Taxpayer Warning: Exercise Caution with SARS Auto-Assessments

https://iframe.iono.fm/e/1592263?layout=modern” width=”100%” height=”170″ frameborder=”0

You can also listen to this podcast on iono.fm here.

JEREMY MAGGS: Millions of South Africans, possibly including you, have already undergone auto-assessment by the South African Revenue Service (Sars) this tax season. While this convenience is commendable, experts warn that it may leave many taxpayers at risk.

What does this mean? They could face penalties, have refunds reversed, or even be audited if, and this is crucial, they fail to verify their numbers. Let’s explore this further, as it affects everyone.

I’m joined by Daniel Swiegers from TaxTim. Welcome, Daniel. Can you briefly explain how the auto-assessment system works and the risks involved?

DANIEL SWIEGERS: Thank you, Jeremy. It’s great to be here. Importantly, Sars’s auto-assessment is a cutting-edge use of technology. They have effectively gathered information from various sources—like employers, medical aids, banks, and investment platforms—to streamline the tax process for the majority of South Africans, making compliance and filing much easier.

However, our concern is that many people may not realize that Sars does not always capture the entire picture. When you receive an auto-assessment, it may appear adequate, but there could be unreported income, such as earnings from side jobs, commissions, or rental income—details Sars may not be aware of, which must be included in your tax return.

Additionally, regarding deductions, you might be eligible to claim home office expenses or charitable donations. Sars may lack the necessary information for these deductions, leading to an incomplete auto-assessment. You might believe everything is in order simply because you received a number from Sars and accepted it without verification.

JEREMY MAGGS: So the key takeaway is not to take things at face value. Who is most at risk with this system? Salaried employees, freelancers, or landlords? I suspect freelancers with multiple streams of income should be especially cautious?

DANIEL SWIEGERS: Exactly. Freelancers, individuals with side jobs, or those earning commissions or rental income ideally should not be auto-assessed. However, Sars is pushing to auto-assess as many people as possible, and you might find yourself auto-assessed without Sars knowing about your additional income from the past year, which can lead to errors.

As I mentioned earlier, our advice is for all taxpayers to verify their numbers. Many South Africans mistakenly believe that since Sars provided a figure, it must be correct. This is a common misconception. Ultimately, it’s your responsibility to ensure your assessment is accurate, and you should not just accept it without scrutiny.

JEREMY MAGGS: In your experience in the tax sector, are there issues you’re noticing? Any significant gaps?

DANIEL SWIEGERS: Yes, absolutely. At TaxTim, we frequently encounter individuals who have been auto-assessed and later face penalties from Sars, thinking their tax filings were correct. We’ve seen instances like that.

Recently, there was a case involving a major pension fund that misclassified a transfer between two funds as a withdrawal and taxed individuals on it. They quickly resolved the issue, but it illustrates that such problems can occur.

Sometimes, necessary information doesn’t integrate correctly, or specific data might be missing altogether; hence, we continually advise people to consult a tax practitioner or use TaxTim to ensure everything is accurate, even if the outcome matches Sars’s figures.

JEREMY MAGGS: If Sars refunds you an incorrect amount, what happens next?

DANIEL SWIEGERS: Even if you are auto-assessed, you have until 20 October, the tax deadline for all South Africans, to submit your tax return. You can log onto eFiling, consult a tax practitioner, or utilize platforms like TaxTim to redo it.

If you’ve received a refund but later declare additional income, Sars will adjust the refund accordingly. In many cases, you might get an even larger refund if Sars was unaware of certain permissible deductions or charitable donations.

JEREMY MAGGS: Is it easy to correct or challenge an assessment before the 20 October deadline?

DANIEL SWIEGERS: It’s quite straightforward. You simply log in as if you’re filing your own assessment. If you’re auto-assessed and take no action, Sars will assume your assessment is correct. However, anyone who has been auto-assessed can log in, go through the entire filing process again, and resubmit their tax return.

JEREMY MAGGS: Your company has also highlighted issues concerning directive errors in pension funds. What does that entail, and how significant is this matter?

DANIEL SWIEGERS: That refers to the case mentioned previously, where a pension fund mistakenly managed the directive, which was an innocent error. They corrected it promptly. However, if an error occurs and you receive an auto-assessment, you might have paid tax on incorrect figures, thinking your auto-assessment was accurate. Anyone who took the time to verify would likely spot discrepancies since they did not withdraw that money as income.

This isn’t a widespread issue and isn’t anyone’s fault; such mistakes can happen in today’s technology landscape. Nonetheless, our recommendation remains that individuals should always verify and make sure all information is accurately represented.

JEREMY MAGGS: In your experience, is Sars receptive to challenges from taxpayers? Do they handle these concerns respectfully and efficiently?

DANIEL SWIEGERS: Yes, it’s essential to understand that some people misinterpret an auto-assessment as a final calculation by Sars. They are merely assisting you in completing your assessment, not claiming the number is accurate. Ultimately, the responsibility for your tax filings lies with you.

Thus, Sars is open to you revisiting your tax submission; it’s not about disputing the auto-assessment but rather re-filing your taxes to ensure everything is precise, including any additional income earned throughout the year.

JEREMY MAGGS: That’s excellent advice. Thank you, Daniel Swiegers from TaxTim, for your insights.

Stay updated with Moneyweb’s extensive finance and business news via WhatsApp here.