EMP501 reconciliations and IRP5 certificates

What the EMP501 does

The EMP501 is the reconciliation that proves your monthly EMP201 declarations, the money you actually paid SARS, and the tax certificates issued to your employees all agree. Three sets of numbers, one return, and they must match. Where they do not, SARS raises an assessment for the difference and the employer carries it.

It is submitted twice a year: an interim reconciliation covering March to August, due at the end of October, and an annual reconciliation covering the full tax year from March to February, due at the end of May. The annual submission is what generates the IRP5 and IT3(a) certificates your employees need in order to file their own tax returns.

Why it goes wrong

Almost every problem EMP501 season produces was created months earlier. Common causes:

• Unreconciled monthly filing. EMP201s submitted from the payroll software without agreeing them to the PAYE control account in the general ledger. Differences accumulate quietly.
• Payments allocated to the wrong period. A payment made without the correct SARS payment reference number lands against a different month, so both months look wrong.
• Employee master data errors. A missing or incorrect ID number, tax reference number or address will cause the certificate to reject on import to SARS e@syFile.
• Incorrect source codes. Travel allowances, subsistence, fringe benefits and retirement contributions each have their own code. Coded wrongly, the employee's personal return either double counts the income or misses a deduction they were entitled to.
• ETI over or under claims. The incentive claimed on the EMP201s has to reconcile at EMP501 stage. An over claim is recovered with penalties.

How we do it

Because we reconcile the PAYE, UIF and SDL control accounts every month as part of the payroll run, the reconciliation is checked continuously rather than assembled twice a year. At submission time we pull your SARS statement of account, agree every payment to the period it belongs in, validate the employee master data against SARS requirements before importing, verify the source codes, reconcile the ETI claimed, and only then submit through e@syFile.

Where differences exist from before we took over, we find them, quantify them and tell you the exposure before submitting anything. That is a better conversation to have in advance than to discover in an assessment.

IRP5 and IT3(a) certificates

Once the annual reconciliation is accepted, tax certificates are issued to every employee. An IRP5 is issued where employees tax was deducted, an IT3(a) where remuneration was paid but no tax was deducted. These are pre populated into the employee's own SARS return, which is why an error here creates a problem for your staff, not just for you.

Certificates are distributed directly to employees by email or through the payroll portal, so nobody has to come to you for a copy in July when tax season opens.

If you have unfiled reconciliations

Unfiled EMP501s are one of the most common things we inherit, and they block a great deal: your Tax Compliance Status will not issue, tenders become unavailable, and your employees cannot file their own returns properly because they have no certificates. It is fixable. We work backwards through the periods, rebuild the reconciliation from the payroll records and the SARS statement, file in the correct sequence and apply for remission of the administrative penalties that qualify.