An individual taxpayer was employed in 2020 and PAYE was withheld each month. The employer did not give the employee any IRP5s and has now been liquidated. The IRP5 is not populating on the individuals tax return on e-filing. Please advise as to what can be done with regards to completing the taxpayer’s tax return?
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
Each individual has an obligation to submit a return of income and declare the income, from employment in this instance, therein. SARS won't provide the taxpayer, the employee, with a populated return nor process the return until the IRP5 tax certificate information from the employer is received by SARS - the employer reconciliation provides this information to SARS. The individual can capture the information on the return, on e-filing and will have to declare the gross amount of the remuneration – this could be obtained from the pay slips or the employment contract. We accept that the employer was, or is, registered as an employer with SARS and that the employee’s tax was actually withheld (deducted from the amounts paid to the individual), and was (or was not paid) to SARS. If it was, the employer is liable to pay the amount – as withholding agent. See section 157(1) of the Tax Administration Act: “A withholding agent is personally liable for an amount of tax withheld and not paid to SARS …” In addition, the employer may be guilty of an offence – see section 234(p) of the Act - irrelevant to your client. The employer also failed to provide the individual with the IRP5 and would not have submit the annual employer reconciliation (EMP501). It would only be from the pay slips that the employee would be able to prove that the employees’ tax was in fact withheld. If there were no pay slips, the individual will have to start with the gross amount (probably obtained from the contract of employment) and reconcile that back to the amounts paid into the individual’s bank account. The problem is that SARS, because no employer reconciliation was submitted, will not be able to verify the information and will request the individual to do so. These scenarios often end up in dispute, but the individual may be correctly assessed in the end.