SARS has recently announced the relevant dates in respect of the 2020 filing season for individuals.
There are some significant procedural changes this year, most noteworthy of which is the new auto-assessment procedure for non-provisional taxpayers.
The fact that SARS branches may not be visited without an appointment is also important for those taxpayers who must visit a SARS branch in order to submit their tax returns.
2020 Filing Season for Individuals
Individuals can start submitting their income tax returns on 1 September 2020. However, unlike previous years, provision is now being made for a significant number of individual non-provisional taxpayers to be auto-assessed by SARS from 1 August 2020.
In other words, the assessment will be issued before the individual has the opportunity to submit his/ her income tax return.
Provisional taxpayers and other taxpayers who were not auto-assessed can start submitting their returns from 1 September 2020, with the last dates for submission of income tax returns as follows:
- 22 October 2020: Taxpayers who need to file at a SARS branch to submit their returns (these taxpayers must make an online booking in order to visit a branch);
- 16 November 2020: Non-provisional taxpayers who were not auto-assessed and who submit their returns via e-filing; and
- 29 January 2021: Provisional taxpayers who file via e-filing.
The intention appears to be to eliminate the need for the submission of returns in those instances where all income received by an individual is reflected in tax certificates issued by third parties.
SARS is currently explaining the process to individual taxpayers by sending e-mails with the subject line: ‘We have made it easier for you to comply because #YourTaxMatters’.
Taxpayers should expect to receive various notifications of communications issued via e-filing, inter alia to notify the taxpayer of third-party tax certificates received by SARS, with the message that such income must be reflected in the taxpayer’s income tax return.
If the third-party information is not correct, the taxpayer must contact the third party to correct any errors, and not SARS.
SARS will notify taxpayers who are selected for auto-assessment, as well as taxpayers who would be eligible for auto-assessment, but have outstanding tax returns or other issues with their 2019 assessments, to facilitate the resolution of these issues.
Taxpayers may further, prior to 1 August 2020, receive communications indicating that they will not be auto-assessed.
How do auto-assessments work?
Where SARS has received all relevant third-party data necessary to determine a taxpayer’s liability, they will use this information to generate an automatic assessment for the taxpayer, eliminating the need for the taxpayer to complete and submit a return.
The information used by SARS to calculate the auto-assessment will include tax certificates issued by third parties such as employers, financial institutions, medical aid funds and retirement annuity funds.
The auto-assessment process assumes that:
- all information provided by these third parties is correct; and
- the individual’s tax liability can be determined based on the information in the tax certificates, without the need for any further information by the taxpayer.
It is not currently envisaged that auto-assessments will be issued in respect of provisional taxpayers.
From 1 August 2020, SARS will be issuing auto-assessments and will notify taxpayers of their assessment results via SMS.
Taxpayers will then be required to review and accept their assessments, or to edit the assessments if they dispute them, providing the correct information to SARS.
This can be done electronically, using e-filing or the SARS MobiApp. Once an auto-assessment is accepted, any under- or over-payment of tax will be processed in the normal manner, and taxpayers will be notified of the amount due or refund owing to them.
The use of existing data collection processes to reduce the administrative burden on individual taxpayers is a welcome initiative by SARS, which reflects global best practice in tax administration.
In principle, the use of third-party data to generate auto-assessments should also reduce SARS’ collection costs and free up resources within SARS to focus on genuine ‘problem areas’, such as the illicit economy.
However, taxpayers still have the responsibility of reviewing their auto-assessments and ensuring that they are correct in all material respects. They are also responsible for communicating with the relevant third parties in the event that any third-party information is incorrect.
We, therefore, recommend that individual taxpayers ensure that they have received and carefully reviewed their IRP5/ IT3(a) certificate(s), and all other tax certificates such as medical aid certificates, retirement annuity fund certificates, and IT3(b)s from financial institutions, on or before 1 August 2020, so that any discrepancies can be rectified as quickly as possible.
Given the shorter 2020 filing season, it is likely that third-party institutions and SARS will be dealing with a larger than normal volume of communications, and taxpayers will have less time in which to obtain and submit correct third-party information to SARS.
In addition, should taxpayers wish to claim any deductions not reflected in their tax certificates, such as a deduction to a section 18A organisation not reflected on an employee’s IRP5, interest expenses, certain medical expenses, etc., it will be important to dispute the auto-assessment in order to correct the assessment.
SARS’ responses in respect of disputes and complaints that need to be dealt with through the SARS call centre and e-mail channels are also likely to be delayed, particularly given SARS’ ongoing capacity constraints during the COVID-19 pandemic.
It is unclear at this stage how much time taxpayers will be given to edit their auto-assessments, but it does not appear as if an auto-assessment will become final unless the taxpayer accepts it.
Accordingly, while the stated objective of streamlining the assessment process is welcomed, it is imperative for individual non-provisional taxpayers to ensure that all third-party information is correct, and in those instances where there is additional information not reflected in third-party returns, that the auto-assessment is disputed so that additional information can be included.
Taxpayers must, as soon as possible, double-check that SARS has their correct personal contact and banking details. They must also duly take note of all SARS communication, so that they can take the necessary steps to request a third party to rectify a tax certificate if applicable, and, in respect of an auto-assessment, to either accept or dispute it.