10 Tax Return Mistakes You Should Not Make
May 02 2019
Making mistakes on your tax return can cost you money: You may miss out on a larger refund than you claimed, wind up owing more taxes – plus interest and penalties – or invite a SARS audit. The best defense against these results is a good offense, such as avoiding errors on your return.
As unpleasant as preparing your tax return can be, you’re invariably better off taking the time to avoid mistakes. Check your return against this list of common errors before you send it off.
- Using The Wrong Filing Status:
There are five main filing statuses South African’s can use. The two most popular: “single” and “married filing jointly” are what you will most probably be looking at. The others are not well understood as of yet.
Single: You’re not married (as of the last day of the tax year) and don’t have any dependents.
Head of household: You’re not married but have a dependent.
Married filing jointly: You’re a married couple and choose to file one tax return for the two of you.
Married filing separately: You’re married but want to file your own return. In some cases, this can be beneficial, but joint filing is generally the better way to go.
Qualified widow/widower: If your spouse dies, you can still file as a married person in the year the death occurs.
- Choosing The Wrong Tax Professional
Choosing an under-qualified tax practitioner or one that is more focused on providing you with the highest refund without consideration of filing an accurate return could easily put you in trouble with SARS. The taxpayer will always be held liable for additional taxes and penalties for errors and fraudulent claims on a return.
Unless your tax return is simple and straightforward, taxpayers generally will be in a better position if they work with a credentialed tax professional. If you choose to hire a tax professional, do your research and make sure you work with someone who knows what they’re doing. Find out more about Setbooks Accounting.
- Not Using Write-Offs
Some may fear that a certain deduction is an audit red flag and shy away from it. For example, there continues to be a belief that claiming a home office deduction can trigger a tax audit from SARS. However, As long as you meet tax law requirements for a deduction, it’s wise to take it. Keep in mind, you can only take a home office deduction if you’re using the home office because you are self-employed. Employees of companies can no longer deduct unreimbursed home office expenses as a miscellaneous itemized deduction. Here are some more, although not all, write-offs you might not know you can take.
– Medical and dental expenses
You can deduct medical and dental expenses for yourself, your spouse and your dependents up to a certain amount.
– Tax preparation fees (if you’re self-employed)
Whether you do your own taxes or pay a professional to do them, you can write off the fees on your tax deductions list if you’re self-employed.
– Car registration fees (if you’re self-employed)
If you meet certain requirements, you might be able to include some or all of your vehicle registration fees in your tax deductions. If part of your registration is deductible, you must itemize your deductions.
– Work-related meals, entertainment, and gifts (if you’re self-employed)
Meals and entertainment expenses for business purposes are deductible up to a certain amount, and costs for gifts for business purposes can be deducted in total or in part, depending on the circumstances.
– Internet and Phone Bills (if you’re self-employed)
You can deduct your business phone, fax, and internet expenses. The key is to deduct only the expenses directly related to your business. If you have just one phone, you shouldn’t deduct your entire monthly bill, which includes both personal and business use. You should only deduct costs that specifically relate to your business, that goes for any business related equipment or resources
– Advertising (if you’re self-employed): Do you pay for Facebook ads, Google ads, a website or other marketing assets? The costs you incur to advertise your business are tax deductible.
– Subscription fees (if you’re self-employed).
You can and should claim back professional subscription fees to lower your tax bill as this is an important expense which is solely for business purposes.
- Not Saving Enough Money For Taxes
Are you guilty of waiting until tax time and then hoping you have enough money to pay for your taxes? If so, you may want to rethink this going forward. Putting aside money every year for your taxes is a smart move. Even though most companies will already take taxes out of a paycheck, it is important to still save a bit extra.
- Failure to File on Time or Request an Extension
The tax filing deadline for 2019 tax returns can be seen here.
For those who missed the deadline, you are still expected to file your outstanding tax return. Administrative penalties may apply.
Keep in mind that an extension of time to file your return does not give you an extension of time to pay your taxes. You’re still required to pay the tax due or face a late payment penalty. If your goal in requesting an extension is to get more time to come up with the necessary cash, you’re better off filing your return on time, paying as much as you can with the return, and setting up an installment agreement to pay off the balance.
- Ignoring Your Eligible Credits and Deductions
Claiming too many or too few credits and deductions is one of the biggest mistakes a taxpayer can make. Every year, many taxpayers attempt to claim tax credits or rebates that they are not actually eligible to take. That being said, do not be afraid to capitalize on all of the tax deductions and credits that you qualify to use.
- Not Declaring A Bank Account
If you declare on your tax return that you don’t have a local savings or cheque account at any bank in South Africa, and this statement is incorrect, you may be liable for an administrative penalty. Always be honest with your tax return submissions because SARS does not take false statements lightly.
- Not Declaring Income That Has Already Been Taxed
Many taxpayers leave out their additional income thinking that because it was taxed by the person paying them, that they do not need to declare this. SARS still requires that you declare it.
- Neglecting To Update Your Records At Home Affairs
SARS checks your date of birth, ID number and passport number with the department of home affairs, which is the official register of all identification information. Ensure all your information is up to date at home affairs to avoid not getting a tax refund and errors with your returns.
- Not Fixing Your Mistakes/Errors Once You Notice Them
If you made a mistake on your tax returns, you should correct them immediately. If you added in a number you shouldn’t have or made a mistake when filing, you should file for a “Request For Corrections” with SARS directly. More information on how to do that can be found here:
Errors can be the difference of not receiving a tax refund or paying a large penalty. It can even lead to an audit. Rather be safe than sorry review your return carefully before submitting it.
This article is for information purposes only and you are advised to seek professional advice from your own accountant as your individual situation will vary.