Sars introduced the auto-assessment system to streamline tax season and reduce the need for manual submissions.
Tax experts have warned that taxpayers who did the Sars auto-assessment could face penalties because they may have unknowingly accepted incomplete or incorrect tax returns, potentially putting themselves at risk of penalties, refund reversals or future audits.
Nicci Courtney-Clarke, COO of TaxTim, a digital tax assistant that helps you to complete your taxes, says it is not that the taxpayers purposefully did something wrong but that Sars does not always have their full story.
“If you do not check and submit your own tax return for income and/or expenses which may be left out, you are taking full responsibility for what is missing and Sars will hold you accountable.”
Courtney-Clarke says Sars paid out over R10.6 billion in tax refunds in July, but these were based only on preloaded data from third parties, such as your employer, bank or investment platforms.
“This data does not always provide a complete picture of your taxes.
“In many cases, taxpayers who rushed to accept their tax refund may have overlooked declaring rental income, freelance payments or capital gains. Others may have missed out on claiming valid deductions such as medical expenses, travel reimbursements or contributions to retirement annuities made after Sars’ data cut-off date.”
ALSO READ: Sars auto-assessments: What you need to know
The result of blindly accepting Sars auto-assessment
The result? A growing number of taxpayers may face additional assessments, interest and penalties, or have their tax profiles flagged as Sars conducts post-submission checks later in the season.
“It might clear at first and you might even get a refund. However, if Sars identifies a discrepancy later, even a minor one, they can reverse your refund, issue a new assessment, or initiate an audit. That is not something most people want to experience.”
What makes the issue more concerning this year is how seamless Sars made the process. Auto-assessed taxpayers receive an SMS or email stating they have received an assessment (ITA34). If the taxpayer agrees with the ‘original estimate assessment’ that appears in eFiling, no further action is required.
If the taxpayer disagrees, they must click the button to Request Return to open and complete a tax return. But TaxTim warns this convenience comes with responsibility.
“Just because it looks official does not mean it is complete. If Sars did not receive your medical certificates in time, or your retirement annuity contributions from July were not on file yet, or you earned income from an online gig that a third party did not report, it will not show up on the Sars system, but you are still expected to declare it.”
ALSO READ: Didn’t receive Sars auto-assessment notice? You can now file for tax return
Mistake from pension fund highlighted risks with Sars auto-assessment
Courtney-Clarke says this year’s risks are further highlighted by recent tax directive errors affecting pension fund data.
“A tax directive error by a certain fund caused some retirement lump sum transfers being taxed incorrectly. For affected taxpayers, this may result in a false tax debt appearing on their auto-assessment, showing the lump sum as taxable when it should not be.”
TaxTim has already seen cases where users left their auto-assessment unchanged and were later contacted by Sars for supporting documents or advised of additional tax due. Courtney-Clarke says while this can often be corrected, it creates unnecessary stress.
“It can also delay the finalisation of a return, especially if a taxpayer already spent a refund they were not entitled to.”
Fortunately, she says, there are ways to correct the situation. Taxpayers who do not agree with their auto-assessments have until 20 October to submit a corrected tax return. “Filing now, with accurate information, is the best way to avoid penalties, interest, or disputes later.”
ALSO READ: Haven’t filed your tax return yet? Here’s how to avoid mistakes