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This article was first published in the third-quarter 2012 edition of Personal Finance magazine.
Taxpayers often think that their responsibilities end once they have submitted their income tax return to the South African Revenue Service (SARS). This is a big mistake and may result in your paying more of your hard-earned cash to SARS than is required.
This article looks at the steps to follow once an income tax return has been filed with SARS, the options available to taxpayers who are aggrieved by an income tax assessment issued by SARS, and how to pay any outstanding income tax liability.
Understand your rights and obligations
You should be aware of your rights and obligations as a taxpayer once you have filed your income tax return. Understanding this process and, in particular, the strict deadlines within which you must act will enable you to make informed decisions – which ultimately may result in more cash in your pocket.
You have filed your tax return. What now?
Once you have submitted your income tax return to SARS, whether manually or using eFiling, it is important that you regularly check the status of your income tax assessment, either via eFiling or telephonically with SARS. It is important that you know when you have been issued with an assessment, because you need to act on that assessment within strict prescribed deadlines.
Failure to act within the prescribed deadlines may result in your being unable to dispute your income tax assessment with SARS (if you are dissatisfied with the assessment issued), or in penalties or interest being levied if payment of any outstanding income tax liability is not settled within the prescribed deadlines set by SARS.
The importance of checking your assessment
Once you have received your income tax assessment, you need to check that the assessed taxable income or the assessed loss and any outstanding income taxes payable to, or refunds due from, SARS are equal to what you anticipated.
Specifically, you should check that:
* Your assessment correctly includes all the taxable income disclosed in your tax return;
* SARS has correctly taken into account all the allowable tax deductions that were claimed on the tax return; and
* All the employee’s tax and/or provisional tax payments that you made during the tax year were correctly taken into account in the calculation of your outstanding income tax liability.
In addition, you should ensure that you have not incorrectly been charged interest and/or penalties, and you should check that any prior year balance of assessed loss (where applicable) has been brought forward correctly to the current tax year.
Satisfied with your assessment?
If you are satisfied with your assessment, ensure that you pay any outstanding tax liability timeously and within the prescribed deadlines. Remember, a failure to settle your outstanding tax liability timeously may result in SARS imposing interest and penalties.
What are the prescribed timelines?
An income tax assessment will reflect two dates:
* The due date; and
* The second date (which is usually 30 days after the due date).
Any outstanding income tax liability must generally be paid to SARS by the second date, unless the assessment reflects an alternative date of payment. If the outstanding income taxes are not paid by the second date (or an alternative date where applicable), SARS may levy interest on the outstanding income tax liability from the due date of assessment until the tax due is paid.
It is also important that you ensure that the payment of your tax liability clears SARS’s bank account by the date on which the payment is due (that is, the second date). Often, taxpayers pay the outstanding taxes on the second date, but, due to certain bank procedures, the payment reflects in SARS’s records only a day or two later, resulting in interest being levied automatically. When the second date falls on a day that is not a business day (that is, a weekend or a public holiday), the payment of the outstanding tax liability must be made no later than the last business day before the second date.
How do you pay any outstanding taxes?
If you are satisfied that the liability disclosed on your income tax assessment is correct, you may pay SARS using one of the following methods:
* Via the internet;
* At a bank;
* At a SARS branch; or
* By debit order.
Please note that SARS has issued guidance on how to effect payments (see “Reference guide South African Revenue Service payment rules”, which may be found in the “All publications” section of the SARS website, www.sars.gov.za).
Not satisfied with your assessment?
If you are not satisfied with your income tax assessment, you can request written reasons from SARS as to how the amounts were assessed.
The request for reasons should be delivered to SARS within 30 business days after the date of assessment. The date of assessment is the due date as reflected on the income tax assessment or, if no due date is shown, the date of the notice of assessment.
It should be noted that the time for delivery of the request for reasons (that is, 30 business days from date of assessment) may be extended by 60 business days if SARS is satisfied that there are reasonable grounds for the delay in lodging the request for reasons. SARS may, however, also decide not to extend the period.
SARS must provide written reasons within 60 business days after receiving the request for reasons.
If a taxpayer is not satisfied with the reasons provided by SARS, he or she may lodge an objection.
Lodging an objection
The objection must be lodged with SARS within 30 business days from the date of assessment (that is, the due date of assessment).
Where a taxpayer has requested written reasons before lodging an objection, the objection must be lodged within 30 business days from the date on which the reasons were supplied by SARS.
As is the case with lodging a request for reasons, the time for lodging a notice of objection may be extended. Where reasonable grounds exist, the period may be extended by 30 business days. However, in exceptional circumstances, this period may be extended by more than 30 business days. SARS may also decide not to extend the period for lodging the objection, in which case you will not be able to take the process further and may potentially lose out on some hard-earned cash.
It is important to note that there are prescribed rules that must be adhered to when lodging an objection. Some of the more important rules are:
* The objection must be in the form prescribed by SARS. The Notice of Objection form, or NOO1, must be completed. This form can be obtained electronically via eFiling or may be requested from SARS telephonically.
* The objection must be in writing, specifying in detail the grounds upon which it is made.
* The objection must specify an address at which the taxpayer will accept notice and delivery of SARS’s decision.
* The taxpayer must sign the objection.
* The objection must be delivered to SARS at the address specified on the income tax assessment.
SARS must, within 90 business days of receipt of the objection, reduce the income tax assessment, alter the income tax assessment or disallow your objection. If your assessment is reduced or altered, SARS must issue a revised assessment, and the normal steps that you would follow after submitting your return should be followed.
If you are dissatisfied with the outcome of the objection, you may appeal against the decision.
Lodging an appeal
The appeal must be delivered to SARS within 30 business days after the date of the outcome of the objection. The appeal must be in writing. The taxpayer must specify which of the grounds specified in his or her objection he or she is appealing to. The appeal must be in a form prescribed by SARS (that is, a Notice of Appeal, or NOA). This form can be obtained electronically via eFiling or may be requested from SARS telephonically.
If you do not agree with the outcome of the appeal, you can appeal to the Tax Board of Court.
Note that for purposes of the above (that is, requesting reasons, lodging an objection and lodging an appeal), Saturdays, Sundays, public holidays, and the days between December 16 of a year and January 15 of the following year (both inclusive) are not regarded as business days.
Must you pay your taxes while awaiting the outcome of your request for reasons, objection or appeal?
You are obliged to pay your outstanding income tax liability even though you are waiting for the outcome of a request for reasons, a notice of objection or a notice of appeal. Failure to do so can result in SARS imposing interest and penalties.
Should an objection or appeal be successful and the income tax assessment be altered or reduced, any excess tax paid, including interest at a prescribed rate, will be refunded to you.
* Anthea Scholtz is a tax director at Deloitte and is the leader of the Global Employer Services Unit of Deloitte in the Western Cape.