Before submitting your ITR12, check your tax return against this list of common errors and save yourself the time and hassle of setting things right.
Many individuals wrongly believe that an IRP5 tax certificate is the only supporting document they need when completing the ITR12 for individual tax returns. Not only are there several other supporting documents you will probably need, depending on your tax affairs, but you are also required to keep them safely in your possession for at least five years.
Below is a list of some of the documents you may need:
- IRP5/IT3(a) certificate from your employer (if you had more than one employer in the tax year, you need an IRP5 from each employer);
- Medical aid certificate as well as documents reflecting amounts claimed in addition to those covered by your medical aid;
- Pension and retirement annuity certificates;
- Proof of your banking details;
- Travel logbook, if you have received a travel allowance and an accurate record of all vehicle expenses during the year, including fuel, maintenance, lease and insurance costs;
- Tax certificates (IT3(b)), which you received in respect of investment income;
- Completed confirmation of the diagnosis of disability form for taxpayers or dependants with a disability;
- Taxpayers who receive foreign employment income must keep a schedule of days spent outside South Africa with copies of passport pages showing exit and entry into South Africa;
- Financial statements for individuals who conduct a business as a sole proprietor, if applicable;
- Information relating to capital gain transactions, if applicable;
- Any other documentation relating to income you received or deductions you want to claim.
Most people are motivated to file their tax returns when they believe that they will get a refund from Sars. On the contrary, taxpayers are required to file an ITR12 if they exceed a certain income threshold or if they have more than one employer.
For 2023, it is R500 000 for employees who received income from a single employer and did not receive an allowance such as a travel, subsistence or office-bearer allowance, and employees’ tax must have been deducted by the employer in terms of the deduction tables prescribed by Sars.
Taxpayers should avoid using the services of people who guarantee a refund from Sars. An even worse situation is a taxpayer who understates or overstates income in their pursuit of a refund. This is a criminal offence.
Some other misconceptions include:
Using the wrong source codes
Many adverse assessments are the result of the use of wrong source codes. You should take extra care when completing an ITR12 tax return because each source code has a different tax implication. For instance, certain income might be exempt from tax. However, if you use a source code for taxable income, you will be assessed for tax on this income.
If the wrong source codes are used, it will leave you with the burden of submitting a notice of objection. This process is technical in nature and as a result, you might have to pay for the services of a tax practitioner.
Some employers issue employees with IRP5 tax certificates generated by the payroll systems instead of the ones exported from the Sars e@syFile system. However, there is a danger that the payroll system might have a discontinued source code. An IRP5 with a discontinued or incorrect source code is not a valid supporting document when submitted as part of a Sars review or audit. It is particularly important to ensure that the IRP5 tax certificate contains current source codes applicable to the 2022 filing season.
Source codes can be found on the Sars website.
Not understanding the ITR12 return fields on e-Filing
Taxpayers often complain that the online ITR12 has too few fields to complete all the information compared to the manual ITR12 tax return. It is important to note that the ITR12 tax return is generated on e-Filing when starting a return on the return wizard. To generate a correct return, you must correctly answer the applicable questions on the first page. For example, the first page will ask if a taxpayer has incurred medical expenses. If you select “no” to this question, the relevant medical expenses field will not be created.
Not declaring other income received during the year of assessment
You must declare all the income received during a specific tax year on the ITR12 tax return. Employees usually declare income reflected on IRP5 tax certificates only and ignore income received from other sources, such as rental income.
If, in fact, you did earn other income not reflected in your IRP5 and do not declare it on the ITR12, you will be faced with a dilemma when Sars asks for bank statements as part of supporting documents. Your bank statements will show that you have received other income which was not declared to Sars, which will issue you with an adverse assessment. The adverse consequences of such an assessment include severe penalties for understating income.
Taxpayers have a tax obligation to ensure that full and accurate disclosure is made of all their relevant information as required in the income tax return, including all income received. Misrepresentation, neglect or omission to submit a return or supplying false information is liable to penalties, additional assessments and, in some cases, criminal prosecution.
Choosing to submit manually
When you are completing an ITR12 return, you should use an electronic submission through e-Filing. The easiest and quickest way to file ITR12 tax returns is online by using Sars’ e-Filing. However, you must first register for e-Filing on the Sars e-Filing website.
There are a number of advantages to e-Filing. For instance, you are given the opportunity to save your return and file it later when you are ready to do so. You also have the opportunity to use the tax calculator function to receive a pre-assessment, which is based on your submission, before a final assessment is done.
Furthermore, a return filed via e-Filing makes it easier to respond to a Sars audit or verification. Submitting a return through e-Filing also gives taxpayers a full history of all submissions, payments and electronic correspondence available at the click of a button. In addition, submission via e-Filing saves taxpayers time as they will no longer have to wait in long queues at a Sars office when the tax filing season commences.
Not checking the Sars auto-assessment returns
This year, Sars will again issue auto-assessments to taxpayers whose tax affairs are less complicated. Sars receives data from employers, medical schemes, banks, retirement annuity funds and other entities. Sars uses that data to calculate your personal tax assessment. We have noted that if the medical schemes and retirement annuity funds do not have your correct income tax number, the contributions done by the taxpayer will not be pre-populated by Sars. This has caused many taxpayers to owe Sars. You must check Sars’ auto-assessments before accepting them.
The previous time frame of 40 business days from the date of your auto-assessment within which such a return must be filed has been extended to coincide with the normal due date for non-provisional taxpayers. The due date for filing income tax returns for non-provisional taxpayers is 23 October 2023. If an auto-assessment has been issued after 23 October 2023, then the 40 business days will start on the date of the notice of the assessment.
Taxpayers who amend or request corrections to be done to the auto-assessed return after the filing due date will be issued with administrative penalties by Sars, which treats amendments or corrections to the income tax return after the due date as late filing of the tax return.
* Musviba is a Tax Director at SA Tax Guide and a member of the South African Institute of Taxation
** The article was shortened