BUSINESS NEWS - During what is known as employer filing season, companies have to submit their annual reconciliation declarations (EMP501s) with the latest and most accurate payroll information about their employees and the tax they have deducted.
The data that must be submitted should cover the monthly employer declarations, payments made and Tax Certificates (IRP5/IT3(a)s) generated, covering the full tax year from 1 March 2020, to 28 February 2021.
If employers don’t submit accurately and on time, it will have an impact on their employees when the time comes for them to file their individual tax returns. Sars uses this information to populate employees’ auto-assessments/income tax returns.
How this relates to employees and the tax they pay:
When you start working at your first job, you are not required to already have an income tax number as your employer can apply for one on your behalf. Alternatively, you can register for an income tax number on your own by using eFiling.
Every month, your employer will deduct a certain amount off your salary for tax, known as pay-as-you-earn (PAYE), and pay it over to Sars. The reason it is done monthly is to save you from having to pay a lump sum to Sars once a year when you file your income tax return.
Employers work out how much tax to pay Sars by consulting the Sars PAYE tables, which have different tax rates for employees who are paid weekly, fortnightly or monthly.
The PAYE calculated is based on the employee’s earnings and includes basic salaries, bonuses, fringe benefits and other income and allowances.
If you have been employed for less than a year, you may be entitled to a refund when submitting your income tax return (e.g. if the amount you earned falls under the tax threshold, which is R87 300, you could get all the tax back from Sars that was paid over by your employer).
That is why it is so important that employers submit the correct payroll information to Sars during this period.
From Sars’s point of view, if they don’t do so accurately and on time, Sars will impose heavy penalties on employers (equaling one per cent of the year’s PAYE up to a maximum of 10 per cent for each month the return was late).
What can you as an employee do to check your employer is fulfilling their obligations?
- Insist on an IRP5/IT3 (a) certificate from your employer. They should have sent this to you by the beginning of June.
- Check that the IRP5/IT3 (a) correctly reflects the salary you received and the taxes withheld from your salary is in accordance with what is stated on your payslip.
- Confirm with your employer that the reconciliation and payments have been submitted to Sars, then you should not have a problem when you submit your personal income tax return later in the year. Remember that PAYE is your tax withheld by your employer as an agent of Sars.
Focus on employers: the Sars Gauteng South region, which covers Gauteng, except Pretoria, central Johannesburg and Soweto, is focusing on employers in their area for the first six months of this new financial year, starting on 1 April.
A special task team has been set up to:
- Assist compliant employers with the submission of reconciliations during employer filing season.
- Engage employers with outstanding PAYE returns and assist them to comply. Heavy penalties will be imposed on employers who fail to declare and pay these over timeously to Sars.
- Focus on employers who have failed to pay over the PAYE withheld from their employees. Harsh action is planned against those who are non-compliant. PAYE is not a tax on the employer and the employer holds the money in trust for Sars.
Some visits to workplaces are being planned to interview employees where non-compliance is detected. As an employer, ensure your tax affairs are in order before Sars needs to contact you.
For more information on your tax responsibilitieArticle: Caxton publication, Bedfordview Edenvale Newsd how to be tax compliant, visit the website.