IRP5 document

The basics of the IRP5 document

by with One Comment Article

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.

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Copyright 2023 Paymaster People Solutions | All Rights

New tax year

The New Tax year – starts 1 March

by ArticleTax
1 March is the day

From 1 March, you will be rolling over into the new tax year. Most payroll systems now “lock down the old tax year” and you can no longer change any of that information. So sort out any issues before the tax year-end. You really don’t want to start having to open the payroll to change earnings or deductions or add information once 7 March has come.

Here are five things that will make your life easier:

1) Check that your employees details are complete

Check that all the information required by the Receiver is correct and complete for all employees. To do this, you need to draw a report from your payroll system listing the following:

  1. Address of the employee.
  2. Banking details of the employee.
  3. Identity, work permit or passport number.
  4. Tax reference number.
2) That all reconciliations are done – payroll deductions to Emp 201 submitted and paid to SARS

Reconcile all Emp. 201 payments made to SARS to the figures declared on the monthly Emp. 201 form submitted to the Receiver. These must balance. (If not, correct the issue as soon as possible – or make a note of why there is a difference, so you can explain it on your annual submission).
The best way to check the balances is the EMPSA from SARS. This shows the actual payments that have been recorded for the year, and can be compared with the year-to-date totals from your payroll system. If this balances then the Emp.501 reconciliation on Easyfile should not be a problem.

3) Confirm all submissions to SARS

Check to make sure that SARS has received all your EMP.201 submissions and that there are no outstanding issues that need to be dealt with. It is ALWAYS a good idea to keep up to date with SARS documentation.

4) Remind company car and travel allowance holders

Remind all your employees who have company cars or car allowance to record their millage first thing on 1 March. Make sure all the details of the vehicle are recorded on the payroll. They will need to upload their log book or make sure that the logbook is complete for the tax year.

5) Resolve any outstanding issues

Make sure that all the earnings and deductions are listed under the right payroll codes. In addition, make sure you have all the information for any retirement annuity and medical aid tax deductions you have made.

It is a useful exercise to run a test IRP 5 upload, since this can show you any faulty issues, such as negative 3601 income or negative retirement funding income which can be corrected in the February payroll. It will also give you any area of incomplete or missing information. These all have to be corrected before Easyfile will accept the upload file.

Guide for codes – employee tax certificates 2023  (click here)

List of registered bargaining councils (click here)

If this feels to overwhelming, consider joining the many happy Paymaster clients. Contact our Helpdesk for additional information.

Two looming SARS deadlines (for 31 May 2016): Tax and ROE

by with No Comment department of labourLatest Payroll NewsSARS

Two looming SARS-related deadlines for 31 May 2016

1.  2016 Tax Year Submissions to SARS

The deadline for submission of EMP501 and Employee Tax Certificates, is the 31st May, Tuesday next week. Have you finished your submission to SARS yet? The SA Revenue website has this advice for employers:

“Employers are required to submit their Pay-As-You-Earn (PAYE) Employer Annual Reconciliations between 18 April and 31 May 2016 to SARS, confirming or correcting payroll tax amounts which were declared during the 2015/2016 tax period.

This year, employers are urged to accurately verify and update each employee’s personal and financial details before submitting their Annual Reconciliation Declaration (EMP501) and Employees Income Tax Certificates [IRP5/IT3(a)s] to SARS.

Should these details be incorrect on an IRP5 certificate, the employee will be unable to file his/her Income Tax Return for Individuals (ITR12) during Tax Season. Individuals will no longer be allowed to make any corrections to pre-populated IRP5 details on their returns.

In cases where details are incorrect, employees will have to revert to their respective employers who will need to make changes on the IRP5 and re-submit these to SARS. This process can be time consuming and it may become problematic for employees to file on time.

Employers play a very important part in the income tax cycle which effectively starts on 18 April with the submission of the annual reconciliations. We rely on your cooperation to make the submission of ITR12s later in the year as stress-free as possible for all involved. Need help? Call the SARS Contact Centre on 0800 00 7277.”

2. Return Of Earnings (ROE) to the Department of Labour

Essential document downloads and login link

COIDA ROE DEADLINE EXTENDED — The Department of Labour has announced that the 2015/2016 ROE deadline has been extended until 31 May 2016. Submissions commenced on the 1st April 2016.

  1. Download the Online Submission Guide (Common Errors and FAQs)
  2. Department of Labour’s LOGIN PAGE
  3. Department of Labour’s Information Slides
  4. Download the Instruction Manual

Any further questions, please contact Ian@Paymaster.co.za

 

Overview of the basics of employer tax

by with No Comment EmployersLatest Payroll NewsSARSTax

Overview of the basics of employer tax

By starting a business, you’re helping to create jobs, contributing towards skills development, and even inspiring other entrepreneurs.
But it’s important to get your SARS red tape right from the start if you want to avoid problems and penalties with the tax authorities later down the line. This overview sets out the basics of employer tax – an area where you have no margin for error.
As an employer, you must deduct taxes from employees, file a range of submissions to SARS, and supply your employees with IRP5 certificates that they will also submit to SARS. You must also register all employees for income tax – everyone who is formally employed needs to be registered with SARS.Declarations and forms to be submitted:

  • Monthly Employer Declaration (EMP201) – This form declares the following deductions: PAYE (Pay as You Earn), SDL (Skills Development Levy) and UIF (Unemployment Insurance Fund) contributions.
  • Employer Reconciliation Declaration (EMP501) – Twice a year you must file this reconciliation of all amounts paid to SARS on behalf of your employees. The next deadline is 29 May 2015 – don’t miss it!
  • Employee Tax Certificates (IRP5/IT3(a)) – You must provide these tax certificates to employees after each tax year, and they will submit them to SARS.
  • Cancellation of Tax Certificates (EMP601).
  • Adjustment to Annual Reconciliation (EMP701) – Where you need to make adjustments to past reconciliation and declarations, this is the relevant form.

Employers must submit their Monthly Employer Declaration (EMP201) by the seventh of each month. Then, you will usually submit an interim Employer Reconciliation Declaration (EMP501) in September-October for the six months from 1 March to 31 August. Your final annual EMP501 submission is done during April and May for the tax year 1 March to 28/29 February.

You will normally issue employee tax certificates once a year. Watch out for SARS announcements at the end of each tax year (end of February) to keep ahead of the annual submission dates.

Steps to follow

SARS no longer accepts paper-based declarations for companies with more than five employees. If you have more than 20 employees, you’ll do most of your reconciliations and declarations electronically using the e@syFile software or use the eFiling website if you have under 20 employees.

Remember:

  • Always use the latest version of e@syFile, since SARS will not accept data submitted using an old version of the software.
  • Backup your data before installing an upgrade of e@syFile to protect yourself against the risk of possible data loss during the upgrade process.

Compiling the PAYE data and submitting employers’ tax reconciliation declarations can be easy if you use the right tools – especially a reliable and efficient payroll software system – and keep track of new SARS requirements and legislative changes.

BY: MADELEIN VAN DER WATT