Interim Tax Reconciliation Season 2023 Article

September Interim Tax Reconciliation Season 2023

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Goodbye August – this means it’s time for filing the Interim tax reconciliation.

The Employer Interim Declaration (EMP501) submission opens mid-September, and must be made by 31 October. Employers must reconcile their Monthly Employer Declarations (EMP 201) for the first 6 months of the reconciliation year (1 March to 31 August).

Useful information to check to prepare your submissions for this half-year reconciliation season:

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  • employee address (postal and residential)
  •  Employee bank account details
  • Employee Income Tax Number
  • Valid employee Identity number
  • Payroll figures for PAYE, UIF and SDL actually paid
  • Register your company on E@syFile , if you have not done so. (Download from the SARS website).
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Please note: tax certificates are not issued at this time (only at financial year end, or when an employee leaves the company).

If the thought of another employee tax filing experience leaves you weak at the knees, consider signing up with Paymaster Payroll Solutions. We will reconcile all the tax information monthly, leaving you to focus on your core business functions. You will wonder why you waited so long to do this! Contact our help desk at help@paymaster.co.za for a quote.

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SARS will again provide employers with an opportunity to test the updated e@syFile™ Employer build before the formal release opening on 18 September 2023 for the Employer Interim Reconciliation.

See the Business Requirements Specification here – SARS_PAYE_BRS – PAYE Employer Reconciliation_V22.1.1 for the Employer Interim Reconciliation submission period 202308.

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IRP5 document

The basics of the IRP5 document

The basics of the IRP5 document

Understanding IRP5 document…

Author: Ian Hurst — Managing Director, Paymaster People Solutions

The IRP5 document provides a record of the income that you have earned during a particular tax year. Note: a tax year begins on 1 March and runs until 28 February of the following year. By law, your employer is required to inform the South African Revenue Service (SARS) about the income that you have received for a particular period. This includes informing SARS about the tax that was deducted from your salary. IRP5 information is automatically inserted into the document by SARS. If this hasn’t happened, the employee/taxpayer needs to speak to their employer in order to establish whether a reconciliation was indeed done or not. Note: SARS will not allow changes to the information on the IRP5.

Your employer informs SARS about these details by means of a twice yearly reconciliation submission directly to SARS. Once a particular tax year has come to an end, your employer is required to issue you with a hardcopy of your IRP5 document. If there happen to be any errors on the IRP5, for example, such as an incorrect source code, then your employer needs to correct the error and reissue your corrected IRP5 document.

Note: depending upon the number of employers that an employee works for, it is quite normal to be issued with more than one IRP5 for a particular tax year.

More details about the IRP5 document

The IRP5 document also provides details concerning the dates that you have worked for each employer. Additionally, details on the IRP5 will reflect to which tax year your income received, applies.

The different categories of income will be indicated by a unique SARS source code. Here are some examples of the categories of source codes that one might typically encounter on an IRP5:

Quick-guide to IRP5's

• Salary payments: source code 3601

• Bonus payments: source code 3605

• Travel allowance payments: source code 3701

• Other (i.e. miscellaneous) allowance payments: source code 3713

• Commission payments: source code 3606

• Medical fringe benefit payments: source code 3810

In some instances, the IRP5 might also indicate an employee’s salary deductions, as set-off against the tax calculation. This is done to reflect a series of calculations that applies before tax was deducted from your income amount. Examples of typical deduction source codes include the following:

• Employee pension contributions: source code 4001

• Employee retirement annuity contributions: source code 4006

• Employee provident fund contributions: source code 4003

• Medical aid contributions: source code 4005

To verify whether your employer declared the tax amount that was deducted from your salary, your IRP5 should reflect the primary PAYE source code 4102.

To verify to which tax year the income received amount applies, the uppermost section of the IRP5 document should indicate the relevant tax year. The IRP5 will also indicate the date when IRP5 information was completed by your employer, as well as the date when it was submitted to SARS. This is called the transaction year. For example: rental monies received in March 2023 must be accounted for in the 2023/2024 tax year.

Commission and lump-sum payments received

Quick-guide to IRP5'sIf you earned a commission or received a lump sum during a particular tax year, you should have received a tax directive number which is reflected at the bottom of the IRP5 document. Simply stated, a tax directive is an official instruction that SARS sends to the employer. This official SARS document ‘instructs’ the employer to deduct tax at a specified tax rate. Such tax rates are determined by SARS, on a case-by-case basis — dependent upon initial criteria submitted to SARS by the commission earner.

To conclude, personal income tax submissions have the potential to overwhelm most individuals. However, this need not be so. Contact Paymaster to help you navigate the IRP5 season safely.

Are you still unsure? For more information on how it all works, contact us, click here.

Paymaster People Solutions. Accurate, Timeous, Client Centered, Process driven, Payroll Software Simplified.

Paymaster People Solutions (Pty) Ltd 

Copyright 2023 Paymaster People Solutions | All Rights

EMP501 Reconciliation

8 Steps to Complete the 2023 Tax Year Submission Process

8 Steps to Complete the 2023 Tax Year Submission Process

8 Steps to Complete Reconciliation and Submission

How to reconcile

Reconciliation involves matching all tax due (liabilities) with all tax paid and checking these against the total value of all tax certificates issued. These three (3) amounts should all be equal. The reconciliation process only relates to the tax paid and not additional tax, penalties or interest.

Reconciliation steps for employers:

Step 1

Before completing the EMP501 (for interim and annual submission), determine the total income of each employee for that year, and recalculate the tax based on that amount. IRP5/IT3(a) certificates should reflect the income, deductions and tax as calculated at this point.

Step 2

If the recalculated liability according to the tax certificates is different to the EMP201s previously declared, it will need to be determined in which month(s) these differences occurred.

Step 3Step 3, capture company information

Capture all the relevant demographic information in the Business Information and Contact Details sections.

Step 4

Capture all the monthly liabilities for PAYE(before ETI deduction), SDL and UIF using these revised figures in the Financial Particulars section on the EMP501 (i.e. where different, the liabilities inserted on the EMP501 should be the final calculated liabilities rather than the liabilities declared on the EMP201).

Step 5

Capture the total monthly payments made in respect of PAYE, SDL and UIF but excluding payments made in respect of interest and additional tax. These are the actual payments made to SARS throughout the year – no recalculations needed.

Step 6

Calculate the totals and difference fields (If using e@syFileâ„¢ Employer simply click on the self-assess button in order to populate all the totals and difference fields for you).

Step 7

Employers must calculate the SDL and UIF totals and capture the values. If the SDL and UIF contributions are not on the certificates this value must be calculated and completed.

Step 8

When settling any shortfall reflected in the reconciliation, the payment must be allocated to the period(s) in which the shortfall occurred. If the relevant period cannot be determined, the payment should be allocated to the last active period within the transaction, which is August (interim) and February (annual).

Make sure to check out our helpful EMP501 submission video guide to assist you throughout the reconciliation process and ensure a smooth tax year submission.

We can handle the entire submission process on your behalf

We simply will require the following from you :

  • A breakdown of all of your PAYE, SDL and UIF payments per month between March 2022 and February 2023
  • Contact Paymaster for expert help.

Contact Ian Hurst now on Ian@paymaster.co.za or 082 898 2426 for a quote.