Preparing to lodge an application for a tax debt compromise? Follow these three steps

Simangele Mzizi, Fsp Business, 16 Sep. 2014

Tags: tax compromise, tax debt compromise, preparing to lodge an application for a tax debt compromise

If your company is financially distressed, you can ask SARS to “park” your outstanding tax debt. This is called a tax debt compromise.

It means SARS treats your debt as no longer due and payable.

But, you can’t just go to your nearest SARS branch and tell officials you want a tax compromise. You must lodge a formal application.

To make sure your application is a success, take a look at the three steps you must follow when you prepare to lodge an application for a tax debt compromise.

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Three steps you have to follow when you prepare your application for a tax debt compromise

Step #1: Submit your returns

Before you do anything, make sure you submit to SARS all outstanding returns for all tax types you’ve registered for.

SARS won’t even consider your application if you have outstanding returns.

Step #2: Gather your information

Gather as much evidence as possible to prove you can’t pay your tax debt.

This information must show SARS that it won’t get any more money if it pursues other avenues to get you to pay.

Step #3: Calculate the absolute maximum you can afford to pay

According to the Practical Tax Loose Leaf Service, it’s only in very few cases of severe financial distress that SARS will consider parking a tax debt in full.

The Loose Leaf Service adds, you’ll determine the settlement amount first and SARS will then review it. If it agrees, or is convinced, your settlement amount is the highest net return it can hope to get for the tax debt, it will probably accept it.

We’ve just scratched the surface, preparing to lodge an application for a tax debt compromise is a long process. Overall, there are nine steps you need to take when preparing to lodge your application. You’ll find the rest of the steps in the Practical Tax Loose Leaf Service – so check it out.

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