10 Questions to ask your tax practitioner this tax season
Tax and Accounting
10 Questions you need to ask your tax practitioner
With the recent shuffles in SARS’ exco and deficit in the national budget, SARS has embarked on a new initiative to prosecute non-compliant taxpayers in order to make up for the budget shortfall.
With the 2018 tax season around the corner, make sure that you are not caught unprepared.
With the recent shuffles in SARS’ exco and deficit in the national budget, SARS has embarked on a new initiative to prosecute non-compliant taxpayers in order to make up for the budget shortfall. In March 2018, SARS launched a drive to issue penalties on all outstanding returns and to collect outstanding taxes from taxpayers.
At the end of March 2018, SARS’s Outstanding Returns Book showed that active taxpayers owed SARS approximately 30 million in returns, in many cases showing that multiple outstanding returns were due by a single taxpayer. With this initiative by SARS, it is worthwhile engaging a tax practitioner to ensure that all your tax obligations are met on time, in an efficient manner, as well as provide you with a clear understanding of how the tax system works.
Here are 10 questions to ask your tax practitioner:
1. Is your tax practitioner registered?
Firstly, ensure that you are dealing with someone who has the required qualifications to assist you. In terms of the Tax Administration Act, it is a criminal offence for a person to provide tax advice or complete returns on behalf of a 3rd party for fees if they are not registered as a tax practitioner with SARS and a Recognised Controlling Body.
2. How is your tax practitioner’s fees calculated?
Fees charged by a tax practitioner should be commensurate with the skill level of the practitioner given the nature and complexity of the work involved. Most practitioners will charge fees based on their time spent. The more complex the return, the greater the time and level of expertise involved, thus resulting in a higher fee.
3. What tax returns will you be required to submit on an annual basis, and when?
If you are a non-provisional taxpayer, in other words, you are an employee with limited investment income, who earns mainly salary income on which PAYE is withheld, you will be required to submit only an annual income tax return. Returns for the year ended 28 February of each tax year will be available on SARS e-filing 4 months after the tax year end (1st of July). The deadline for submission of these returns is generally the end of November of that year.
If you are a provisional taxpayer, in other words, an independent contractor, sole proprietor, or individual who has significant investment/rental or other income, along with your annual income tax return, you will also be required to submit provisional tax returns for the preceding 6 months by 31 August and 28/29 February of each tax year. SARS allows a later deadline of 31 January of the following year for the submission of annual income tax returns by provisional taxpayers.
4. What documentation must be provided for your annual income tax returns?
All tax certificates received by you for the relevant tax year should be provided. Examples of these include:
IRP5 certificates – For salary/commission/contracting income received
IT3(a) certificates – For investment income received e.g. dividends, interest, etc.
IT3(b) certificates – For capital gains on investments
IT3(s) certificates – For tax-free investments
Retirement Annuity contribution certificates
S18A donations certificates
Medical aid contribution certificates
Additional documentation that may be required include:
Details of income and expenses incurred for the tax year where the taxpayer is a sole proprietor, independent contractor, or earns rental income.
A logbook recording business and private travel if a motor vehicle allowance is received by the taxpayer or he has use of a company vehicle.
A schedule of medical expenses incurred as well as copies of all medical invoices and proof of payment of these expenses where a taxpayer qualifies for a medical expense tax credit.
5. What format should your documentation be in?
Although most practitioners will accept hardcopy certificates, the preference would generally be for electronic documents, since they are requested as such by SARS. Supporting documentation should be submitted in an electronic format via e-filing.
6. When can you expect to pay tax or receive your refund?
For individual taxpayers, final tax if any due, is payable 7 months after the end of the tax year (by 30th September). In addition, provisional taxpayers will be required to pay tax by 31 August and 28 February of each tax year. Provisional tax payments work as a pre-payment of final income tax, thereby reducing the final tax payable by 30th September.
Where SARS has issued a final assessment on an annual tax return with a tax refund due to the taxpayer, this refund should be received by the taxpayer within a few business days, unless the return was selected by SARS for review or audit. In the case of a review or audit, the refund will only be paid out once the process has been completed by SARS. This can take anything from 30 to 90 days.
7. How do you make tax payments and can you check that these have been received by SARS?
Where a provisional or final income tax payment is due, your practitioner can either set this up on e-filing or provide you with the relevant payment details so that you can pay the tax directly to the relevant SARS bank account via EFT. Where the payment is set up on e-filing, you will still need to log on to your on-line banking profile and authorise this payment before it will come off your bank account.
Note: all payment should go directly to an approved SARS account and one should be wary of any practitioner who requests payment to an account other than SARS.
To check that the payment has been received by SARS, your practitioner can request a statement of account on e-filing — this will reflect all outstanding amounts as well as payments received to date by SARS. Payments will normally take one business day to reflect on the SARS system.
8. When can you throw out the supporting certificates and documentation for your tax return?
Generally, documents should be kept for a period of 5 years before being destroyed. E-filing will keep a history of all returns submitted and assessments received on this platform so it is not necessary to keep hard copies of these documents.
9. How can I be more tax efficient?
A key duty of your practitioner is to ensure that you are tax efficient at all times. This may involve providing advice on the best vehicle through which you should run your business, the structuring of your salary, as well as ensuring that you are taking advantage of all allowances and deductions provided in terms of the Act.
10. How will a change in your circumstances affect your tax situation?
Any change in your financial circumstances could potentially have tax implications. This may include the sale of your house, the purchase of a second property, resigning from your job, or starting a new business. To ensure that you are adequately prepared, it is worthwhile discussing any upcoming changes with your practitioner to establish the effect that this will have on your taxpaying position. Your practitioner can then ensure that all resulting tax payment or filing obligations are met and help you to avoid any potential penalties that may arise from non-compliance.
Clear communication between yourself and your tax practitioner will assist not only in ensuring that you stay on the right side of SARS, but that you do so in the most tax efficient and cost-effective manner possible.