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Beware of the IT14 SD

2012-02-10

Many of the amounts on your IT14
income tax return can be checked and compared to your other
declarations to SARS over the tax year. For some time now the statutory audit would have
tested the VAT turnover declarations to the accounting turnover disclosed in your annual
financial statements.
SARS is now going further and using the computer automation and integration to highlight
discrepancies. Should a discrepancy arise you will have the joy of completing a supplementary declaration known as an IT14 SD. As an aside this will cost you a significant fee due to the complexity, risk and low
level of materiality used by SARS.
Income Tax Reconciliation

As with your tax return you will need to reconcile your accounting profit to your taxable income. This
would have been done in your tax return and is merely a review and a supplementary declaration.
Errors perpetuated will impact on penalties.

PAYE Reconciliation
The allocation of expenditure to salary and wages needs to be more closely considered.
Director's remuneration, medical aid, pension or provident fund contributions paid by the company,
other employment costs will be reconciled to the remuneration computed in your monthly PAYE
disclosure.
Bonus not subject to PAYE, fringe benefits not disclosed, ghost workers and other questionable
employment costs will be highlighted and audited by SARS.

VAT Reconciliation
The reconciliation of vatable sales and accounting turnover is generally done as part of your statutory
audit. The level of variance and materiality will need to be considered more closely. Allocation of vatable supplies as recovery of cost and not as turnover for accounting purposes, and other variances will be scrutinised.
This is not as difficult as the VAT input reconciliation reconciling cost of sales to VAT inputs. The safe
haven for unknowns will not be as safe as previously. Customs Duty Reconciliation
Imports and exports will have further reconcilations of customs duty deductions with imports and exports
in the annual financial statements.
When you receive a request to submit a  IT14 SD
note the following: -
1. Take a deep breath.
2. Double check your IT14 correctly reflects the amounts disclosed on your annual financial statements. As there are limited control totals you may have typed incorrect figures on your IT14.
3. If there is an error on your IT14, resubmit and hope that this resolves the issue.
4. If not, take another deep breath and begin the reconciliation process and request professional
assistance.
If you have too high a discrepancy, prepare yourself for a SARS audit at your premises.
Beware of the IT14 SD
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Beware of the IT14 SD

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