Results 1 to 7 of 7

Thread: What happens when the tax return is negative?

  1. #1
    Email problem stephanfx's Avatar
    Join Date
    Apr 2007
    Posts
    203
    Thanks
    0
    Thanked 1 Time in 1 Post

    What happens when the tax return is negative?

    This has been bugging me. I don't know the answer and I don't have money for an accountant yet.

    What happens when my CC tax return is negative?

    I know that when it is in your personal capacity, you receive money back from the Receiver. What happens with a CC, do you get money back, do you deduct it somewhere else? Does it get carried over to the next year?

    Please, any help will be very appreciated, as I am very curious......

  2. #2
    Site Caretaker Dave A's Avatar
    Join Date
    May 2006
    Location
    Durban, South Africa
    Posts
    20,944
    Thanks
    3,054
    Thanked 2,458 Times in 2,064 Posts
    Blog Entries
    12
    If you've overpaid in provisional payments, then you will get a refund. Get that return in soon. Hopefully you aren't getting too much back - excessive refunds are known to attract an audit.

    If you've made a taxable loss in a cc, that loss gets carried over and can be offset against profits in the next tax year. As an aside, a sole proprietor can't carry over losses like that.
    The trouble with opportunity is it normally comes dressed up as work.

  3. #3
    Email problem stephanfx's Avatar
    Join Date
    Apr 2007
    Posts
    203
    Thanks
    0
    Thanked 1 Time in 1 Post
    Thanks for the information Dave!

    Let's say I don't make any profits for the first 2 years, tax wise, do I still need to make provisional payments?
    When do provisional payments apply?
    What amount is to excessive that it would merit an audit?

  4. #4
    Site Caretaker Dave A's Avatar
    Join Date
    May 2006
    Location
    Durban, South Africa
    Posts
    20,944
    Thanks
    3,054
    Thanked 2,458 Times in 2,064 Posts
    Blog Entries
    12
    Provisional payments are not that complicated really.

    Twice a year you will get a provisional return to fill in - one that needs to be submitted by the end of August and a second by the end of February.

    This provisional return will already have default figures put in based on historical information. But there is a column where you can put in your own figures based on how your cc has performed to that point. If you haven't made a profit, you can put in a null return. But lets look at the objective:

    The goal is to have paid over fairly close to the correct amount of tax for that financial year. There is some margin for error - provisional returns and payments are, after all, estimates and the final figures might well change. What you want to avoid is where those changes in the final figures might be considered unreasonable - and hence worthy of closer investigation by SARS.

    As a rough guideline as to these tolerances, either as a flag for audit or for penalties, I have heard the following numbers bandied around when it comes to income tax:
    • Try to be within 10% either way with provisional payments vs final assessed tax for the year.
    • Try to keep refunds due to you under R15 000.00.

    Ultimately, SARS needs to assess whether you are "deserving" of additional attention. Each deviation from "normal" behaviour adds up. And it is considered unusual to pay SARS large sums in excess of what you need to.
    The trouble with opportunity is it normally comes dressed up as work.

  5. #5
    Bronze Member Sieg's Avatar
    Join Date
    Oct 2006
    Location
    Durban
    Posts
    126
    Thanks
    0
    Thanked 52 Times in 30 Posts

    Provisional taxpayers and refunds

    I had always understood, that as a provisional taxpayer it was always better to owe SARS something, even if a negligible amount. The reason apparently was that if SARS owed you money and you were a provisional taxpayer, then your tax affairs were subject to an automatic tax audit. (Which is not nice because then they come and scratch through your books and stuff and ask all sorts of uncomfortable questions like "how much money did you spend at the casino?" and "how did you afford that overseas trip on the little income you have declared" and "Who paid for that 4 X 4 parked in your garage?" etc.

    Maybe they just don't have the staff to attend to all those tax audits?

    Don't worry, they won't come and hassle you today 'cause its Freedom Day!


    Sieg

  6. #6
    Site Caretaker Dave A's Avatar
    Join Date
    May 2006
    Location
    Durban, South Africa
    Posts
    20,944
    Thanks
    3,054
    Thanked 2,458 Times in 2,064 Posts
    Blog Entries
    12
    Quote Originally Posted by Sieg View Post
    I had always understood, that as a provisional taxpayer it was always better to owe SARS something, even if a negligible amount.
    That's generally the safest - not to mention best for the cashflow.
    The trouble with opportunity is it normally comes dressed up as work.

  7. #7
    just me duncan drennan's Avatar
    Join Date
    Jun 2006
    Location
    Cape Town
    Posts
    2,642
    Thanks
    119
    Thanked 94 Times in 77 Posts
    Just a general note about taxes and flags being raised:

    My accountant, who worked for SARS and his wife currently works for SARS, mentioned that in general they typically look at two things, percentages, and historical trends. If something sticks out as unusual, then flags start being raised.

    So, for example, if you spent R500 on equipment maintenance one year (let's just say it was 1% of your turnover) and the next year you spent R10000 (and it was 20% of your turnover) they are probably going to get suspicious and come asking questions, even if it is totally legitimate — you would just need to make sure you have all your ducks in a row and can explain large deviations.

    Another thing to keep in mind, apparently (again according to my accountant) it costs something like R400 for them just to raise a flag, so if there are small errors it is just not worth the cost to go and investigate them.

    --

    And just in case Dave's explanation of provisional taxes wasn't enough...here is some more

    As an employee your employer pays over tax due by you each month to SARS (if you are an employer you must do this), which is supposed to add up over the year to your total tax due. Tax is levied on your total income for the year, but just paid over in small instalments each month. At the end of the year your total income is assessed and you either pay the difference in, or SARS gives you a rebate.

    Provisional tax is just like that, except you only have to make two payments in a year (and if you need to a third payment can be made too), instead of twelve. So instead of paying over tax each month, you pay it over every six months, in August and February.

    You actual tax liability is only calculated at the end of the year when you complete your final tax return which shows the actual amount of tax that was due for the year (based on your profit and loss). SARS compares it to what you have provisionally paid over so far and then lets you know if you must pay in, or whether you have overpaid.

    As Dave said, it seems wise to have your provisional payments within 10% of your final tax liability.
    [SIGPIC]Engineer Simplicity[/SIGPIC]
    Turn ideas into products | The Art of Engineering blog

Similar Threads

  1. Tax Amnesty for Small Business
    By I Robot in forum News Archive
    Replies: 13
    Last Post: 07-Jun-07, 08:18 AM
  2. Flat tax rates for SA.
    By Dave A in forum General Business Forum
    Replies: 3
    Last Post: 13-Apr-07, 10:25 PM
  3. Royalty payments are tax deductable.
    By Dave A in forum Tax Forum
    Replies: 0
    Last Post: 13-Mar-07, 09:13 PM
  4. Managing tax risk
    By Dave A in forum General Regulatory Compliance Forum
    Replies: 0
    Last Post: 30-Jan-07, 09:30 PM

Tags for this Thread

Did you like this article? Share it with your favourite social network.

Did you like this article? Share it with your favourite social network.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •