SARS EMP501 annual reconciliation

What is an EMP501 reconciliation? 

The deadline is approaching for all employers to submit their payroll information to SARS by submitting the annual EMP501 reconciliation. An EMP501 reconciliation is a report of all your employee’s earnings, which must be submitted to SARS. Employers are required to reconcile the payroll taxes liabilities (PAYE, SDL and UIF) which is declared monthly on the Employer declarations (EMP201). It is the employer’s obligation to deduct and declare the correct amount of employees’ tax from the employee’s remuneration each month and pay this over to SARS on a monthly basis.

This year the annual reconciliation submission will be opened from 1 April and closes on the 31st of May 2024.  

EMP501 reconciliations are due 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 are certain information and criteria that needs to be correct and up to date to have a successful EMP501 reconciliation status:

• EMP201’s which is the monthly Employer Declarations that you should have already submitted for the period March to February
• The payments that have been made for each month.
• Tax values on the Employee Tax Certificates (IRP5/IT3a’s) that have been generated 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.

Any discrepancies 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 you have 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
• e@syfile Employer (It is advised to submit via e@syfile if you have more than 50 employees)

It is also important to download the latest version of e@syfile 7.4.1 and java applications as this is a necessary requirement in the submission process. 
Minimum system requirements: 

• Java 7
• Windows 7 (32 bit & 64 bit)
• Adobe Reader 9
• Adobe Air 3.1

How to identify the Validation checks on the channel used

• e@syfile 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 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 e@syfile 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, would be for all employers to 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 annual EMP501 reconciliation, RSM’s Accounting and Financial Outsourcing department can help you stay compliant. We have a team of payroll administrators with the necessary knowledge, experience and resources to assist in this process. 

Rasheeqah Achmat
Assistant Manager, Cape Town

Related articles: