“The interim reconciliation process has become an integral part of the employer reconciliation and assists employers…” (SARS)

Employers are assisted by the interim EMP501 reconciliation, says SARS, because it makes it easier to:

• make more accurate annual reconciliation submissions
• maintain an up-to-date employee database 
• register employees for income tax purposes

Of course, there are other benefits, such as maintaining your compliant tax status, and avoiding wasting money on stiff penalties and interest.

It goes without saying that you want to reap all these benefits for your business. Allow us to help you to understand what needs to be done. We will be able to assist in ensuring a smooth, hassle-free submission process – even with the next deadline right around the corner.

EMP501 Reconciliation fast facts

• All employers are required to submit an EMP501 Reconciliation
• There are two deadlines in each tax year. For the 2025 tax year the deadlines are:
  • 31 October 2024 – 2025 Interim Reconciliation (for the period 1 March 2024 – 31 August 2024) 
  • 31 May 2025 – 2025 Annual Reconciliation (for the period 1 September 2024 – 28 February 2025)  

Potential pitfalls

The EMP501 Reconciliation is an intricate process which creates many opportunities for errors:

• Payroll information must be verified 
• Correct deduction of employees’ tax (PAYE), Skills Development Levy (SDL), and Unemployment Insurance Fund (UIF) contributions must be verified 
• Deductions must reconcile with IRP5 / IT3(a) tax certificates
• Employment Tax Incentive (ETI) values claimed must be reconciled
• EMP201 returns must be reconciled with actual payments made to SARS
• EMP201 returns must be reconciled with EMP501 statements
• Employee information needs to be updated on eFiling
• Employees without tax numbers must be registered
• Employer’s Reconciliation Declaration (EMP501) needs to be submitted via the eFiling website or the e@syFile application

This is an intricate and time-consuming process, and, as SARS puts it, “accuracy and timely filing are critical”.

Consequences of non-compliance

This is serious business. Inaccuracies or late submission can result in severe consequences.

• Calculating PAYE liability incorrectly will result in the imposition of both penalties and interest. This includes corrections made on the EMP501 reconciliation, as any shortfall is attributed to the last month of the reconciliation period.
• If an employer submits their EMP501 late, administrative penalties will be charged. The penalty will equal 1% of the year’s PAYE liability, increasing each month by 1% (up to a maximum of 10% of the year’s PAYE liability). 
• An employer who wilfully or negligently fails to submit an EMP201 or EMP501 return to SARS is guilty of an offence and could face a fine or imprisonment for a period of up to two years.

The bottom line

The penalties are stiff, and the submission process is fraught with opportunities for inaccuracies and errors. We understand the importance of tax compliance to your business. And we have the expertise and experience to help ensure a smooth and stress-free submission for you.

We offer a wide range of specialist services, including tax consulting and tax compliance. Should you need our advice or assistance, contact your contact Partner at MGI Bass Gordon. Send an email to info@bassgordon.co.za or call us on 021 405 8500.

Additional reading:

Access the SARS External Guide to the Employer Reconciliation Process here for step-by-step explanations and practical guidance.

The article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.