E-FILING – FRIEND OR FOE?
In recent years SARS have focused heavily on streamlining and promoting their free online e-filing system in an effort to encourage taxpayers to use this platform. The hope is that the increased user-friendliness of the system, as well as the on-line help offered by their consultants, will eliminate the need to submit a return at a physical SARS branch.
Jeremy Burman of Private Client Financial, a division of Private Client Holdings, explains that for a number of years IRP5 and IT3A employee tax certificates have been pre-populated on an individual’s IT12 tax return. “In addition, SARS have recently worked to integrate their systems with 3rd parties in order to pre-populate the retirement annuity contribution and medical aid contribution section of individual taxpayers. This means that for an employee who has no other income apart from their salary and who contributes to a retirement fund and/or a medical aid fund, no further action should be necessary to complete his or her return, apart from checking that the pre-populated information matches their tax records and confirming their personal details.”
“E-filing contains a tax calculation function which will prepare a calculation of the tax payable or refund due to the taxpayer based on the information in the return,” says Burman. “This allows taxpayers to check that the result is in line with their expectations prior to submitting their return, and enable them to fix any errors or omissions.”
SARS has plans going forward to collaborate with financial service companies so that the investment income sections of the taxpayer’s return can be pre-populated with the information on the taxpayer’s IT3b interest certificates. “The long-term aim is to pre-populate as much of the tax return as possible with 3rd party verified data thereby ensuring greater accuracy of returns. This will help reduce time involved in completing and verifying returns - in theory these returns will then be able to be filed, quickly assessed by SARS, and should a refund be due to the taxpayer, this would be received within a few days.”
However, Burman says that the reality for many taxpayers is that this process is far from streamlined. “Returns submitted on e-filing may be selected by SARS for review or verification, which requires supporting certificates and documentation to be uploaded and submitted. Where a refund is due, the taxpayer will have to wait for the review to be concluded before the refund is processed. This process can take anything from a few days to a few months.
Additionally, in certain cases a refund will be subject to delays where a taxpayer’s bank details are reflecting as invalid. Frustratingly, this can even occur where a taxpayer has not changed their bank account and SARS has previously paid refunds into this account without issue (online verification of bank details is available in some cases, but more often than not the verification process involves having to visit a SARS branch in person).”
Burman says that in previous tax years, a visit to SARS was also required in instances where so-called “special stoppers” were placed on the taxpayer’s account. This was ostensibly to prevent fraud but more cynically appeared to be an extraordinary measure introduced by SARS to delay the payment of refunds.
Although it may be tempting for some taxpayers to ‘go it alone’ and save themselves the expense of using a tax practitioner, the decision to do so should be based on the complexity of your tax affairs. The more complex a taxpayer’s situation, the more likely a practitioner’s specialist skills will be necessary to apply judgement, prepare supporting schedules, and interact with SARS to avoid errors and omissions which could lead to penalties.
“A commission earner, rental property owner or sole proprietor for example may be unaware of the expenses which they are entitled to claim and those which they are specifically prohibited from claiming, as well as the accepted formulae to use when calculating certain allowable expenditure. In addition, where a return is selected for verification, having a practitioner who is able to handle the flow and format of documents submitted to SARS can be a huge advantage as they know exactly what is required to be submitted and how,” advises Burman. “This can help avoid a verification escalating to an audit, and prevent an additional assessment being required where incomplete or incorrect documentation is provided. Where necessary a tax practitioner is also able to make an appointment with a SARS consultant to resolve an issue, which can be a potentially invaluable assistance to a taxpayer when weighed up against the significant opportunity cost of a long day in the queues at a SARS branch.”