IRP5’s and IT3(a)’s are generally referred to as “tax certificates”. An employer is required by law to produce these certificates under certain circumstances :
-An IRP5 is to be given to an employee when that employee terminates his service with the employer, and an IRP5 must also be provided to all employee’s at the end of each tax year. A copy (electronically these days!) of ALL IRP5’s produced during the year as well as at year end must also be submitted to SARS within 60 days of the tax year end. An IRP5 is used in respect of employees from whom tax has been deducted by their employer.
-On the other hand an IT3(a) is used to report earnings of employees from whom tax has not been deducted. As with the IRP5 it must also be given to an employee who leaves the company during the tax year as well as to all employees who have not had tax deducted within the tax year.
IRP5’s…
IRP5’s are official tax certificates used to record an employees taxable earnings and deductions and any tax that has been deducted from their income. You are supposed to (by law) provide an IRP5 to an employee that has left the company, within 14 days of his leaving. This is normally a hand written (i.e. manual) IRP5, and the information on this manual IRP5 must also be stored within your payroll software together with other terminated employees’ IRP5’s. These IRP5’s are again produced at tax year end with all other live employee’s IRP5’s. An IRP5 must have a unique reference number so make sure that the number you write on the manual IRP5 is the same number you use when you store the IRP5’s in your computerized payroll system. If you don’t, the employee will have a problem when he submits this manual IRP5 with his annual tax return as the reference number you provide to SARS for the employee at tax year end won’t match with the employee’s actual IRP5.
Cancelled Certificates - Certificates must be cancelled if the information thereon is incorrect. A new certificate, with a new number must be issued. SARS must immediately be notified in writing if an incorrect certificate was issued and needs to be cancelled.
Ceasing to be an Employer - Where the employer ceases to be an employer, all IRP5 certificates must be submitted within 14 days of the date on which the employer ceases to be an employer. The Electronic IRP5s submission must include the IRP501 reconciliation (not a IRP511).
Duplicate Certificate - If a certificate is lost by an employee, a reprint of the original certificate must be done – the same IRP5/IT3(a) number will therefore be used.
Issuing of IRP5s - An IRP5/IT39A0 certificate must be printed (original only, no copies required) and handed to the employee. This must be printed in black ink on A4, A3 or standard size white computer paper. The certificate must contain all the information as required.
Rejection / Validation of Electronic IRP5s - Validation test will be done and will be rejected if it contains a virus, if the disk cannot be read or if the totals do not balance.
Where the disk is rejected, it will be returned to the creator of the file together with an error report containing the reasons for rejection. A new IRP501 must accompany the new disk that is submitted.Retaining Electronic Copies - An electronic and a physical copy of the IRP5s must be kept for 5 years.
Submission of Electronic Media - The electronic media must be submitted as soon as possible, but not later than 60 days after the end of the tax year or within 14 days if the employer ceases to be an employer.
An IRP501 reconciliation must accompany the electronic certificates.IF IRP5 and IT3(a)’s are combined onto one electronic file, bothe the IRP5 and IT3(a) must form part of the IRP501 reconciliation and the number ranges of IRP5 and IT3(a) certificates issued, must be filled in on the IRP501 reconciliation.
Stiffy’s and CD’s can be submitted to any SARS office.
IT3(a)’s…
As mentioned, these tax certificates are for employees for whom no tax has been deducted. The reasons for no tax being deducted could be :
-The employee’s rate of earnings is below the tax threshold,
-The employer is a private company, and the employee is a director of the company,
-The employer is a CC (i.e. Close Corporation) and the employee is a member of the CC.
-A written directive has been received from the Receiver instructing you not to deduct tax from that specific employee.
Casual Employees and IT3(a) Returns
IT3(a) returns must be made out for all employees from whom no tax has been deducted, unless an employee’s rate of earnings is below R6,000 per annum. This exemption, however, does not apply to director’s fees, which must always be reported, regardless of amount.
However, an employer must submit a list of all such low-paid employees instead of making out an IT3(a). The IT3 form, which gives instructions regarding the circumstances under which IT3(a) forms must be made out, specifically states that :
“These returns need not be rendered in respect of … remuneration or the annual equivalent thereof, which does not exceed R6,000 for the tax year, excluding director’s fees”.
This could mean – don’t bother about returns for these low paid employees. But on the next page of the return, there is an instruction which says :
“Where employees tax has not been deducted from the remuneration paid to an employee and an IT3(a) return has not been issued in respect thereof, the employer must furnish the Receiver of Revenue with a list, in alphabetical order, in which the necessary information in respect of each individual is reflected:”
It may well be easier to produce IT3(a)’s for all employees, rather than produce a separate list for some of them. This seems to be legal, as the instruction (as quoted above!) says that ‘these returns need not be rendered”. This presumably means that you can send in the returns if you want to. However, the official response from SARS head office is that the forms or a list must be supplied.
As IT3(a) forms submitted to SARS (whether electronic or manual) are subjected to validation by their computer. If certain mandatory particulars are missing, (which is very likely with regard to the casual labourers where not all information is known) the return by the employer will be rejected.
This is unacceptable as it leads to employers potentially breaking the law, simply because it is impossible to comply with it. SARS will eventually devise a practical ruling in this regard. Until such time, each employer will have to decide whether or not he will break the law with regard to submitting IT3(a) returns for casual employees who :
-earn less than the tax threshold;
-are illiterate; and
-cannot supply the employer with the information required to comply with the law.
MonthlyReturn…
Form IRP201 is used to record tax deductions made from employees earnings on a monthly basis. Payment of these taxes to the Receiver must be made within 7 days of month end. The report does not have to detail each employee and their tax deducted from the month – it only needs to have the summary (i.e. total) of all tax deducted for the month.
Copy of Tax Certificates…
At the end of each tax year employers must submit copies (either electronically or manually!) of all IRP5’s produced for discharged employees during that tax year together with IRP5’s for all current employees. This information must be provided to the Receiver’s office within 60 days of the tax year end. Employers that have genuine problems with producing this information within the 60 day timeframe can request an extension.
AnnualTaxReconciliation…
When copies of all employees tax certificates have been submitted to SARS, it is also necessary to submit form IRP501, which reconciles the total employees’ tax paid to SARS on a monthly basis with the total tax deducted as reflected on the tax certificates.
Form IRP501 is sent to employers automatically by SARS at the end of the tax year which will reflect the amount of tax paid to SARS each month together with a total for the year.
Employers must enter the total amount of tax deducted as reflected on the copies of tax certificates submitted to SARS, and must provide a written explanation for any difference between this total and the total amount paid in during the year.
It is not necessary to perform such a reconciliation for IT3(a) forms (which are issued in respect of employees from whose earnings no tax has been deducted). These forms are not numbered, and cannot cause tax to be refunded to an employee.
Directives…
Directives are official instructions from the Receiver pertaining to the method of taxing an employee which is outside the norm (i.e. a fixed percentage on all earnings or, a bonus, or a retrenchment payout). If you are going to deviate from the normal tax tables ALWAYS make sure you have a written and appropriately authorized Directive from the Receiver. If you don’t and there is any sort of “comeback” the Receiver will hold you as the employer liable for any shortfall in tax due by the employee.
The Receiver would normally issue a Directive as a result of being approached by an employee who requests to pay less tax on an amount of money received. There could have been expenses incurred as a result of the employee generating this income, or some other reason that would cause less tax to be calculated on this amount when a tax assessment is done at year end. In this instance the Receiver would review the circumstances and work out what the employee would be liable for at assessment time and adjust the tax due on that income accordingly.
Lost Forms…
If an employee loses his original IRP5 or IT3(a) the employer must make out a duplicate and supply this to the employee. Where an electronic certificate is being replaced, a reprint of the original certificate must be reproduced and in such instances a manual IRP5 cannot be used (this is according to the SARS manual!). This is confusing so, if it is not possible to reproduce the electronic IRP5 - write out and issue a manual IRP5. (make sure you put the correct reference number on the IRP5!).
Regarding a lost IT3(a) - things are a little more tricky. You see, the IT3(a) is supplied on preprinted stationery with the certificate numbers already printed on the form. So, the certificate number on the replacement IT3(a) is not going to match up with the one originally supplied to SARS electronically.
Right now we don’t know the answer to this so watch this space. In the meantime we suggest you write the original certificate number on the manual form and also detail what you have done in a covering letter.
At tax year end…
If you are using a computerized payroll system (like PSIber PAY!) IRP5’s and IT3(a)’s will be correctly produced for you at the appropriate times. If you are manually preparing your payroll then you will need to fill out these certificates by hand. Instructions on how to do this can be found in “IRP10 Guideline for Employees Tax” issue by the Receivers office. This publication is issued to all registered employers once a year.
A few final comments…
During the 1998/1999 tax year employers were prohibited to issue tax certificates to employees when they left the company (exceptions were made in cases of death, emigration and insolvency). Employees could only be given these certificates at tax year end because the format of the certificates had changed and the new certificates were not available from SARS until February 1999.
As from the 2000/2001 tax year the existing rule of providing an employee with a tax certificate 14 days after termination will again apply.