Tax filing season off to a slow start due to technical issues

Several technical issues with the electronic tax filing platform (eFiling) of the South African Revenue Service (Sars) at the start of the annual tax season (since 1 July) caused huge frustration amongst taxpayers and tax practitioners.

After two businesses days the problems were sorted out, the eFiling system could be accessed and their returns were available with data already prepopulated.

Read: Tax season will be shorter this year

Filing season started last Friday and ends on 24 October for non-provisional taxpayers who have not been auto-assessed and on 23 January 2023 for provisional taxpayers and trusts.

Important changes this year

A major difference this year is that non-provisional taxpayers who have been selected for auto-assessments will have 40 days after receiving their auto-assessment to respond.

Previous years they had until the submission deadline to decide whether they accept or reject the automated tax return.  This year they will receive an estimated assessment and not a populated return.

If the taxpayer agrees with the auto-assessment that is the end of the process; they do not have to accept it as previously. However, if the taxpayer disagrees, he has 40 business days to file an edited return or ask for another 40 days in which to amend it.

The South African Institute of Taxation (Sait) says their understanding is that the first 40 business days will apply automatically, and the second 40 business day may be granted if there are reasonable grounds for an extension.

However, it appears unlikely that Sars will grant extension beyond the current deadline of 24 October.

The selection

Sars says it has identified a large segment of non-provisional taxpayers who are typically in formal employment and have deductions such as retirement annuity and medical aid contributions.

Third-party data from employers, pension funds and medical aid schemes enabled Sars to complete the tax returns on behalf of these taxpayers and then issue them with an estimated assessment.

Taxpayers will be notified of their assessments and if they find there is information missing or the assessment is incorrect it must be declared within 40 days after the assessment was raised.

Amending an assessment

According to Sait’s independent consultant Cecile Bothe, taxpayers who have medical expenses that were paid out of pocket, either because they are not contributing to a medical aid scheme, or their day-to-day funds in the scheme has been depleted, will have to amend their estimated assessments as Sars would not be aware of the expenses. However, they must be able to proof that they paid the expenses.

If they have proof, they can submit the edited return within the 40 days of receiving the assessment or ask for additional time to gather proof.

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Once the taxpayer has submitted an edited return, Sars will issue a revised assessment. If the taxpayer disagrees with the revised assessment, they can object to it.

Bothe says Sars intends to send notifications to taxpayers in batches and the last notification of the assessments will be around 24 July.

Taxpayers must take note that if they agree with the assessment, they do not have to do anything. If there is a refund due, Sars has undertaken to pay it within 72 hours after the notification was sent. Sait’s understanding of the process is that the tax debt owed to Sars will only be payable on 31 January next year.

Taxpayers who are not affected

Bothe notes that the estimated assessments will not affect provisional taxpayers or taxpayers where Sars does not have sufficient third-party data to compile a return and issue an assessment. They will have to file a return before the 23 January deadline.

Sars says in a statement it has significantly “sharpened” its capability to detect non-compliance and to make it costly for taxpayers.

It threatens taxpayers with understatement penalties if they deliberately attempt to claim impermissible expenses or understate their income.

Read: Rigid penalty regime drives taxpayer compliance

Although Sars caused delays at the start of the tax season, it intends to impose administrative penalties if taxpayers do not adhere to the applicable deadlines during the filing season.

Anton Krynauw, managing director of Krycom and regular presenter at The Tax Faculty, says the annual filing season offers sufficient time for taxpayers to be compliant and doubt if Sars will extend it because of the delays at the start of the period.