If you do one of these seven things, you'll set off alarm bells for SARS
Has SARS sent you a request for your statements of assets and liabilities? Well, it isn't as innocent as it seems!
It starts with a seemingly innocent request stating: 'Kindly furnish within 21 days the following: Statement of Assets and Liabilities'.
SARS uses this statement to do a Capital Reconciliation. And ultimately, to identify possible undisclosed income over a number of years. But, you have the power of knowing whether you're at risk of a Capital Reconciliation or not. Here are seven red flags SARS will look for.
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Seven red flags SARS will look for on your statement of assets and liabilities
1. If you always declare a low level of income from a business that appears profitable.
2. You're a director or member who always declares a low level of income, e.g. directors commonly declare R100 000 per year over a number of years with no apparent increase in their earnings.
3. If you accumulate assets (residential property, luxury vehicles etc.) without an indication of any alternative legitimate source of income.
Read on for the other four.
Seven red flags SARS will look for on your statement of assets and liabilities cont.
4. If you're living an expensive lifestyle of frequent holidays, lavish entertainment and high living costs and/or support a large family.
5. There's insufficient growth in your income so you can't maintain a certain standard of living, taking into account that the cost of living constantly increases and there's no evidence of loans, overdrafts or reduction in favourable bank balances.
6. There's uncertainty about how your capital has grown or how you financed your living expenses.
7. Your income decreases or you incur recurrent losses.
There are another seven red flags SARS will look for. Turn to chapter C08: Capital Reconciliation
in your Practical Tax Loose Leaf
to get the rest of them. If you don't have a copy yet, click here now
Until next time
Managing Editor: Practical tax Loose Leaf Service
P.S. If you have a Capital Reconciliation question, why not ask it on the Accounting and Tax club at http://www.accountingandtaxclub.fspbusiness.co.za/