What is an EMP501 Reconciliation?
The deadline is approaching for all employers to submit their payroll information to SARS by submitting the EMP501 reconciliation. An EMP501 reconciliation is a report of all employees’ earnings, which must be submitted to SARS. Employers are required to reconcile the payroll taxes liabilities (PAYE, SDL and UIF) declared monthly on the Employer declarations (EMP201). It is the employer’s obligation to deduct and declare the correct amount of employees’ tax from each employee’s remuneration and pay this over to SARS on a monthly basis.
This year the interim reconciliation submission opened on 19 September and closes on 31 October 2022.
EMP501 reconciliations must be performed twice during a particular financial year:
- Interim period – six-month period 1 March to 31 August (Due 31st October)
- Annual period – full tax year period 1 March to 28/29 February (Due 31st May)
How do I know what needs to be submitted?
There is certain information and criteria that needs to be correct and up to date in order to have a successful EMP501 reconciliation status:
- EMP201’s are monthly Employer Declarations that you should have already submitted for the period March to August
- The payments made for each month
- Tax values on the Employee interim Tax Certificates (IRP5/IT3a’s) must be accurate
There are certain mandatory fields which must be completed for each employee on the certificate otherwise you will not be able to submit your EMP501 reconciliation without completing these fields:
- Full name and surname of employee
- Identity number or passport number
- Income tax reference number
- Physical residential address
- Dates of employment in the current financial year
- Remuneration details received during the financial year (interim and annual)
- Employee’s bank account details
Additional certificate validation process
As from the 2020 tax year of assessment, additional validations have been introduced by SARS for the IRP5/IT3(a) certificates. These checks are as follows:
- IRP5/IT3(a) certificates that was already assessed on the Income tax system
- No duplicates of Income Tax Refence numbers on the IRP5/IT3(a) certificates
- Directive information on the SARS system corresponds to the directive information on the IRP5/IT3(a) certificates; and
- The PAYE, SDL & UIF has been correctly deducted from employee and declared on the certificates
If any discrepancies are detected through the Employment Tax Certificate Validation (ETV), feedback will be provided in the form of SARS issuing a letter to the employer of the ETV discrepancies identified on the certificates that was submitted, for the employers to rectify the identified issues. The letter will be issued via the channel through which you submitted the reconciliation. Any corrections made to the certificates must only be resubmitted using the same channel that was used for the initial filing.
The channels which can be used to submit the reconciliation
Employers who have less than 50 employees can choose either to submit via
- SARS eFiling or
- [email protected] Employer (It is advised to submit via [email protected] if you have more than 50 employees)
It is also important to download the latest version of [email protected] 7.2.9 and java applications as this is a necessary requirement in the submission process.
Minimum system requirements:
- Java 7
- Windows 7
- Adobe Reader 9
- Adobe Air 3.1
How to identify the validation checks on the channel used
- [email protected] validation calculation file – Check under the EMP501 status dashboard. After clicking update the submission status will be shown, select Download Employment Tax Validation button at the top of the screen in order to download the file.
- eFiling validation calculation file - Check on the EMP501 work page next to the EMP501 information. Click on View under the Certificate Errors heading. The file can now be downloaded as the save option will be displayed.
SARS requires that employers be consistent in the submission channel used when submitting their EMP501 reconciliation and tax certificates for a particular filing period. For example, if an employer submitted their reconciliations via SARS eFiling for the August interim submission, they should submit the annual reconciliation through the same channel and not resubmit via [email protected] and vice versa.
The importance of capturing the correct PAYE liability each month on the EMP201 returns is very important, as SARS has indicated that they will impose penalties and interest on incorrect calculations, including corrections done on the EMP501 reconciliation and late or incomplete reconciliations.
Most importantly, all employers must check the status of the submission on the platform they have used to confirm that the EMP501 has been successfully submitted to SARS.
Should you require assistance with your interim EMP501 reconciliation, let our RSM Accounting and Financial Outsourcing department help you stay compliant. We have a team of payroll administrators who has the necessary knowledge, experience and resources to assist in this process.
Senior Bookkeeper, Cape Town