Tax Law in Action – Employers’ Tax Obligations

Tax Law in Action – Employers’ Tax Obligations

It unfortunately often happens that employers do not comply with their employees’ tax obligations.

Typically these employers do not issue IRP5’s, often leaving the employee in a precarious position when he/she needs to file their tax returns. What to do?

Simply put, the employee needs to declare his/her salary on the tax return and for most part, it appears SARS is not too worried about that. The problems normally start when the employee wants SARS to take into account employees’ tax withheld by the employer (bear in mind that only disclosing the nett amount paid to the employee would constitute an omission of income, should give rise to a USP and would be unlawful).

If there is no IRP5 this can be problematic. In a recent case we dealt with, the employer withheld employees’ tax but there was no IRP5 to be found anywhere and further still, it transpired that the employer did not even pay the PAYE to SARS. We successfully resolved the case by providing payslips reflecting the withholding of PAYE backed up by a bank statement showing the nett amount deposited in the bank account coupled with the employment contract indicating the gross salary as well as increase letters. Whilst SARS may not like granting a PAYE credit if they never received it (and understandably so), it is, unfortunately for SARS, not the employees’ problem.