SARS sends a warning to South Africans who get family and friends to do their taxes

Relying on family and friends to handle SARS matters is the biggest indicator of potential tax non-compliance, with errors ranging from incorrect eFiling to serious misreporting.

Analysis of taxpayer data compiled by Tax Consulting shows a clear link between tax non-compliance and the involvement of family members or friends in handling tax affairs.

Tax Consulting is South Africa’s largest independent tax practice and handles more than 150 new queries from taxpayers each day across a range of SARS and tax matters.

The firm uses in-house technology to assign each matter to the appropriate tax professional, based on its complexity and the taxpayer’s compliance history.

Tax Consulting SA’s Team Lead of Expatriate Tax, Mbalenhle Mahlaba, explained that tax has become increasingly specialised over the past 20 years.

As a result, it is no longer realistic to expect one person to have expertise across the country’s entire tax system.

The same applies to SARS, which has specialised teams dealing with areas including tax technical matters, technology, compliance, collections, prosecutions, audits and voluntary disclosures.

According to Mahlaba, one of the first steps when handling a tax matter is to assess both its complexity and the taxpayer’s level of compliance.

Tax Consulting SA’s SARS Independent Software Vendor link is important in this process. It provides direct access to taxpayer information as it appears on SARS systems.

This allows tax professionals to identify potential compliance issues before advising a taxpayer on how to address them.

Some taxpayers know that they are not fully compliant and understand that it may only be a matter of time before SARS identifies the problem.

However, most taxpayers believe they are compliant. Others may have a nagging concern that something is not quite right and seek a professional “health check” of their tax affairs.

Mahlaba said Tax Consulting SA’s data suggests that one factor stands out in these assessments – the involvement of family and friends is the strongest indicator of potential non-compliance. Examples include:

• “My brother is an accountant.”
• “My cousin works in tax. He will help.”
• “A family friend has been doing my taxes for free.”
• “My friend’s sister’s friend’s sister is working at SARS.”

While these offers may be well-intentioned, Mahlaba said they can indicate that a taxpayer’s affairs require closer attention.

Tax mistakes can have serious consequences

Mahlaba explained that handling tax affairs involves more than completing forms and submitting documents to SARS.

Taxpayers also need to understand the long-term tax and financial implications of the information they submit.

Non-compliance can result from something as simple as incorrectly navigating SARS eFiling or making a technical error after a change in tax legislation. It can also result from a misunderstanding of specific tax requirements.

Mahlaba pointed to South African tax non-residency as one example, where a taxpayer may apply for or obtain a non-residency certificate under the wrong category.

More serious cases can involve taxpayers submitting “nil returns”. These returns declare no income or tax liability and can result in a SARS statement of account showing that no tax is owed.

In some cases, this may also allow a taxpayer to obtain a tax clearance certificate. However, receiving a tax clearance certificate does not necessarily mean that a taxpayer’s affairs are correctly reported.

A taxpayer’s tax residency status ultimately determines which income must be declared to SARS and how their tax returns should be completed.

This means an incorrect declaration can cause problems later, even if the taxpayer initially appears compliant, Mahlaba cautioned.

He added that the growing complexity of the tax system makes it increasingly important for taxpayers to use the right expertise when dealing with SARS.

The involvement of a family member or friend does not automatically mean that a taxpayer is non-compliant. However, the firm’s data suggests it is a strong warning sign that their tax affairs may need to be reviewed.

Errors that appear minor can also lead to delays, additional costs and further complications when dealing with SARS.

For taxpayers unsure about their compliance, Mahlaba recommended having their affairs reviewed by an appropriately qualified tax professional.

“When it comes to your relationship with SARS, choosing the right expertise from the beginning can make the difference between a smooth process and months of unnecessary delays, additional costs, and complications.”