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Why using a tax practitioner to do your tax return is still risky

by , 22 October 2014
This month, I received an email from Natasha, a friend of mine, asking me look over correspondence between her and her tax practitioner.

Natasha works for a winery, and she earns most of her income as commission. For the 2014 tax year, 80% of her income was commission. So she wanted to use the services of a tax practitioner to help her with her tax return.

She knew she could claim her business expenses against her income but didn't want to deal with the complexity herself. She was referred to this tax practitioner (We'll call her Negligent Nelly) by a colleague because Nelly was super cheap - R200 per return! What a bargain right? Wrong. Here's why...


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Imagine SARS calls you and says they will be doing an audit of your business, you're not worried as you know your accountant has paid all your taxes on time and your finances are up to date.
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Why Natasha shouldn't have used a cheap tax professional
Natasha compiled all her supporting documentation and went to meet with Nelly at her offices, which were in quite an upmarket office park. Nelly was a registered tax practitioner (even showing her registration letter from SARS confirming her TP number), and assured Natasha she'd have her return in by the end of the week.
The return was filled out and ready for submission. Nelly emailed Natasha indicating what she expected the tax due was going to be, and gave a brief rundown of Natasha's deductions.
Natasha noticed there was nothing in Nelly's calculation for travel, so she raised this with Nelly by asking the following question: 'Nelly, I travel so much, please can't we claim my travel expense allowance? I gave you my logbook and petrol slips'. Nelly replied with the following (these are my words of the content of her email, not a direct copy-paste):
'Natasha, I can't add in the travel deduction because I can't put it on the return. Your IRP5 doesn't have a travel allowance, so you can't claim it. I tried to open up the travel claim section, but it is all greyed out. Sorry I can't do anything, you can't claim travel. Can I submit your return?'
Always check this one section on your tax return if you want to claim a travel allowance
What Nelly didn't realise is, there's an entirely different section on the ITR12 that opens up when you answer a specific question on the first page of the return. And it's in this section of the return where you can put in your travel deduction as a commission earner. Not only did Nelly not have a clue what she was doing, but in offering tax services to taxpayers, she was clearly doing so negligently.
Natasha had travel costs she could deduct of around R55 000. At her tax rate, that's a tax saving of R22 000. Choosing the bargain price of R200 could have cost Natasha R22 000 in tax (and R200 for Nelly's fee). Imagine paying R22 200 for someone to file your taxes? Not a bargain in my books.
The Tax Administration Act has gone a long way to weeding out the unqualified individuals offering tax services. Section 240 of the TAA has made it a requirement for anyone offering tax services (admin, consulting and advice) to be registered with one of the controlling bodies SARS has approved. If anyone is offering tax services without a TP number, they are doing so illegally.

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Five things to bear in mind when you use a tax practitioner
There are a couple things taxpayers (both individuals and businesses) should keep in mind before using the service of a tax practitioner to avoid a situation like Natasha had: 
  1. Individuals who call themselves tax practitioners are not always 'good' tax practitioners. If they're charging ridiculously cheap fees, chances are it's too good to be true. You really do get what you pay for.
  2. Make sure your tax practitioner is a good fit for your tax portfolio. Ask for your tax practitioner's TP number, which controlling body they are registered with, and their experience in your specific tax field. If a tax practitioner is fantastic at transfer pricing or international tax, it doesn't mean they'll be great at individual income tax.
  3. With SARS' drive to regularise the tax consulting industry, SARS introduced stricter measures for individuals to be registered as tax practitioners. The entire Chapter 18 of the Tax Administration Act (Sections 239 to 243) has help legislate these rules.  Taxpayers should be aware that every single tax practitioner must now have a controlling body – and taxpayers are within their rights to report any misconduct or negligence to the tax practitioner's controlling body.
  4. Getting a second opinion, or even a quick view of a tax calculation by someone else, is always advisable where you have any doubts.
  5. Just because a tax return doesn't say you can do something, it doesn't mean the tax legislation says the same thing! A tax return, whichever one it is, is not a representation of current tax laws.
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James 2015-12-01 10:08:05

how much should a Tax Practitioner charge and is there a place you can check there legitimacy ?

Felicity 2014-10-23 12:52:12

I totally agree with your comment about the risk of erroneous tax returns being completed by Tax Practitioners, but there are also problems with returns that get taken to SARS for completion by the taxpayer, as SARS will only file what you have presented and not ask you any questions in assisiting you to get the best benefit pertaing to the your taxation,as you have rightfully pointed out that just because a tax return doesn't say you can do something, it doesn't mean the tax legislation says the same thing! A tax return, whichever one it is, is not a representation of current tax laws.

Cathy 2014-10-23 09:38:10

This tax issue should be reported to SARS, if a Tax Practitioner is not doing her job and does't know what she is doing it must be addressed. I myself is a Tax Practitioner and a member of Sait. There are many people out there calling themselves Tax Practitioners just to make money and if the are not stopped they making a mess of other peoples returns.

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