15 TAX TIPS FOR INDIVIDUALS
I recently heard a very true statement – “There are only 2 certainties in life. Death and paying taxes. You can’t do anything about death, but you can certainly plan your taxes.”
If you are using a registered tax practitioner be sure to enquire whether they are registered with a controlling body such as the South African Institute of Chartered Accountants or the South African Institute of Taxpayers.
The 2018 tax season is just around the corner opening on 1 July 2018. And as you should be aware of by now is the tax season was shortened with 3 weeks this year therefore the deadline is 31 October 2018.
It is therefore crucial that you plan your 2018 tax season and here is a few tips that you can use
- Open a folder on your computer that is allocated specifically to income tax. In that folder open separate folders for the different tax years. As soon as you receive a tax certificate of any kind go put it in that folder. When the time comes to do your return all your information is therefore easily obtainable, and you don’t have to scramble to search for outstanding documents.
- Make a list of all the items that are included in your annual tax return and check them off as you go along before you even log on to e-Filing. This way you will ensure that everything that was included in your prior year tax return will be included again, except for where a certain item is not applicable anymore. Then you can also indicate it as such. Just remember to also add all the new items that may be applicable this year that was not applicable in the prior year.
- Keep your medical tax certificate. Once you receive your medical tax certificate from your medical aid go put it in your tax folder. Also, remember about those qualifying medical expenses that were not claimed from your medical aid seeing as those are also tax deductible. Ensure that you keep all the invoices/slips and prepare a schedule which summarises the total of these expenses. Qualifying medical expenses include:
- Doctors visit paid in cash and not claimed from the medical aid
- Prescription medication paid in cash and not claimed from the medical aid
- Hospitalisation paid in cash and not claimed from the medical aid
- Home nursing or a midwife paid in cash and not claimed from the medical aid
- Qualifying expenditure prescribed by the Commissioner as a result of physical impairment or disability
- As soon as you receive your tax certificate from a bank, investment house or charity go place them in your tax folder. These will include IT3(b) interest certificates, IT3(c) capital gains/losses certificates and S18A donation certificates.
- If you receive a travel allowance be sure to keep a logbook of your travels, splitting between business travels and private travel. Remember traveling between your home and work is classified as private travel.
Also, keep a record of the following as you will need it when completing your tax return:
- The cost price of the vehicle
- The opening kilometers on 1 March
- The closing kilometers on 28/29 February
- The vehicle make and model
- As stated above the business kilometers traveled
- Supporting documents of expenditure actually incurred if you wish to claim the actual expenditure, otherwise, a deemed deduction will be calculated by SARS based on the fixed rate table
- Remember to keep separate logbooks for different vehicles if you changed vehicles during the year.
- If you have received any dividends during the year you will also get a tax certificate from the applicable financial institution. Place this certificate also in the tax folder.
- If you owned a property prior to 1 October 2001 and you sold that property in the tax year be sure to have the valuation certificate available in case SARS asks for it. This valuation will be used as part of the base cost to determine the Capital Gains Tax paid on the sale of the property.
- If you sold any other capital assets be sure to have supporting documents for the proceeds and the base cost (purchase price) for accurate calculations of Capital Gains Tax.
- If you received income from a side business of which you are the sole proprietor, remember to keep a record of all income and business-related expenses to include in your tax return.
- If you received income for the letting of property remember to keep a record of all income and deductible expenses incurred such as:
- The interest portion of the bond on the property
- Insurance for the property
- Any repairs and maintenance are done on the property
- Accounting fees
- Agency fees
- Depreciation
- Rates and taxes (electricity is not deductible)
- Levies
- If you received any distributions from a trust be sure that you know in which form that distribution was seeing as you are taxed on that distribution in the same form in which the trust received it, for example, if the trust distributed interest they received to beneficiaries, the beneficiaries will be taxed on that amount as if it was interest that they received in their personal capacity.
- If you made contributions to a retirement annuity fund or a pension fund be sure to also put those tax certificates in your tax folder as a portion of those contributions are tax deductible.
- Your employer will upload your IRP5 to SARS and it will therefore be on your e-Filing return when you are logged in. Your IRP5 details your employment income and deductions as well as the PAYE paid. Check all the income and deductions on your IRP5 to ensure that it is correct.
- When completing your income tax return be sure to be very careful with the information you are including. Double check that all information is correct against any documents you have. SARS can penalise for errors they call, “failure to take due care” in completing one’s return. The penalties can be up to 50% or even 100% of the tax effect of the error in some cases.
- Ensure that your details with SARS are correct especially your banking details. If your banking details are not correct you will need to go into a SARS office to verify the correct banking details.