Employer's responsibility to deduct correct PAYE

[dellatjie]

Hi guys,

I have a question regarding the responsibility of the employer to deduct the correct PAYE:

I have a client who earned a salary alone from the employer. He does not have a medical aid, pension fund or RAF, therefore there is no reason he should pay less PAYE per month.

His employer simply paid 25% less PAYE over than he should have.

Should the employee be held responsible? Something in the back of my head tells me that it is the employer's responsibility to pay over the correct PAYE, and should the employer not have deducted sufficient PAYE, it is the employer's responsibility to rectify the situation?

Your help will be appreciated!

[Christel]

Hello Dellatjie,
As far as I know is it the Employers responsibility to make sure the tax is correct. The employer does calculate it, but the taxpayer needs to verify it.

In your case I would suggest that the employer rectifies it with SARS: issue a new IRP5 (if this was for a prior year), revise the Feb emp201 with the amount.
The employee & employer can then arrange a "loan" repayment between them so that the extra PAYE can be deducted off his salary monthly until settled.

Something else:
I stumbled across this very interesting article on the internet: http://www.saica.co.za/integritax/20...t_pay_SARS.htm which talks about the paye not been paid over to SARS by the employer.

[Dave A]

In your case I would suggest that the employer rectifies it with SARS: issue a new IRP5 (if this was for a prior year), revise the Feb emp201 with the amount.
The employee & employer can then arrange a "loan" repayment between them so that the extra PAYE can be deducted off his salary monthly until settled.

Just giving the employee a loan to pay the assessed shortfall would amount to much the same thing from a financial point of view.

Kinda curious as to how the employer got to the wrong deduction in the first place. Any chance of finding out?

[dellatjie]

I'm working on finding out.

Obviously it's a sensitive matter, as the employee is still working for named employer and intends on staying there..

[Christel]

We have cases like this often. Sometimes the PAYE deduction from the employees was too much (most of the cases) so this is easy to fix. But in cases where there was none deducted or too little, then I correct it on behalf of the employer by declaring the correct figures to SARS. We advise the employer to deduct the amount off the employees wage. I.e. if the PAYE was short by R2000 it might not be a lot for the company to pay in, but to a normal wage earner R2000 is a lot of money to take off in one go. If he was paying it in on assessment he would only get 30 days to pay, whereas taking a "loan" from the company he can pay off over 10 or 12 months. Hope this makes sense Dave?

[Dave A]

Just massaging the issue to explore options and issues, Christel.

My thought/concern is amending historical EMP201's, IRP5's and recons might attract penalties and interest on the shortfall actually paid over that emerges with the change.

If this is the case, financing the employee to settle the shortfall timeously after assessment becomes the preferable route forward for the employer.