HomeHome SearchSearch MenuMenu Our productsOur products

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...

********************

Find out how to avoid tax penalties of up to 200% today...
 
We are a team of tax experts and we'd like to show you how to avoid nasty tax penalties from SARS and save you thousands of rands… maybe even R1 270 150.
 
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.
 
Following the audit you get an assessment saying you owe penalties of 200% and interest on all the money you owe, which means you will have to liquidate your business!
 
This is what happened to Mr Da Costa because he didn't know anything about taxes and relied on his accountant to ensure he was paying the correct amount of tax… and paying it on time. Instead he got an assessment of R1 270 150! 
 
If you know your rights and what you should be checking every month you can prevent this situation from happening to you. Here's how

********************

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.

**********Recommended Product**********

Know the Law on Avoiding Tax: You Are Now Presumed GUILTY
 
Dealing with SARS and acing your SARS Audit
 
SARS has been dealt a better hand in dealing with you if you try to avoid tax. SARS knows where it stands. The question is: do you?
 
Do you plan on obtaining an 'innocent' tax benefit? If your main or only reason for entering into any arrangement is to receive a tax benefit, SARS will brand you guilty of avoiding tax...and guess who has to prove their innocence… YOU!
 
********************
 
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.
 If you'd like to avoid this situation and use expert tax professionals, get your hands on the Practical Tax Loose Leaf today. It's been written by 9 of South Africa's leading tax experts. Click here to get your copy


Related articles




Related articles



Related Products



Comments
3 comments


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.

Recommended for You 

  Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance



Here are all the most interesting, thought-provoking and common tax questions
asked by our subscribers over the last tax year – everything from A to Z!

To download Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance click here now >>>
  Employees always sick? How to stop it today



Make sure you develop a leave policy to regulate sick leave in your company.

BONUS! You'll find an example of the leave policy and procedure in this report.

To download Employees always sick? How to stop it today click here now >>>
  Absenteeism: Little known ways to reduce absenteeism



This FREE e-report will tell you how you can reduce absenteeism in your workplace while avoiding the CCMA and without infringing your employees' labour rights.

To download Absenteeism: Little known ways to reduce absenteeism click here now >>>
  7 Health & safety strategies to save you thousands



Don't let a health and safety incident cost you one more cent. Implement these seven
strategies in your company today.

To download 7 Health & safety strategies to save you thousands click here now >>>