Don't understand what we've said above? An example of this is:
Let's say you submit a tax return for a client and you indicate that you're a representative person for the return, but your client hasn't paid his tax liability. This means SARS can come after you to collect the tax debt.
But it must follow these four steps…
Four steps SARS must take before making you liable for someone else's tax debt
Step #1: The taxman will always start with the person or company charged with the primary tax liability to recover the funds from them.
It'll request payment within a specific period. The tax payer can then arrange payment options with SARS. For example, the person may be allowed to pay off the debt over a fixed term.
Step #2: If SARS isn't able to recover funds from the primary source then it'll look if there's a 3rd person to be held personally liable for the outstanding tax debt. People who can be held liable for someone else's tax debt include:
Step #3: It is at this stage that you'll face the music. SARS will contact you and tell you that it's holding you personally liable for tax debt.
They will send you a letter and then issue an assessment of the tax debt. This will have the same criteria of a normal tax assessment.
Step #4: If you don't agree with the assessment, object.
The Practical Tax Loose Leaf Service warns that SARS can go straight to your financial institution (i.e. Bank or retirement administrators) and request it to deduct the tax liability.
But, 'they must send you a final demand for outstanding debt first. On the final demand, a period is given when to settle the debt -usually within 10 days.'
Now that you know the steps SARS must take before making you liable for someone else's tax debt, check out this article. It has six good business practices you can use to minimise your risk of personal liability.
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