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Here's what to do if you didn't update your payroll to meet last year's medical aid contribution changes

by , 11 July 2013
As of March 2012, employers had to change the way they treat medical aid contributions on their payroll to be in line with changes made by SARS. But what if you're one of the employers who haven't made these changes? Read on to find out what to do so you can avoid penalties.

According to the Practical Tax Loose Leaf Service, if your company contributes to medical aid schemes on behalf of your staff, you must make sure you treat the contributions correctly. Get it wrong, and you'll face penalties

And that means your payroll better be in line with the change to the new tax credits system effective from March 2012.

But what if you didn't update your payroll on the set date?

Here's how to remedy the situation if you payroll isn't payroll still not in line with medical aid contribution changes

If you use payroll software like Pastel, that' good news. Your medical aid contributions should've been updated automatically when the law changed. Double check this with your service provider if you're unsure.

If, on the other hand, you have your own payroll systems in-house, then make sure you're recording, declaring and calculating employees' tax correctly.

If you don't, your tax certificates and employer submissions could attract tax penalties.
For example, let's say you underpay employees' tax because you didn't have your payroll processes right. This simple mistake could result in a 10% tax penalty! And you could be seen guilty of tax evasion and pay a 200% tax penalty!

If you've been doing things incorrectly since 1 March 2012, then make sure you make these corrections immediately.

How to correct errors for the next bi-annual employer reconciliation deadline?

Each month, you complete an EMP201 form, which outlines the remuneration you've paid to staff and the employees' tax you've deducted.

And twice a year, you must submit an EMP501 employer reconciliation to SARS. On it, you reconcile all the information on the monthly EMP201 forms you've submitted.

For this year, all employers must have submitted their Annual EMP501 declaration (EMP501) and employees' IRP5's to SARS reconciling the PAYE/SDL/UIF paid during the tax year 1 March 2012 to 28 February 2013 before 31 May 2013, says the Practical Tax Loose Leaf Service.

So how do you make sure your EMP501 is correct?

If you want to correct an error before you submit your EMP501, simply file a correction of the EMP201 form for the affected month. Then continue filing your EMP501 as normal.

If you discover an error after submitting your EMP501:

  • File a correction of the EMP201s that bear the error.
  • Submit an EMP701 form to correct the EMP501.

For more information from SARS on how to correct your EMP501 click here.

Don't delay –Take these steps to remedy the situation if you hadn't updated your payroll to meet changes relating to medical aid contributions.

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