Coming clean with SARS

[apprepcen]

I have had a small - very small - business for 10 years. I could not afford an accountant to do my books and subsequently have not payed Income Tax for that time. My conscience is bothering me now and I want to come clean with the Tax man. What are the chances of me ending up under a bridge doing that. Will they sequestrate me? Getting a job at my age is a big problem in this country.

They have an amnesty at the moment, should I apply for that? How do they decide on the amount of money in back taxes that has to be paid?

Good advice will be appreciated.

Thank you.

[Dave A]

The current amnesty means no penalties and interest, but SARS is still expecting the tax that would have been due.

Out of interest - There was a small business amnesty a few years back that would have worked really well for you. Why didn't you come clean then?

[apprepcen]

I should have, but it was and still is a situation where cashflow was extremely tight. and it was like that all these years. I almost lost my house quite a few times (3 or 4) during the 10 years, then family lent me the money to get up to date with the bank. The cost of record keeping seems prohibitive. It is literally a situation that if R200 comes in that day, it goes towards groceries. So there is no working capital. I keep asking myself why I carry on like this and the answer is that it is better than standing on a street corner.

Something has to change now, that is why I want to get my tax affairs in order.

[Dave A]

I expect many of us can relate with the "money has always been tight" situation.

About the best encouragement I can give is that SARS is reasonably accomodating for people that come forward (as opposed to people they have to hunt down) and will be more interested in regularising your tax affairs going forward than punishing you for past transgressions. And they'll take instalments once your liabilty is established.

Just how far back they will want to cover I don't know. I suspect their level of curiosity about your earning history will be affected by just how much in assets you might have accumulated while off the radar.

[AndyD]

Problem is going to be if there's no books and you were working cash in - cash out then your assets will be the only indication of your income. If you don't have assets or if your family/wife was earning and contributing towards the house then I don't see how you're going to 'come clean'. Is this purely a conscience thing or are there other issues at play? What ballpark income are you talking about and over what period? What prompted the sudden will to come clean?

[apprepcen]

The income was about R5000 per month over a 10 year period. Sometimes less, sometimes a bit more. It is my conscience bothering me and when I look at the bigger picture, there might come along opportunities that require a tax clearance certificate. I have passed up a few of those over the years, but in retrospect, it was not the right thing to do. So if there comes another opportunity, I want to be able to take it. There are no real assets that accumulated, just a dillapidated old house, bought 10 years ago when I was still young and full of energy.

[BusFact]

Forget the accountant for now. Are you not able to come up with some figures of your own. What were your sales each month? What were your expenses each month (do you have documents to prove this)? What amount of these expenses were paid to yourself or for personal expenses, which effectively means they were a salary?

If money has always been tight, you might have no company profit to speak of and so hardly owe them a thing. They do still want the tax returns though. Similarly at R5k a month your income tax may be reasonably low too, although over 10 years it may start adding up a bit.

They will want to look at your business and personal assets and figure out how you managed to pay for them. This would give a good indication how much profit your business made and how much salary you received. I strongly suspect that if you have virtually no assets accumulated over 10 years, then you may well not have much tax due.

I haven't been down that road myself, but I would imagine that it can be stressful trying to always avoid the taxman. At some stage they are going to find you. Rather get it out the way now and come clean during an amnesty, instead of getting caught with penalties and all later. It is of course easier said than done as it must be scary walking into those offices unsure as to how much they are going to make you pay.

[Martinco]

From the gist of the posts so far I assume the business is a one man show ? Or not ?

[apprepcen]

Yes it was pretty much a one man show. I have not done the detail calculations yet, but it looks like the balancesheet will be about the same as it was 10 years ago and that includes the appreciation of my house. They will have to work with that.

[Dave A]

SARS did take estimates for the small business tax amnesty, and ultimately if there are no formal records, they don't have much choice but to take estimates now. I wouldn't knock myself out putting together financial statements unless SARS starts asking for them.

If/when you do go to SARS, could you please give feedback on how it goes and what they ended up wanting? I'm quite sure you're not alone...

Here's a thought - are you already registered with SARS as a tax payer? If not, I would simply wander into SARS and ask to be registered and only answer questions when they're asked.

[AndyD]

Here's a thought - are you already registered with SARS as a tax payer? If not, I would simply wander into SARS and ask to be registered and only answer questions when they're asked.

If it was done this way would he still qualify for the amnesty?

[Dave A]

I guess not - but it's something that must happen to SARS all the time. Old survival strategy - move with the herd.

[Celeste_DG]

I suggest the same as Dave, i.e. if you are not registered as a taxpayer. Complete the registration form, you just have to complete basic personal details and estimate your current annual income. Once you receive your tax number (they will send you a letter confirming registration), call the call centre and confirm if there are any tax returns outstanding. A client of mine was in your situation recently and luck for him, he is only liable from this current tax year.

If you are registered with SARS, it will not hep to avoid the issue as each year they are getting less lenient. Take it in bite sizes (like you would eat a elephant). There are two things you are avoiding here, first the non-submission of the returns; and secondly the non-payment of taxes (if payable). Get the first part out of the way - submit outstanding returns (they are now penalizing people left right and centre for that). If taxes are payable, worry about that last.

Good luck!

[apprepcen]

I will go see them tomorrow and report back. What I really need is a tax clearance certificate, because I am working on a huge opportunity.

[Perform Computers]

Time for me to face the never ending queue & get this sorted out too.