With tax season that opened on 1 July, it is important that employees are financially educated about their income tax and what is required from them.
Paying income tax can be a frightening journey; from understanding how much you owe in income tax to knowing how to file a tax return and who to speak to if you need expert advice. As an employer, you will therefore spare your employees a lot of time, effort and headaches if you financially educate and guide them through the process.
Here are a few important facts your staff needs to know about managing their income tax:
The reason why we have to do a tax return: Every month a specific tax amount is deducted from your salary. This amount may change due to fluctuations in your salary such as bonuses, commission, travel allowances etc. At the end of the year, you thus need to make sure that you are paying tax at the correct rate for your annual total – which means you might have to pay money back to or receive a refund from SARS.
In addition, there might also be expenses that you incurred during the respective tax year, that are ‘tax deductible’ and can therefore be deducted from your total taxable income. These include, among other things, medical aid contributions and retirement annuities. You don’t have to do a tax return if you earn less than R350,000 a year, but remember that you can’t get a tax refund if you don’t.
How to file a tax return: Your first employer will register you for income tax with SARS or you must register yourself. In order to do so you will need to go to your nearest SARS branch with your ID book and proof of residence. You will then receive an income tax number, which you will use to register for e-Filing – this is the platform where you file your tax return electronically (www.sars.gov.za). As you will be registered with SARS already, all your details will appear on your e-Filing document.
How does paying income tax work? Employers should deduct Pay As You Earn (PAYE) from their employees’ salaries each month. Income tax on your salary is thus paid to SARS by your employer on your behalf. Your employer will annually issue an IRP5 document, which you will use to compare with the information on your tax return.
If you have any other sources of income – such as rental or interest earned on investments – you will have to declare those to SARS when you do your tax return. After your return has been assessed, you may have to pay additional tax to SARS, who will then inform you of their banking details, or you may receive a tax refund.
When do I file my tax return? Tax season for individual tax returns runs from 1 July to 31 October 2018.
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Adopted from: https://www.1life.co.za/blog/10-things-you-need-to-know-about-tax-returns
Here are other interesting blog articles to read: How financially well are your employees? or How to manage your finances responsibly