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Two ways to climb out of a tax black hole of ASA proportions

by , 10 May 2013
Athletics SA or ASA is doing all it can to get its finances back on track, now that an administrator's been appointed. Things are so bad that ASA faces bankruptcy if all its creditors demand their money now. Luckily, it's administrator has announced it realises its first priority is to pay SARS, as interest on outstanding tax accumulated quickly, and the penalties for not paying SARS what you owe are severe. Here's what to do if you're in similar dire financial straits...

Athletics SA faces a stack of bills and outstanding payments.
Now, its administrator Zola Majavu admits the federation has a long way to go to rectify its financial status, says The BusinessDay's BDLive website.
Majavu was appointed to decide how best the ASA should spend its money to get out the financial black hole it's dug itself. 
But its first priority is making sure it's tax compliant, as athletics body owed nearly R2 million to SARS for not paying SARS money deducted from staff salaries.
If this isn't paid, SARS could attach the federation's bank account. 
This means SARS'll be able to take the funds it's due directly from ASA's bank account.
But don't panic just yet that you face a similar fate if your business has also run up a scary tax bill with SARS.
Your first step is to acknowledge the problem and not stick your head in the sand, hoping the problem will go away, because it won't.
Then, you need to approach SARS for a tax debt write off or a tax compromise agreement, says FSPBusiness.
Two situations where SARS'll grant you a tax debt write-off
A tax debt write off would be the best solution as your tax debt will be cleared, but be warned - SARS will only write off your tax debt temporarily if it's uneconomical for it to chase the money, meaning the total cost of recovering the tax debt will exceed the amount that SARS would actually be able to recover from you, says The Practical Tax Loose Leaf.
And SARS will only permanently write off an amount of tax debt when the debt is totally irrecoverable at law, even if SARS had to arrange a compromise.
So your best bet is to request a tax debt compromise with SARS, as this will give your business a bit of breathing room.
Send this info to SARS to request a tax debt compromise…
To do so, you'll need to apply in writing, giving a detailed list of all your business assets and liabilities at their current market value. 
That's why it's so important to keep an up-to-date fixed asset register, as it includes detailed information on all the assets your business owns like the fixed asset number, a description of the asset, its cost price, the purchase date and balances per class of asset, explains Henk Heymans, Editor-In-Chief of the Practical Accountancy Loose Leaf.
Remember that if you also provide SARS with a detailed list of your income and expenditure for the last 12 months, as well as copies of your bank statements for the past 12 months and a reason why you need, SARS'll be more likely to agree to a tax debt compromise for you. 

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