Managing Your Tax Returns – 5 ways things can go wrong, and how the deal with it…
- SARS makes an honest mistake. Doubling-up on income, leaving out one or more deductions, or failing to take your PAYE into account are some examples of “finger trouble” that can happen at SARS.
- Exempt income is treated as taxable. This can happen as a result of the return being completed incorrectly. For example, if you have earned dividends (which are tax-free), and you entered them on the return as interest (which is taxable), SARS cannot reasonably Bell expected to check that everything is in the correct box. This is a common error when it comes to unit trust distributions, where your payment includes both interest and dividends.
- Your employer makes an error on the IRP5. Employees who earn both commission and salary income often fall victim to a common error made by employers when preparing the tax certificates. Commission and salary income must be shown separately, and if the whole amount is shown as salary, SARS will disallow the deduction of expenses claimed against your commission income.
- Deductions are overlooked. A commission-earner will submit a claim for various expenses incurred in the earning thereof. However, the space on the return for entering this claim is buried at the bottom of the deductions page. It can therefore easily be overlooked.
- Certificates are omitted. If you don’t submit your investments, retirement annuity or donations certificates, SARS will not allow the deduction.
So, don’t neglect to check your SARS assessment, line by line. Getting SARS to correct any error is not simply case of ‘phoning them. You need to lodge a formal objection, and there are specific procedures and time frames that you need to adhere to, if you want your objection to be considered.
Submitting your objection
Your income tax assessment has three dates printed on it. The “date of issue” is the date upon which the assessment was generated. The “first date” is the date from which additional interest will be calculated in the event of you failing to pay the amount due on time, whilst the “second date” is the date by which the amount due must be paid.
However, the important date for objection purposes is the date of issue, since all objections must be submitted to SARS within 30 working days of this date. Late objections will only be accepted if you provide valid reasons for the late submission thereof
SARS introduced a formal procedure for resolving tax disputes known as “Alternative Dispute Resolution” (ADR). This “alternative” process is the only process that SARS recognises in practice
ADR does not take away the taxpayer’s right to have their dispute heard in court, but it is far cheaper to lodge an ADR objection with SARS than to resort to any legal process. Encouragingly, majority of tax queries resolved using this process.
Any supporting documentation that will assist SARS in considering your objection is obviously useful, but the actual objection must be submitted on the prescribed form ADR1 (available from www.sars.gov.za or your local SARS office).
The form must also be signed personally be the taxpayer. If your tax consultant is lodging the objection on your behalf, he/she may not sign the ADR1 unless you have given him a Power of Attorney to do so. SARS has become very strict on this, and will reject any ADR forms not signed in this manner.
If your objection is disallowed, or a revised assessment has been issued that you still wish to appeal, you need to complete a “Notice of Appeal” (form ADR2) and deliver it to the office that issued the response to your original objection. Note: In some cases you will receive a letter specifying the name of the SARS official to whom any appeal must be sent. Make sure that this specified person gets your appeal so as to avoid delays.
A facilitator must be appointed by SARS within 15 working days of receipt of your ADR notice, and SARS is required to notify you of who has been appointed.
SARS may decide to call you to a meeting to discuss the matter in an attempt to resolve the dispute. If this route is taken, such meeting must take place within 20 working days of the appointment of the facilitator (or later date by arrangement between SARS and the taxpayer). The details of this meeting must be recorded in writing, and once the process has been completed, SARS has 10 working days within which to respond to you.
The entire process should therefore (at worst) take no more than 45 working days (about 2 months) from submission to completion. In practice, straight-forward disputes are often resolved within a month.
Be aware: To avoid unnecessary delays, make sure that you keep copies of everything that you submit to SARS, obtain reference numbers (where applicable), escalate via SARS’ internal channels – and, if all else fails, lodge your complaint with the Tax Ombudsman.