Sole Proprietors listen up! If you write a 1 on your tax return instead of a 16 you'll pay more tax
One of the most common mistakes sole proprietors make on their tax return is reflect their income under code 3601.
Yes, code 3601 is the correct code for regular income. But under this code, SARS will tax you (sole proprietors) in full, with very few deductions.
Let's look at the right code you should use...
Put all your income and expenses under the correct section on your tax return!
If you're a sole proprietor (not an independent contractor) e.g. you run a small retail shop through your own name, then you must put all your income and expenses under the correct section on your tax return!
Don't put anything under code 3601 nor 3616 – only use the income/expenditure section on your tax return.
This is just one of the common mistakes people make on their returns.
Here's what will happen if you use the wrong code...
How to make yourself invisible to SARS
The key to reducing how much tax you pay is staying off SARS' radar.
SARS has conducted R1.8 million audits. They've added 100s of new tax collectors and auditors to their payroll and each one has his own collection targets to meet. This means two things:
1. If you're not compliant, your chances of an audit this year have just doubled, and
2. You will pay more in penalties.
But there are 139 perfectly legal ways for you to make yourself invisible to SARS. Here's how
Use the wrong source code, and you could lose out on deductions.
Or worse — SARS will tax you incorrectly, and you'll have to fork out thousands in penalties!
And there's also the risk that the incorrect use of the code will tip SARS off to the fact that you don't know what you're doing with your taxes, in which case, you're inviting an audit. SARS will flag you as 'high risk'.
Turn to the Practical Tax Handbook to see the three other common tax source code errors, so you don't make the same mistake. Claim your risk free copy now.
Note: 4.5 of 2 votes