South African employers are reminded of the need to comply with SARS’ Employer Reconciliation Process and submit an employer reconciliation declaration and an interim Employee Income Tax Certificate for the six-month period 1 March to 31 August 2018.

For some businesses, the task is substantial – overwhelming even – because they are aware of the numerous steps involved that have to be taken to ensure full compliance and accuracy. These are non-negotiable for SARS and make all the difference to the end result.

Employers must submit reconciliation declarations (EMP501) in respect of the EMP201 submitted, payments made and the IRP5/IT3(a)certificates for 1 March to 31 August (interim period) and 1 March to 28/29 February (annual full tax year period).

HR and HCM services and solutions specialist CRS Technologies says for SARS, the Employer Reconciliation Process is part of its modernisation and alignment process with international best practice.

Fortunately for the market, CRS is a highly experienced services provider and outsource partner, and has devised a guide to reconciliation.

The company says according to SARS reconciliation involves matching all tax due with all tax paid and cross-checking these against the total value of all tax certificates used.

“These three amounts should be equal,” says SARS, and the process only relates to the tax paid.

8 steps to reconciliation: –

Step 1: First determine the total income of each employee for the period in question and recalculate the tax based on that amount.  IRP5 certificates will reflect all relevant details.

Step 2: Determine if there are any differences between recalculated liability (according to tax certificates) and that which was previously declared in EMP201 forms.  Also determine which months these differences occurred.

Step 3: All relevant demographic information must be captured/ recorded in the Business Information and Contact Details sections.

Step 4: Make sure to answer the question related to ETI (Employment Tax Incentive) – if yes, the ETI containers will be populated on the EMP501 form.

Step 5: Capture and record all fields related to PAYE, SDL and UIF, using revised figures in the Financial Particulars section on the EMP501.

Step 6: Capture and record the actual monthly payments made in respect of PAYE, SDL and UIF – but excluding payments made in respect of interest and additional tax.

Step 7: Calculate totals and difference fields. It is calculated automatically and will indicate a difference (if any) while capturing the totals on the electronic declaration.

Step 8: SARS explains directly: “When settling any shortfall reflected in the reconciliation, the payment must be allocated to the period(s) in which the shortfall occurred. If the relevant period cannot be determined, the payment should be allocated to the last active period within the transaction, which is August (interim) and February (annual).”