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5 Tips for Taking on Income Tax
Looking for some tax law tips to ensure you’re ready when it’s time to fill out your income tax return?
Paying income tax is unavoidable, but the good news is if you approach tax season with all your documents in order, the process is pretty painless, and could even see you getting some money back at the end of the day.
In the UCT Tax Law online short course, you’ll walk away with the ability to confidently handle the ins and outs of South African tax law, and be certain of your legal requirements as a taxpayer.
In the meantime, here are five simple tax law tips that will ensure you’re prepared when it’s time to fill out your income tax return:
1. Keep a record of everything
- Travel allowance: if you receive a travel allowance from your employer, keep a log book in your vehicle so you can declare it on your income tax return. Make copies of the log book because there’s a chance that even three years later, SARS could demand proof of business travel expenses.
- Valuation certificate: if you bought a home, always be sure to have the valuation certificate readily available. It’ll be used by SARS to ascertain the Capital Gains Tax paid on the sale of the property.
- Side business expenses: if you do freelance work or run a side business, including renting out property, ensure you keep any records of income and business-related expenses.
2. Ensure accuracy of your documents
When you include any sort of documents attached to your income tax return, ensure all the information is accurate. If it isn’t, SARS can penalise you for “failure to take due care”. These penalties can amount to 50% or 100% of the tax effect of the error.
3. Get hold of your IRP5
An IRP5 is a document detailing your employment income, deductions as well as the PAYE tax already paid by your company. Your employer should give you your IRP5 at the beginning of June so you can compare it to the one submitted to SARS. If you don’t have it by the end of July, you have a right to demand it from your employer.
4. Make sure you get your money back
Do you use a personal computer or cell phone for work purposes? Do you have medical expenses that medical aid didn’t cover?
If you answered yes to either of the above, you can claim some of this money back from SARS.
In terms of personal items you use for work purposes, you can write off a portion of the value of this item over a set number of years, and this amount qualifies as an income tax deduction. Don’t forget to ask your employer for a letter confirming you’re allowed to use these assets for work.
With regards to medical expenses, add up all the money spent on prescription medicine, or doctors visits, and ensure you declare these on your income tax return.
There are a number of other things you can claim deductions on, that include: medical aid contributions not covered by your employer; a retirement annuity contribution; and donations to certain public benefit organisations. Just remember to keep proof of the above contributions and to fill them out when completing your income tax return.
5. Don’t overlook passive income
Have you earned an income passively on things such as interest, dividends or capital gains? Ensure you get an IT3b and IT3c tax certificate from your bank or investment house so you can declare this income when submitting your income tax return.
Ready to take your tax law knowledge even further?
Learn more on the UCT Tax Law online short course today.