STANDARD OPERATING PROCEDURES FOR TAX YEAR END 2003 by kpg20724

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									Tax Year End Procedures              Page 1 of 8             last amended 29/08/2010


PROCEDURES FOR TAX YEAR
END

STEPS TO FOLLOW ARE SET OUT BELOW
It is critical that the steps are done in the recommended order

1. If you have not yet „Accepted‟ the final period of the year
    Make a „period‟ back up
    Accept Pay period


2. NB !!! All the procedures below are found under the TAX YEAR END tab & they can
   be run after the tax year-end has been completed. It is however recommended that the
   final tax calculation be run prior to the tax year end especially if you have e.g. directive
   percentages that change every year

3. You can never have too many backups !!! – So make another one & name it e.g.
   “PreTaxProcedures 2009”

4. Ensure that tax year start & end dates are correct & that end date is the same as the
   last pay run date

5. Print “Pay Type Summary”
    Standard Reports
    Pay Type Summary
    Check start & end dates correspond with tax year start & end dates
    In “Employee options”, remove tick from “Active employees” & choose all
       employees

6. Final Tax Calculation
   This option serves to report on whether the correct tax has been deducted &
   consequently it will report on any discrepancies
    Employees names will display – choose select all - click ok
    Choose correct tax year e.g. 2009 from drop down box e.g. 2009
    If the default dates displayed are correct – click ok
    If the dates for your company are different
          o Change the tax start & end date under the
                  SETUP
                  Company Profiles
                  Tax
          o Run option 4 again
    CALCULATION OPTION – is defaulted to SITE (change if you wish to do an
      assessment only)
    EXTRA TAX – is defaulted to include (change if you do not wish to include any
      extra tax deducted)
    Click ok – your final tax calculation will now run
Tax Year End Procedures             Page 2 of 8             last amended 29/08/2010


7. Final Tax Report
   This option will print the results of the above option. It is important that you run this
   option to check on the final tax & possibly correct any errors
    Choose correct tax year e.g. 2009 from drop down box
    Print Tax Report - It is imperative that you check this report
    POSSIBLE PROBLEMS THAT COULD OCCUR
      o If the final tax calculation is not completed at the end of the tax year (e.g. 2009)
          but in the new tax year (e.g. 2009) & tax method details have changed e.g.
                   Directive percentages – please change to percentage that was
                     applied in the relevant tax year
      o NO SITE message: the site category has not been set up as the tax type SITE.
          To correct this, go to
                   System set up
                   Company Profiles
                   Company pay types
                   Click on site category
                   Go to look up values tab
                   Click on tax type tab
                   Choose edit button from tool bars & from the drop down box choose
                     SITE & save
      o There are unders or Overs on the report:
              Check the following:
                   Date joined
                   Date suspended if employee left the company
                   For suspended employees check the last tax calculation
                   If there are any refunds to be paid out/ tax to be collected, do not
                     refund/deduct as tax or earnings in the new tax year, but edit the
                     employee‟s history and the refund must be paid over/collected
                     manually (by cheque / cash)
              Run final tax calculation again / Print report and check
      o Check that tax deducted balances to totals (PAYE + SITE) on Pay Type
          Summary report printed in Step 5


8. Print WCA REPORT
   This option prints totals for your WCA assessment report
    Choose tax year from drop down box e.g.: 2009
    System defaults to limit declared by the WCA Commissioner for the tax year
    Certain earnings are excluded from this report e.g. those of a reimbursive nature –
       if you are not certain, please check with the WCA office
    If any earnings have to be excluded, select these from drop down box If not, do not
       select any
    Click ok
    Please note that you have to run 2 WCA reports
       The 1st report is for the tax year that you are completing & is based on actual
       earnings for this tax year
       The 2nd report is for the following year & it is an assessment of expected earnings
       for that tax year (eg in 2010 you expect that the payroll will increase by 10%)

          o Run the 1st report with the defaulted maximum limit
Tax Year End Procedures              Page 3 of 8             last amended 29/08/2010


           o Run the 2nd report with the maximum for the next year as well as the
              expected increase in the payroll eg 10% per annum
           o NB !! Both these limits will are available from the WCA assessment report
           o E.g.
                   Choose tax year 2009
                   Limit defaults to 214305
                   Print the report
                   Choose tax year 2010
                   Limit defaults to 239172
                   Enter percentage increase ie the increase that the employees will be
                      expected to receive in the following tax year
                   Choose tax year to obtain earnings from ie 2009
                   Print 2nd report
      If you have not received your assessment form the WCA commissioner, then
       proceed to step 9 & return to this option when the assessment is received. Please
       note that this report does not form part of the returns to SARS but it is necessary in
       order to complete the assessment for WCA for the year

9. Insert Data
   This option assumes that you have inserted all the necessary data required for your
   tax certificates e.g.
                       Employer information e.g. address
                       Creator information e.g. contact details
                       Employee information e.g. ID no‟s, addresses etc
                       Pay type information e.g. tax codes, clearance codes for
                         pension/provident/retirement annuity etc
    Warning for backup will appear – (back up has been made) click ok
    Choose tax year e.g. 2009
    Criteria box will appear on screen
    „All data‟ will be highlighted & checked - change this if you only wish to reinsert e.g.
       employees after correcting e.g. identity numbers
    Click ok
    Selected data will be inserted
    If any changes are made afterwards, the data must be re-inserted


10. Validate Data
    This option will validate the data that you have selected in order that it agrees with
    SARS requirements
     Choose tax year to validate from drop down box e.g. 2009
     Validation criteria will appear on screen i.e.
           o Creator
           o Employer
           o Pay types
           o Employees
           o Financials
     Each criterion must be validated
     After validations – a certificate master is generated
     If any changes are made after this, you must re-insert & re-validate the data
Tax Year End Procedures               Page 4 of 8              last amended 29/08/2010


11. Validation Report
    This option will report on any validation errors. It is important that you run this option so
    that you can correct any errors
     Click in box next to heading that has been validated – print report
     After all the errors are fixed, you will have to re-insert & re-validate the corrected
       options. This validation procedure should be run until there are no severe errors
       displayed on it. Non-severe errors are
           o Pension/provident/retirement annuity contributions that exceed the
              maximum.
           o Pay types that do not need coding
           o Employee with no values will not receive a tax certificate
           o These are the only errors that should be tolerated.
      DO NOT PROCEED TO THE NEXT STEP UNTIL THERE ARE NO SEVERE ERRORS
       !!!!!!!
      POSSIBLE ERRORS THAT COULD OCCUR
Error Type Error             Solution
Pay Types Pay types that are Check properties of pay types and whether a code is
           not coded         required.
                             Pay types that do not normally require codes
                                   Memos
                                   Deductions except medical aid / pension
                                      /provident/ tax /loans
                                   Company Contributions
                             To code a pay type, refer to relevant SARS manual
                             page. To insert the code go to
                                   System set up
                                   Click on global pay type list
                                   Choose the pay type
                                   Click on edit
                                   Insert code
                                   Save
                             Correct the situation & re-insert & re-validate the pay
                             types
                             If the financial data has already been validated, this will
                             have to be re-validated
           Invalid Clearance Clearance Codes are needed for certain pay types e.g.:
           Codes                   Provident Funds
                                   Pension Funds
                                   Retirement Annuities
                             If there are no clearance numbers for the above, contact
                             the companies (e.g. Sanlam / Old Mutual etc) with whom
                             the e.g. pension is held
                             To insert the clearance code go to
                                   System set up
                                   Company pay types
                                   Find the relevant pay type
                                   Click edit
                                   Insert code
                                   Save
                             Bear in mind that retirement annuities could be held with
Tax Year End Procedures             Page 5 of 8             last amended 29/08/2010


                                    different companies and have different clearance
                                    numbers therefore a pay type for each has to be set up.
                                    E.g. an RA from Old Mutual will have a different
                                    Clearance number than that of an RA from Sanlam
                                    Correct the situation & re-insert & re-validate the pay
                                    types
                                    If the financial data has already been validated, this will
                                    have to be re-validated
Creator /    No Address line 1      Go to
Employer                                  System setup
errors                                    Click on company report filters
                                          Enter address line 1
                                    Re-validate the creator / employer data
             No contact             Go to
             telephone number             System setup
                                          Company set up
                                          TAX tab
                                          Contact tab
                                          Enter contact number
                                    Re-validate the creator / employer data
Employees Incorrect ID              An employee with no ID and passport must be changed
Errors    number                    to „Nature of Person B‟
                                          Processing
                                          Employees
                                          Choose the employee
                                          Tax
                                          Edit
                                          Choose nature of person = B
                                    Re-insert & re-validate the employee data for this
                                    employee
             Date of birth and ID         Processing
             no do not match              Employees
                                          Choose the employee
                                          Edit
                                          Correct the DOB or ID number
                                    Re-insert & re-validate the employee data for this
                                    employee
             Invalid ID number/     SARS has a special formula for calculating the last digit
             Income Tax             of these numbers (i.e. the check digit)
             reference              Please get correct number from employee(s)
                                    Re-insert & re-validate the employee data for this
                                    employee
Financial    No values for tax      The employee has no history & a certificate will not be
Errors       certificates           generated for this employee
             Negative Values        SARS does not allow any negative values for any codes
                                    – correct the situation on history & re-validate the
                                    financial data for this employee
             Directors              Has a special code 3615
             remuneration                 If you do not a pay type with this code then add
                                             one to the global pay types
Tax Year End Procedures             Page 6 of 8             last amended 29/08/2010


                                       Assign to all companies but not all employees
                                       Assign to directors only
                                       Edit all history so that basic salary is shifted to this
                                          code
                                   Re-validate the financial data for this employee

12. Click on PRINT PAY TYPE DETAILS to aid with correct coding.
    Pay special attention to the following on this report
     „Memo‟ pay types normally would not need coding
     „Pretax‟ pay types would either be coded as „4001‟ for pension or „4006‟ for
        retirement annuity deducted from salary
     Only „Annual‟ payments must be coded as „3605‟
     Pay types that are used as the basis for pension/provident calculations must have
        „R/F‟ indicator set to „yes‟ & a clearance code must be inserted
     Directors remuneration must be coded as 3615
     Employer Contributions
            o Pension must be coded as 4472
            o Provident must be coded as 4473
            o Medical Aid must be coded as 4474

      Retirement annuity „tax reductions‟ must be coded as „4006‟ with a clearance code
       inserted
      Retirement Funding Indicator:
          o If the employee has a company provident/pension fund calculated as a
              percentage of certain pay types e.g. normal time & sick pay
                  Set the retirement funding indicator to „yes‟ for these pay types
          o If the employee has a company provident/pension fund calculated as a
              percentage of a package e.g. 6.5% of rate per week irrespective of actual
              hours worked
                  No pay types will have the retirement funding indicator set to „yes‟
                  On the employee file, tax tab, set R/Funding Income to the annual
                    equivalent of the package


13. Assign Certificate Numbers
This option assumes that all the severe errors have been corrected & the validation report
is clear of any severe errors
     Choose tax year from drop down e.g. 2009
     Click on Ok
     The following employees will not be assigned a certificate number
            o Employees with no values for the tax year
            o Employees with no tax deducted whose projected annual earnings does not
               exceed R2 000

14. Print Certificate Numbers
This option produces a report of the certificate numbers assigned, as well as the tax
deducted. This report should accompany the IRP 501 reconciliation
     Choose tax year from drop down e.g. 2009
     Click on Ok
     Ensure that total tax agrees with Pay Type Summary printed in Step 5
Tax Year End Procedures            Page 7 of 8            last amended 29/08/2010



15. IT3‟s not generated
This option produces a report of all the employees with no tax deducted whose projected
annual earnings do not exceed R2 000. This report should accompany the IRP 501
Reconciliation or the IT3 General return

16. Generate File
This option produces an electronic report of certificates issued & must be submitted to
SARS or imported into E@syFile
     For manual submission to SARS (not E@syfile)
           File name must be “IRP5.tax year” eg “IRP5.09” for tax year 2009
           Please generate 2 disks
           1st disk with a test indicator
           2nd disk with a live indicator.
           Because you are only allowed 4 live submissions, submit test submissions
              until your submission is successful
           Should SARS report that your submission is successful, then submit the live
              disk
           It is recommended that you insert a reference e.g. “1st test submission” or
              “2nd test submission to correct ID numbers” etc in the event that you need
              clarification later
           Please remember to insert a disk if you are writing the submission to a disk

      For import into E@syfile
           Please generate a “live” disk as a “test” disk cannot be imported

17. Submission Report
This option produces a report of submissions that have been made. Useful if you forget
your last generation number.

18. EMP501 Report
     In Reports, Statutory Reports
     Ensure that pay types in contributions box have been entered correctly
     Ensure that end dates for each month have been entered correctly
          o Remember that these dates must correspond with Emp201 payments for
            each month
     Check that totals balance with Pay Type Summary printed in Step 5 and payments
      made to SARS for the relevant tax year

19. Once again, you can never have too many backups !!! – So make another one & name
    it e.g. “PostTaxProcedures 2009”

20. Tax Year End
     Only do if you have not done yet
     Make a back up & name it e.g. “TaxYear 2009”
     Run „Tax Year End‟
          o System will prompt for start & end dates for the new tax year.
          o Check the displayed dates carefully (especially for wages & fortnightly), &
             correct if necessary
     Press OK & a year end will be performed
Tax Year End Procedures             Page 8 of 8             last amended 29/08/2010


      System will now be ready for the first pay run of the new tax year

General comments
   For E@syfile import
         o File generated in step 16 must be imported into E@syfile
         o Certificates must be printed from E@syfile

      For manual submission of file to SARS
          o Print 2 copies of IRP5
                 1st copy to file
                 2nd copy to employee
          o Do keep a copy of the SARS submission (on disk or hard drive or CD)
                 On hard drive is a good idea because it can be backed up with other
                   regular backups
                 If SARS loses the disk, you can always submit the copy (eg your
                   computer is stolen or damaged)
      Please check the following
          o UIF max (12478 as at 28/2/2009)
          o Medical caps for tax year 2010 are as follows
                 Salaries
                        R625 for main member & 1st dependant
                        R380 for all extra dependants
                 Fortnight
                        R288.46 for main member & 1st dependant
                        R175.38 for all extra dependants
                 Wages
                        R144.23 for main member & 1st dependant
                        R87.69 for all extra dependants

      If you are in any doubt on any of the steps , please phone the support line for
       assistance

								
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