As part of the diagnostic, your previously submitted tax returns will be analysed to make sure that all income and assets have been accurately declared (local and foreign). Further, it can be identified if there may be any capital gains implications based on your asset portfolio.
An additional audit of your existing tax compliance status is conducted to look for any SARS liabilities or penalties. This is another vital check done under the tax diagnostic as these may be subject to interest if not paid on time.
What makes a Tax Diagnostic Report necessary?
It is advantageous to have a tax diagnostic performed on a taxpayer’s SARS profile in order for a tax professional to provide accurate professional advice, enabling the tax expert to plan a roadmap for the required subsequent actions for compliance.
If the tax diagnostic is not performed on the SARS profile, the taxpayer will be at risk of not being alerted of any non-compliance.
Without the comprehensive understanding of the profile that the diagnostic report offers, the tax professional will be unable to help with the correction of the non-compliance, as a result, giving inaccurate tax advice.
Being wrongly advised places the taxpayer at risk with SARS. Incorrect income declaration can lead to liability/owing SARS, when one should not be, as well as possibly paying tax on income that has been incorrectly declared. Taxpayers should beware of inept unthorough advice which can only further exacerbate non-compliance and raise the risk of SARS levying penalties.
Is there any action taken by SARS as a result of the Tax Diagnostic Report?
It is a common misconception that, performing a tax diagnostic will alert SARS of your non-compliance. Most taxpayers are under the impression that by performing a tax diagnostic you are automatically inviting SARS to come knock at your door. This is in fact not true, as the whole purpose of performing the tax diagnostic, is to alert the taxpayer or tax professional of the current accurate SARS tax status. There is no action taken without the taxpayer’s consent, when performing the tax diagnostic.
It is significant for the taxpayer to be aware of their tax status and SARS history therefore performing this diagnostic is imperative. The benefit of the tax diagnostic will help the tax professional attend to the non-compliance as per the findings on the report before SARS takes action.
By completing this we are not alerting SARS of any non-compliance by rather bringing to taxpayers and tax professional’s attention any tax matters that needs to be addressed. The proposed actions after the findings will only be actioned by the tax professional upon approval from the taxpayer.
It is important to remember that the responsibility lies solely on the taxpayer to ensure that their tax matters are up to date, that they have met all their tax obligations and their SARS EFiling profile remains compliant.