Have you used the correct IRP5 codes for deductions relating to medical aid contributions?
Accounting And Tax Club, 11 Jul. 2013
Tags: irp5 codes, irp5 codes for deductions relating to medical aid contributions, medical aid contributions, sars, irp5 codes on employees’ tax certificates, irp5 source codes 2013
Last years’ changes to the way you treat medical aid contributions on your payroll came with the introduction of new source codes. It’s crucial you check the source codes you’ve used on your employees’ tax certificates are correct on your employees’ IRP5 forms. Find out what the new IRP5 codes are so you can comply.
“SARS has made some changes to the existing source codes for deductions relating to medical aid contributions paid by the employer,” says the Practical Tax Loose Leaf Service.
So make sure you use the correct IRP5 codes on your employees’ tax certificates. Remember, SARS has systems in place that screens your IRP5s to make sure they’re accurate.
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Revealed: The new IRP5 codes for medical aid contributions
#1: Deduction code 4474 - Contributions you pay as an employer on behalf of an employee 65 years and older and who hasn’t retired, should also be reflected under this code.
#2: Deduction code 4493 - Use this code for medical aid contributions for an employee who qualifies for the ‘no value’ provisions.
#4: Employees’ tax deduction and reason code 4116 - Use this code for medical scheme fees tax credit taken into account by you (employer) for PAYE purposes.
#5: Fringe benefit code 3815 (3865) - Use this code for non-taxable bursaries and scholarships to employees and their dependents.
In addition, SARS has re-activated source codes that it had previously deactivated. So you can start using these again.
#6: Normal income codes 3603 (3653) - Use this code for pension (PAYE).
#7: Normal income codes 3610 (3660) - Use this code for annuity from a Retirement Annuity Fund (PAYE)
#8: Fringe benefit codes 3805 (3855) - Use this code for accommodation (PAYE)
#9: Fringe benefit codes- 3806 (3856) - Use this code for services (PAYE)
#10: Fringe benefit codes- 3808 (3858) - Use this code for employee’s debt (PAYE)
#11: Fringe benefit codes- 3809 (3859) - Use this code for taxable bursaries or scholarships (PAYE).
Remember to use the codes in brackets for Foreign Service Income.
Ensure you apply these new IRP5 codes correctly when dealing with deductions relating to medical aid contributions to avoid penalties.
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- » Help your employees tax out-of-pocket medical expenses
- » How to handle medical expense taxes for employees who are over 65
- » Medical tax credits: A gift from SARS to you
- » Are you still accounting for your employees’ medical aid incorrectly?