Home Tax Tax Returns: Top 18 Pitfalls to Avoid

Tax Returns: Top 18 Pitfalls to Avoid

Source: Business Insider SA.

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In an article by Helena Wasserman featured in Business Insider SA, taxpayers are alerted to the top 18 mistakes one could make on a tax return.

Are you preparing to file your own tax return now that tax filing season is open? SARS is waiting for returns according to Wasserman, and she urges tax filers not to make these common mistakes.

1. Bank account declaration must be true.

Filers who declare that they do not have a bank account in SA could incur a R16,000 administrative penalty if the statement is found to be false. This advice was given by Gratia Snyman of Gautax, a Joburg-based tax and accounting service.

2. Non-declaration of investments.

SARS has its finger on the pulse in respect of investments. Investment houses provide information directly to SARS. If you fail to declare any investment, SARS will penalise you!

3. Not filing a return when you have to.

Marc Seivitz, director of the online tax assistance service TaxTim advises that individuals are under a misconception if they believe they don’t have to file a return if they earn under R350,000.

Seivitz says: “This is incorrect, there are very limited circumstances for when taxpayers do not need [to] file their return. We always advise taxpayers to file anyway just to ensure they are always fully compliant with SARS.”

Also important to note is anyone under 65 who earned more than R75,750 in the past tax year from any source must have a tax number.

4. Pension contributions information.

The information regarding pension contributions should already be reflecting in your IRP5. Don’t make the mistake of duplicating this information.

5. Declare all income.

Sars requires taxpayers to declare all income irrespective of whether it has been taxed by an employer.

6. Avoid numerical errors.

Pinky Ndaba of Durban-based firm Professional Accountants and Tax Consultants says arithmetical mistakes are a big contributor to taxpayers not getting a refund or, conversely, having to pay in large sums of money to SARS.

7. Unnecessary Typos.

Ndaba also advises that incorrect spelling of names when compared to identification documents may result in the system kicking you out and rendering the return incomplete.

8. Keep all records updated.

SARS relies on information obtained from other departments such as Home affairs to verify taxpayer identification information. Make sure you update your records as changes happen.

9. Double check your IRP5.

Make sure your employer has correctly populated your IRP5 before you attempt to file. If there are any errors, the employer will have to correct these and resubmit via EasyFile.

10. Declare rental income.

According to Snyman, property transfer attorneys submit full information to SARS. If you don’t declare rental income, SARS will find you and issue a penalty!

11. Claim your tax-free reimbursement for business travel.

There are specific criteria to be met but taxpayers must remember to claim a reimbursement for tax-free business travel. On the contrary, if you do opt for a travel allowance, ensure your employer provides a letter with an explanation of the calculation of the fringe benefit.

12. Keep proof of medical expenses.

In order to claim a refund for expenses not covered by your medical aid, you will need supporting documents as proof of payment.

13. Married in community of property? Avoid doubling up.

Both spouses need to declare all interest earned, capital gain and losses and rental income for properties. According to Snyman, if you have indicated to SARS you are married in CoP, the system will calculate the split.

14. If you earn a salary, don’t claim fees.

Individuals may not claim professional subscription fees if they earn a salary not mainly derived from commission.

15. Get a Tax-free savings account.

Individuals should not miss the opportunity to save in a tax-free savings account. Invest up to R33,000 per year and pay no tax on interest, dividends and capital gains.

16. Claim in respect of donations.

Individuals may claim up to 10% of their taxable income for donations to public benefit organisations (PBOs). As long as they obtain a valid s18A certificate and a PBO number required for a tax return.

17. Don’t neglect to declare an investment in a venture capital fund.

Joon Chong, tax partner at law firm Webber Wentzel says, “An investment in a Section 12J venture capital fund can be claimed as a deduction.”

18. Avoid spending your tax refund too quickly.

Snyman warns taxpayers not to allocate their refund based on the estimates received from SARS. It would be prudent to wait for a final completion letter first.

Share your tax tips and pitfalls with accountingweekly. Write to Tabitha at tabitha@accountingweekly.com.