Facing an audit from SARS (South African Revenue Service) can be really scary, but with the right information and preparation, it can be a breeze. In this post, The Tax Ladies will cover five common questions about SARS audits.
1. What should I do if I am selected for a SARS audit?
So, you’ve received that email from SARS stating that there is correspondence for you on efiling and your heart sinks. You log into eFiling, and there you find the letter that says you’ve been selected for an audit. First off, take a deep breath—this doesn’t automatically mean you’re in trouble. Audits are routine, and verification of documentation can be sparked by something as small as the computer noticing you had a second name in last year’s IRP5 and not in this one.
Your first step should be to carefully read the document and select the items that apply to you, and gather those records. Most initial letters are generic and will ask for a blanket list of documents which you will need to narrow down to suit your return. If this is not an initial general info-gathering audit, or a verification of information audit, then the letter will contain all the information that the auditor plans to go over, and will generally give you dates by which they expect the information to be sent to them.
Consider consulting a tax professional. They can provide invaluable guidance and help ensure that you’re fully prepared for the audit. Remember, being selected doesn’t imply wrongdoing; it’s often just a standard procedure to verify compliance.
2. How can I prepare for an audit?
Preparation is key when it comes to a SARS audit. Take a minute to compare your previous return to the current one, and check any correspondence you’ve had with SARS on prior audits. This could help you to understand what the auditors will be looking for.
Go through the letter and create a checklist of documents that they have requested – ensure to keep the order as SARS has it in their letter. Work your way down that checklist marking off each item as you find it, labelling it with the number that corresponds to the query. Once you have all that has been asked for, put it in a folder in the order that it was requested, with the letter on top.
If any unusual transactions have occurred during the year, make sure you have a detailed explanation for that transaction available, should they ask about it.
3. What documents should I submit?
Only provide SARS with the documents that they have asked for in their letter. They are not interested in anything other than what they have asked for. If they find, while reviewing the information you send to them, that they have other queries, they will ask you for the relevant documents.
A rule of thumb is that if you have put in a claim to reduce your taxable income you should provide evidence that the claim is legitimate. Example: If you have claimed a tax deductible donation of R1000 you need to be able to send a Donations Certificate from a registered Public Benefit Organisation to justify that claim.
Always keep a record of correspondence between you and SARS in order to refer back if need be.
4. Can I dispute a SARS audit decision?
Absolutely! If you feel that SARS have made an audit decision that is contrary to the information you have provided them you have the right to object to their decision within 30 days.
If you object to their decision your argument must be very clear, with all supporting documents attached to your objection.
If your objection is unsuccessful, you can appeal the decision, apply for an ADR hearing (Alternate Dispute Resolution) or take the matter to the Tax Court. Bear in mind that these processes can be expensive and will require the help of a Tax Practitioner.
5. Do I need a representative for a SARS audit?
While it’s not mandatory to have a representative during a SARS audit, it is advisable. Having a tax professional or an accountant represent you can take a lot of the pressure off you, and can make the process a lot more pleasant. They understand the tax laws and can communicate effectively with SARS on your behalf, in the formats that SARS prefer.
However, if you feel confident in your understanding of the audit process and your documentation is in order, find that handling the matter yourself is not going to be complicated.
Conclusion
Navigating a SARS audit might seem overwhelming at first, but with the right preparation and assistance from the right people, you can manage the event without stress. Remember to stay organized, seek professional help, and maintain clear communication with SARS throughout the audit process. Ultimately, understanding the process can change that mountain back into the molehill it is. Whether you’re preparing documentation, disputing a decision, or considering representation, being informed is your best ally on this journey.