What to do if you’re audited by SARS

Last updated on 17th September, 2024 at 11:46 am

For many people, receiving a tax audit or verification request is a nerve-racking experience. Yet it’s quite common for SARS to request supporting documents. Here’s what to do if it happens to you.

Reading time: 10 minutes

In this article, you’ll learn:

• Why SARS selects returns for auditing.
• What to do if your tax return is audited.
• What documents to have on hand.

So what is a tax audit, anyway?

We often use the terms ‘audit’ and ‘verification’ interchangeably, but there is, in fact, a difference. SARS uses a verification process to check that the information declared on your tax return is true and correct, while an audit is a full-blown investigation checking the finer details of your return, TaxTim explains.

Which tax returns are likely to be verified?

If it’s the first time your return has been flagged for verification, don’t panic! And don’t take it personally. Verification is a common process and many taxpayers have their returns verified in multiple years.

Nicci Courtney-Clarke, TaxTim COO and head of tax, says verifications are a common requirement for people who claim home office expenses, solar panel rebates, business income and expenses, rental income and expenses, or business travel, as well as those who have claimed out-of-pocket medical expenses or who are due a refund.

Even if you don’t include any of those categories on your tax return and are not due a refund, you could still receive a verification request. A recent TaxTim blog post says around 25% of tax returns undergo verification and this year’s percentage may be even higher, with more frequent and more random selections than before.

What to do when you receive a verification request

You’ve submitted your tax return on time, and well before the due date. Then comes the email you dread: your return has been selected for verification. You will need to submit documents backing up every expense claim or deduction you have claimed for.

“Often SARS will request to see these documents and ensure your reported amounts comprise valid costs. This is more commonly referred to as a verification and simply means that your return, together with your documentation, will be physically reviewed by one of SARS’ tax agents to ensure accuracy. They request these documents by sending you a letter, email and or SMS asking you to submit your supporting documents,” says Courtney-Clarke.

You’ll need to upload documented proof of all your claimed expenses within 21 days of the notification being issued. If you miss this deadline, your deductions may be disallowed.

“Once submitted, SARS have committed to complete their review within 21 business days provided the return is for the current year and all supporting documents have been received. If SARS advances their review to an ‘audit’ stage, you will be advised as such and after you have submitted all supporting documents, SARS should complete their audit within 90 business days,” she explains.

SARS is questioning my home office deductions

With many employees choosing to work from home, people are increasingly claiming a deduction against home office expenses. “We see SARS being super strict with this deduction,” warns Courtney-Clarke. She says you are likely to be asked for the following documents:

• A letter from your employer stating that you, the taxpayer, can work from home.
• Dates worked at home, reason for doing so, and whether or not an office is provided at your employer’s premises.
• List of home office expenses you are claiming, which could include a portion of the rent you pay for your home, repairs undertaken during the year, cleaning costs, rates and taxes, and electricity.
• Calculation showing how this amount was arrived at and the apportionment.
• Supporting invoices/proof of payment for all expenses; these must include at least one utility bill with a physical address (or affidavit if property is not owned by taxpayer).
• For wear and tear on office equipment, an employment contract or letter from employer, purchase invoice and calculation of claim.
• Photos of the office showing that the room is used for work only.

“We are also seeing SARS ask for floor plans of your house with the separate office clearly shown. This does not need to be a municipal or council plan of the home but can be an informal but accurate drawing of the floor plan,” she says.

“SARS is also asking for 360-degree photos of your home office. These should provide evidence that it is used exclusively for your work. If, for example, there is a bed and cupboard in it, it would indicate that it may double up as a spare room, which would lead SARS to question its ‘exclusive’ use as an office.”

Other documents you’ll need

For expense claims other than those relating to a home office, Courtney-Clarke provides a list of documents you’re likely to need on hand for a verification.

Salaried employees are likely to need:

• Salary details and retirement withdrawals and transfers: IRP5/IT3a; see more about this here).
• Investment certificates from financial institutions: IT3b.
• Capital gains certificate for investment disposals: IT3c.
• Medical aid tax certificate and invoices and receipts for all additional ‘out-of-pocket’ qualifying medical expenses.
• If you donated to charity, include your S18a certificates from public benefit organisations.
• S11(f) certificate for retirement annuity contributions.

If you receive a travel allowance or drive a company car, you must submit a logbook. And if you installed solar panels in your home and want to claim the rebate in 2024, you will need these three crucial documents:

• VAT invoice indicating the cost of the solar panels separately from other items.
• Proof of payment of the above invoice.
• Certificate of compliance showing that the panels were brought into use for the first time during the period of 1 March 2023 to 29 February 2024.

What happens next?

Once you’ve submitted the documents for verification, there are several potential outcomes. These are:

• SARS can request further documents.
• They can accept all your documents and issue a completion letter, marking your return as complete. This means that the original assessment is valid and any refund due to you will be paid out.
• They can disallow certain expenses and issue an additional assessment, which means that you will need to pay in more money than originally estimated.
• They can advance their verification to an audit which can take up to 90 working days and which would be a full-blown investigation, potentially including an on-site visit.

A verification may be stressful, but it’s a standard procedure and very common. If you have your supporting documents on hand, it should be easily dealt with.