As individuals gear up for the 2024 tax season, many have access to a wide range of self-help guides and the convenience of auto-assessments, making it easier to prepare and file their tax returns accurately and efficiently.

But what about small and medium businesses without the luxury of having tax accountants on call?

In this article, we provide essential tips to assist any business in preparing and filing tax returns.
We also explain the key differences between a SARS verification and an audit after filing your tax returns.

Tips for filing tax returns

Below we have listed some top tips that can assist your small business in preparing for your provisional tax submission as well as your yearly final tax submissions.

Be Proactive:

• Organize Financial Records: Keep your financial records organized and easily accessible. Use digital tools to scan and store documents to prevent loss or damage.

• Regular Reconciliation: Regularly reconcile your accounts to ensure all transactions are accurately recorded and discrepancies are promptly addressed.

• Tax Compliance Calendar: Maintain a tax compliance calendar to keep track of all key tax dates and deadlines such as VAT, PAYE and Provisional tax payment dates. This will ensure that you never miss an important filing.

• Pre-Submission Review: Conduct internal audits or pre-audit reviews periodically to identify and rectify potential issues before they attract SARS’ attention.

• Tax Consulting Services: Engage with tax consultants periodically to review your tax strategies and ensure compliance with current tax laws and regulations.

• Audit Trail: Maintain a clear audit trail for all financial transactions, including documentation of approvals and authorizations.

   

Effective Communication

• Professional Correspondence: Ensure all communications with SARS are professional and timely. Use clear, concise language and provide all requested information promptly.

• Detailed Responses: When responding to SARS verification or audit queries, be detailed and thorough. Provide supporting documents and explanations to clarify any points of contention.

• Record of Communications: Keep a record of all communications with SARS, including emails, letters, and phone calls, to refer back to if necessary.

   

Expert Guidance

• Stay Informed: Stay informed about the latest tax regulations and changes in tax laws. Attend workshops, seminars, and training sessions to stay updated. SARS has a variety of articles indicating all updates and giving tips from SARS to assist in filings. SARS also has a YouTube channel which has helpful videos that makes staying informed easier in our current digital world.

• Hire Specialists: If your business has complex tax structures, consider hiring tax specialists who have experience with similar cases. These include accounting firms, tax lawyers and registered tax practitioners.

• Continuous Learning: Encourage your accounting team to pursue continuous professional development to stay abreast of the latest best practices in tax compliance.

Post-Submission Actions

• Post-Submission Review: After the submission of taxes, conduct a thorough review to understand the parts of the filing that was uncertain to you and implement recommendations to improve future compliance.

• Address Findings Promptly: If there was a verification or audit lodged on one of your returns, address any issues raised promptly to prevent recurring problems in subsequent audits/verifications.

• Update Procedures: Update your accounting and tax procedures based on verification/audit findings to strengthen your financial controls and compliance measures. 

Legal and Ethical Compliance

• Ethical Standards: Adhere to high ethical standards in all your financial dealings. Avoid any practices that could be considered tax evasion or fraud.

• Professional Counsel: If you encounter significant issues during the an SARS audit, consider consulting registered tax practitioners, accounting firms or legal counsel to understand your rights and obligations.

SARS verifications and audits

In addition to the tips above, another way in which you can remove stress from your tax filing is understanding the SARS verification and audit process:

Being selected for an audit or for verification are separate processes.

Refer to the key differences and actions below:

What is it?

Verification means that SARS checks the information that the taxpayer gives in a declaration or tax return. SARS compares this information against third-party data, financial and accounting records, and other supporting documents. Through verification, SARS ensures that the taxpayer’s declaration or return is fair and accurate. Once you have submitted your declaration or return, SARS can choose to verify these documents.

In an audit, SARS examines your financial statements, accounting records, and supporting documents to check that you correctly declared your tax position. If the taxpayer did not file a declaration or tax return, the audit will investigate if the taxpayer’s actions comply with tax law.

Who can be selected?

Any taxpayer can be selected for a verification or an audit.

What should you expect?

Verifications:

SARS will notify you if they would like to verify your return or declaration. SARS attempts to verify your information within 21 business days after you have uploaded the requested documents. During this process, SARS can ask you to upload more information.

If you have a refund due, it will be paid only after verification. If SARS finds that your tax declaration or return is incorrect, they may issue a revised assessment. SARS can also levy penalties if we find that you have understated the amount of tax you owe.

Audit:

SARS can audit you even after they have done a verification on your tax profile. A notification that SARS referred you for an audit does not mean that the audit has begun. Your audit officially begins when SARS sends you a Notification of Audit letter, which states that your audit has been allocated to a specific auditor.

What steps must the taxpayer take?

Verifications:

• Read SARS’s verification letter, which lists the information that you must provide.

• Upload documents on eFiling.

• Remain aware of the allowed document formats and file sizes.

Audit:

• Read your Notification of Audit letter and note the contact details of your SARS auditor.

• Upload documents on eFiling.

• Remain aware of the allowed document formats and file sizes.

What can you expect when the verification/audit is complete?

Verifications:

Once SARS has finished verifying your information and found:

• No issue with your tax position, they will send you a notification through eFiling, post or email that your verification is complete.

• A discrepancy, they will issue a Notice of Assessment based on the revised assessment through eFiling, email, or post.

• Financial risk posed by your tax position, we will issue a Referral for Audit Letter through eFiling, email, or post.

Audit:

If SARS finds no issue with your tax position, SARS will give you a Finalisation of Audit Letter through eFiling, email, or post to conclude the audit.

If SARS finds that your tax position should be adjusted, within 21 business days they will issue an Audit Findings Letter which explains the grounds for the proposed assessments. SARS will give the taxpayer at least 21 business days to respond to the Audit Findings Letter.

Who can be selected?

If you disagree with SARS’s findings you can lodge an objection with the necessary support.

In the case of an audit or verification notice lodged by SARS, we encourage the following behaviours to assist in getting the query resolved promptly and with efficiency.

• Transparency: Be transparent and cooperative during the audit process. Honesty can help build trust and may result in a smoother audit experience.

• Professional Demeanour: Maintain a professional demeanour during interactions with SARS auditors. Avoid confrontational or defensive behaviour, and instead focus on resolving issues amicably.

• Clarifications: Do not hesitate to ask for clarifications if you do not understand any part of the audit process or specific requests from the auditors. If you do not want to speak to SARS about clarifications, hire a registered tax consultant to assist you with this particular situation.

Conclusion

By following these additional tips and understanding the difference between verifications and audits as well as your rights and obligations, you can increase your chances of a successful and stress-free SARS tax season for your business.

Still not sure about all the tax requirements? Contact our team for guidance to help you make an informed decision.