The SARS 10 commandments for eliminating your tax debt
If you've ever owed SARS money, you know that SARS goes on a drive to collect all outstanding taxes in February and March each year.
And you're probably thinking SARS won't bother you again until 2016.
Well... things have changed.
SARS' image took a huge knock earlier this year when some of its senior staff acted beyond their authority to gather information on suspected tax evaders. So SARS now has a new Commissioner - and beware, he used to be the Commissioner of Prisons. So he has a lot to prove. And now he's working hard to restore the image of SARS as the best Government institution.
So this year, SARS started its debt collection drive in June. This is ten months earlier than usual. And many businesses have already felt the pressure!
Read on as I show you just what you can do if you owe SARS money.
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If SARS sends you a 'final demand for outstanding debts' and you don't respond in 10 days, it will grab any money in your bank account. Then, it will try to collect money from your debtors.
And finally, it will get a judgement for the debt from the High Court. Here, the sheriff arrives on his horse and takes your assets. And all this can happen within 30 days of you receiving a 'final demand.'
If you're like me, I know you want to avoid that.
So use the following 10 Commandments to keep you out of trouble with SARS. If you follow them, you have a good chance of saving your business.
Keep out of trouble with these 10 commandments
**********By law, SARS can just grab money out of your business bank account!
Have you checked your bank balance recently?
Derek did, and found R150 000 missing
The culprit? SARS.
The reason? One simple VAT pop-up letter.
And.. He's one of many
around the country who've had the same experience.
One they could have avoided with one simple tool…
Contact SARS before they contact you.
Lodge current returns and pay current Vat and PAYE on time.
Figure out what debt you owe and what you can afford to pay off monthly.
Make an offer to SARS for the next three months.
When making your monthly debt payments, try and pay off the full debt on the newest tax periods first. This will stop interest running on the tax debt for that tax period. If you just send the money to SARS, the Tax Administration Act says it must be set off against the oldest debt and it might all be swallowed up by penalties and interest.
Try and pay off Vat and PAYE in full (with interest and penalties) then explain why you got into arrears. Ask for relief from the ten per cent late payment penalty on the tax you've paid. And ask SARS to apply the amount of penalty waived against debt on the other tax.
Try to borrow money from your bank, your uncle, or the Mafia! At least the interest you pay on these debts is tax deductible (unlike the penalties and interest SARS charges). SARS will be a lot more sympathetic if you make a big payment on your old debt.
Tell SARS you've taken an extra bond on your house or other loan. This will show that you're co-operating.
SARS will usually be accommodating if you keep your current taxes up-to-date and the total of the old debt isn't getting bigger.
Don't let your debtors misuse your generosity. If you give them tax invoices and they don't pay, they're using the credit they get from you and the Vat on your tax invoices to claim input tax from SARS. Put pressure on them to pay over at least the Vat before you have to pay it to SARS.
Well there you have it! Use these 10 commandments as your way to stay out of debtors prison.
One way vendors get into serious debt is by getting their zero rating wrong! SARS will deem all the amounts you say are 'zero-rated' to include the 14% Vat. So if you claimed for R10 million, SARS will demand their R1.4 million, and add penalties and interest. Here's how to avoid this...