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| Tax tips for under 25s | 12 July 2010 | |
| Steven Jones - www.moneywebtax.co.za | ||
| Things about tax I wish I knew when starting out… PIETERMARITZBURG - Isnt it strange how there are some areas of life where we spend years in training, while there are others where we are expected to ""just know"". For example, while one spends 12 years at school followed by anything between three and seven years in tertiary education to enter a profession, precious little time is spent learning valuable life skills, such as relationship building, managing ones finances, or - the subject of this article - how to deal with the tax man. And whether we like it or not, all of us are going to have to deal with the South African Revenue Service (Sars) sooner or later. As Benjamin Franklin once famously said, there are two certainties in life: death, and taxes. Both are unpleasant - and both need to be prepared for. So over the next couple of weeks, a series of articles will be examining how to prepare for the ""great inevitable"" - paying tax. Registration as a taxpayer The first thing that a young person starting out in their first job needs to get sorted out, is the not-so-little matter of being registered with Sars as a taxpayer. This is especially important that Sars has now made it compulsory for all employees to be registered. Gone are the days where one could put off registering because they ""dont earn enough"" - as from the tax year ending 28 February 2011 (which is now), everyone has to be registered as taxpayers. The process itself is simple enough - complete the IT77 form, attach a certified copy of your ID book, confirm your banking details by means of an original cancelled cheque or letter from your bank, and provide proof of residence (utility bill, Telkom account, etc), and drop it all off at your local Sars office. Provisional tax The next question is whether or not one should register as a provisional taxpayer. This is a separate registration to that as an ordinary taxpayer, and applies only to those taxpayers who receive taxable income from which employees tax is not being deducted. Such income includes interest in excess of the exemption threshold, rental income, and other business / trade activities. If your income comes only from sources where PAYE is being deducted and paid to Sars on your behalf, you are not required to be registered for provisional tax. Such registration would normally entail submitting a provisional tax return twice a year (in August and February). However, a recent Sars press release has relaxed these rules somewhat, in that you are no longer required to submit a provisional tax return if your calculations result in no tax being payable. This usually applies in cases where, for example, your salary income has PAYE deducted from it, and your rental property is still at the loss-making stage. However, if you have failed to submit provisional returns and you end up in a ""due by you"" situation on assessment (ie, where the amount of tax deducted / paid is less than your final tax liability), Sars will still be entitled to levy interest and penalties on the shortfall so make sure all your calculations are accurate before deciding not to submit a provisional return. | ||
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