The basics of the IRP5 document
Understanding IRP5 document…
Author: Ian Hurst — Managing Director, Paymaster People Solutions
The IRP5 document provides a record of the income that you have earned during a particular tax year. Note: a tax year begins on 1 March and runs until 28 February of the following year. By law, your employer is required to inform the South African Revenue Service (SARS) about the income that you have received for a particular period. This includes informing SARS about the tax that was deducted from your salary. IRP5 information is automatically inserted into the document by SARS. If this hasn’t happened, the employee/taxpayer needs to speak to their employer in order to establish whether a reconciliation was indeed done or not. Note: SARS will not allow changes to the information on the IRP5.
Your employer informs SARS about these details by means of a twice yearly reconciliation submission directly to SARS. Once a particular tax year has come to an end, your employer is required to issue you with a hardcopy of your IRP5 document. If there happen to be any errors on the IRP5, for example, such as an incorrect source code, then your employer needs to correct the error and reissue your corrected IRP5 document.
Note: depending upon the number of employers that an employee works for, it is quite normal to be issued with more than one IRP5 for a particular tax year.
More details about the IRP5 document
The IRP5 document also provides details concerning the dates that you have worked for each employer. Additionally, details on the IRP5 will reflect to which tax year your income received, applies.
The different categories of income will be indicated by a unique SARS source code. Here are some examples of the categories of source codes that one might typically encounter on an IRP5:
• Salary payments: source code 3601
• Bonus payments: source code 3605
• Travel allowance payments: source code 3701
• Other (i.e. miscellaneous) allowance payments: source code 3713
• Commission payments: source code 3606
• Medical fringe benefit payments: source code 3810
In some instances, the IRP5 might also indicate an employee’s salary deductions, as set-off against the tax calculation. This is done to reflect a series of calculations that applies before tax was deducted from your income amount. Examples of typical deduction source codes include the following:
• Employee pension contributions: source code 4001
• Employee retirement annuity contributions: source code 4006
• Employee provident fund contributions: source code 4003
• Medical aid contributions: source code 4005
To verify whether your employer declared the tax amount that was deducted from your salary, your IRP5 should reflect the primary PAYE source code 4102.
To verify to which tax year the income received amount applies, the uppermost section of the IRP5 document should indicate the relevant tax year. The IRP5 will also indicate the date when IRP5 information was completed by your employer, as well as the date when it was submitted to SARS. This is called the transaction year. For example: rental monies received in March 2023 must be accounted for in the 2023/2024 tax year.
Commission and lump-sum payments received
If you earned a commission or received a lump sum during a particular tax year, you should have received a tax directive number which is reflected at the bottom of the IRP5 document. Simply stated, a tax directive is an official instruction that SARS sends to the employer. This official SARS document ‘instructs’ the employer to deduct tax at a specified tax rate. Such tax rates are determined by SARS, on a case-by-case basis — dependent upon initial criteria submitted to SARS by the commission earner.
To conclude, personal income tax submissions have the potential to overwhelm most individuals. However, this need not be so. Contact Paymaster to help you navigate the IRP5 season safely.
Are you still unsure? For more information on how it all works, contact us, click here.
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