Tax season can be daunting, especially for new business owners. From 1 April to 31 May 2024, employers are required to submit tax documents for their employees. Failure to do so can result in serious penalties. Thankfully, there is still time to complete these.
The Employer Annual Reconciliation period is the time during which every employer needs to ensure SARS has all the employees’ tax certificates. These documents need to be reconciled with the business’ EMP201s and EMP501 certificates along with the required payments for the financial year ending in February of that year.
Submitting your documents in time for this part of the tax season means that your business is tax-compliant and your employees can submit their tax returns in time. For SARS, this means that the employer’s responsibility regarding PAYE, SDL and UIF can be calculated. All the information needs to be accurate to ensure a smooth process.
As the deadline for many tax-related submissions approaches, we have compiled a list of three key things to keep in mind this tax season.
1. Issue Employee Tax Certificates (IRP/IT3(a))
The IRP5/IT3(a) is the cornerstone of information that employees need to complete their tax returns. It details the income earned and taxes that were deducted by the employer. Every employer is required by law to issue these tax certificates by the end of May.
Deadline: 31 May 2024
2. Submit PAYE reconciliation
The Pay As You Earn (PAYE) reconciliation is the tax that every employer is required to deduct from an employee’s income. It is a type of income tax that is paid to SARS on the employee’s behalf.
According to the law, the business (employer) needs to pay this amount to SARS by the 7th of every month. This ensures a steady collection throughout a financial year that enables the tax authorities to execute their duties while preventing employees from needing to pay a lump sum once a year. However, the PAYE reconciliation is the document that lists all the payments made to SARS on behalf of the employees throughout the financial year.
It is important to note that the Pay As You Earn reconciliation declaration serves as a tool that helps accurately report these figures.
Deadline: 31 May 2024
3. Ensure the Submission of Employers’ Annual Reconciliation Declaration
During the period of 25 April to 31 May 2024, employers need to ensure that all the reconciliation documents that need to be submitted throughout the year are available to SARS. These documents include the Monthly Employer Declarations (EMP201) and the Employer Interim Reconciliation Declarations (EMP501).
All the information reflected on these documents needs to be accurate and up to date. The EMP501 needs to include the following:
- The Monthly Employer declarations (EMP201) for PAYE, Unemployment Insurance Fund contributions (UIF), and the Skills Development Levy (SDL).
- The Employee Tax certificates (IRP5/IT3(a)).
- Detailed information about the payments that were made – Excluding any penalties or interest paid).
All outstanding payments to the tax authority also need to be completed before the end of the tax season for employers to prevent interest charges or penalties.
Deadline: 31 May 2024
Repercussions of Non-Compliance to Tax Season for Employers
Late submissions or non-compliance not only affects the business, it also affects the employee. If these documents are not up to date, the tax authority struggles to issue individuals with auto-assessed or pre-populated Income Tax Return (ITR12) documents. The result is employees who struggle to fulfil their tax obligations during Income Tax Season in South Africa.
Should a business or employer not comply, in other words, submit late or inaccurate documents, the employer can be penalised with a penalty fee of 1% of the year’s PAYE liability. For every month that an employer fails to fix this mistake, the penalty fee increases by 1% monthly. This can quickly add up to 10% of the year’s PAYE liability.
It constitutes a criminal offence if the employer wilfully or negligently :
- Fails to submit the fully complete EMP201 and/or EMP501 returns before the deadline
- Fails to issue an IRP5 or IT3(a) certificate to any employee within the stated tax season for employers.
- Fails to deduct or withhold PAYE or UIF from the employee’s remuneration.
- Fails to pay any PAYE or UIF deducted or withheld from the employee’s remuneration to SARS.
- Uses PAYE deductions for any other reason than paying SARS.
Should a person be guilty of any of these offences, they are liable to a fine or imprisonment of up to two years upon conviction.
The Tax Submission Process for Employers
Understanding the seriousness of submitting your tax documents in time is one thing, but how can an SME file these documents? SARS has made it simple for taxpayers to submit them online.
If you have one or up to 50 employees, you can:
- Use SARS eFiling or e@syFile Employer to file your EMP501.
- Use SARS eFiling to import a tax certificate that was created from payroll.
- Use SARS eFilling to change, cancel, or capture certificates.
If you have over 50 employees, you must use e@syFile Employer to file your EMP501.
Remember to always keep an eye on your records and update your declarations timeously. This will result in an easy and happy tax filing experience.
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