The EMP501 is a culmination of all the documents issued in payroll processing. Let’s breakdown this process.
The EMP501 is done twice a year. There is an interim reconciliation for March to August followed by a final reconciliation for September to February. Only the final reconciliation issues IRP5 certificates.
An IRP5 (or IT3(a)) is issued to each employee and depends on the salary structure. This a document that contains all your information regarding your payroll as an individual.
You can have any number of IRP5 certificates. They will be issued to you by all sources of income. For example, you are a full-time employee but work for another company on the weekends. They both pay you a salary. You (should) get a payslip from them both and an IRP5 from both.
EMP501: The employer’s responsibility
The EMP501 serves as a reconciliation done by the employer. This reconciliation is between the EMP201 (monthly) returns and the information that SARS has in terms of payments. For smaller firms (less than 50 employees) there are 2 ways of submitting this reconciliation:
- SARS efiling
- SARS E@syfile (the only option for more than 50 employees)
If the employer uses a computer-based payroll system program (not Microsoft Excel), it is simple to complete this submission. These packages have an export function that produces a file (usually a .txt) that came be imported into the SARS systems.
All the information is taken and put into the system which does the “hard work” and pretty much “spits out” all the information needed.
Once this is done, all you do is check it that all the numbers agree to your records and that is that.
Businesses don’t realise that these submissions have a ripple effect beyond the offices. Let’s go through the following example.
John works for ABC (Pty) Ltd. He is a salaried employee earning R10 000 (R120 000 per year). His take-home pay is R 9 000 after deductions. He receives a pay slip every month without fail. He is based in the factory of the company and has no dealings with the HR department, besides the ad hoc occasions in line with normal conduct.
John as medical aid and he also contributes to a retirement annuity on a monthly basis.
He has taken care of his tax returns yearly since he started paying tax. He is tax compliant. This year is no different.
So in early July, he continues, as usual, submitting his return. He has all the documentation to do so. Upon submitting his return, he gets a strange-looking error regarding his IRP5. On further investigation, he sees that the efiling system does not have a prepopulated IRP5 in his return.
He phones SARS and asks why this is. Their response is that the “IRP5 was not submitted by the company and he must ask the company to submit it”. He asks for his IRP5 for the 2018 year. Despite many requests, he does not get any proper response. The tax season has come and gone, still nothing.
This is the impact on employees that the employer does not see. The employer does not like being questioned in this regard. It shows them that they have not submitted their returns on time. This can be construed as them not looking after the employees. This is not good.
- Please note this is an example and does not reflect any real-life facts. Any correlation is unintentional and non-existent. The numbers used in the above example are for illustration purposes and for ease of understanding. Always consult a professional tax accountant when doing any calculations.
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