will deny you your deduction, but it can take it a step further (and it's been doing this more and more in recent years). SARS can hit you with penalties and interest for misleading it and claiming false deductions. A conviction for fraudulently misrepresenting your deductions is also a possibility, along with SARS publishing your full name on their Facebook page.
Step #2 - Use a reputable and trustworthy tax practitioner to handle your tax portfolio
If your tax portfolio is complicated, let's say you have a capital gain on the sale of property, or you have various fringe benefits structured into your salary, it's always advisable to make use of a tax practitioner. If you don't disclose something on your return, or even declare it incorrectly, it can lead to the same consequences as step #1 above.
Even if your return is a simple one, at least have a practitioner in your corner if SARS decides to audit you.
I've used the words 'reputable and trustworthy' for a reason. Just because someone has a SARS practitioner number, it doesn't mean they're either of those.
I've already seen one story of a tax practitioner in Cape Town being arrested toward the end of July. This particular practitioner had over 1 000 clients. Unknown to her clients, was she was submitting false medical aid claims for them and getting them very big refunds. Of course, the clients were happy as they got money back from SARS, and the practitioner was happy because she was charging a percentage fee based on the size of the refund.
SARS discovered this scheme, the practitioner has been arrested, and now those 1 000 taxpayers have the unenviable task of sorting out their taxes with SARS. They have to pay back the incorrect money on top of being out of pocket for the fees they paid this practitioner.
So, always check your practitioners work. Steer clear of practitioners who charge contingent based fees (or at least be cautious). Get copies of your tax returns, check your personal details on your returns, and if you have any doubts whatsoever on your assessment, get a second opinion.
Step #3 - Always get a tax clearance certificate
A tax clearance is now very easy to get via eFiling. SARS should issue it within an hour, and will tell you in plain English if you have any taxes or returns outstanding.
This is an additional check I do for all my clients, and I send it to them so they can be assured SARS doesn't want anything further from them. If it's declined, you'll know SARS wants something else from you.
This isn't a total failsafe, but just one more piece of building certainty. It will also help you keep your practitioner in line if you have any doubts about their service. When you ask for copies of your returns and assessment, request they do a tax clearance for you as well. And they really shouldn't be charging you any large amount (if anything at all!). This is because the application shouldn't take them (or you) more than five minutes.
Save your business from penalties by being an instant audit expert!
With penalties as high as 200%, you can't afford to stay in the dark about the auditing process. You need to know your rights, your responsibilities and obligations, and you need to know them before it's too late…
Two more steps you can take to minimise a SARS audit
Step #4 - Call SARS!
Unsurprisingly, the SARS call centre queue isn't as long as the branch queues. You may be holding for 10 minutes, but it's certainly better than standing in line for three hours.
The call centre agents are well trained, and particularly helpful. Once you've submitted your return, give them a call after 20 days and ask if there's anything outstanding. Does SARS want anything from you? Do you need to submit your documents? Do you owe it anything? This is essentially a verbal version of the tax clearance check in step #3.
Step #5 - Log into eFiling at least twice after submitting your return
In the two months following submission of your return, log into eFiling, or ask your practitioner to do so, twice and make sure SARS hasn't issued any sneaky notifications. These are very often issued a week or two after you've received your assessment, and are usually SARS asking for supporting documents.
Twenty-day intervals are usually a good timeframe, as SARS wants you submit your documents, they usually allow for 30 days to do so. The 20 day period will give you an extra 10 days to comply with this request.
Many of us have our heads down, attending to our annual tax obligations. Don't forget to refer to your Practical Tax Loose Leaf
if you're having any difficulty with any area of your tax compliance, and if you're still stuck, please log on to our AccountingandTaxClub.co.za
and ask us a question – it's free to both subscribers and non-subscribers! Good luck with the remainder of the filing season!