Tshepo Khoza, Registered Tax Practitioner
What to Do if You Owe SARS Money (And You Can't Pay)
Received a tax bill you can't afford? Don't panic. Learn about your options, from a SARS instalment payment agreement to a compromise of debt.
There are few things more stressful than getting an assessment from SARS (an ITA34) and seeing a large amount due. Your immediate reaction might be panic, especially if you don't have the cash to pay it.
The most important rule is: Do not ignore it.
Ignoring a SARS debt is the worst possible thing you can do. The 10% late payment penalty will be applied, interest will start accumulating daily, and SARS has the power to take further action, like issuing a judgment or even attaching your assets.
The good news is that SARS is surprisingly reasonable if you are proactive and communicate. If you genuinely can't pay the full amount, you have options.
Option 1: The Instalment Payment Agreement (IPA)
This is the most common and practical solution. An IPA is a formal agreement you make with SARS to pay off your outstanding tax debt in monthly instalments over a set period (e.g., 6, 12, or 24 months).
Who qualifies?
You can apply for an IPA if you can show that you don't have the assets or cash (liquidity) to pay the debt in one go, but you will be able to pay it off over time.
How to apply:
The easiest way is through your SARS eFiling profile:
- Log in to eFiling.
- Go to the "Debt Management" or "Tax Status" section.
- There will be an option to "Request a Payment Arrangement."
- The system will guide you through a process where you propose a down payment and a monthly payment amount.
You must be compliant first: SARS will only consider an IPA if all your tax returns are up to date. You cannot ask for a payment plan on your 2025 debt if your 2024 return is still outstanding.
Keep in mind that interest will continue to accumulate on the outstanding balance until the debt is fully paid.
Option 2: Compromise of Debt
This is a more extreme option and is much harder to get. A "compromise" is when you ask SARS to write off a portion of your tax debt because you are financially insolvent and will never be able to pay the full amount.
Who qualifies?
This is not for people who are just having a tough month. You must prove to SARS that:
- You are facing genuine financial hardship.
- A compromise would be in the best interest of the fiscus (i.e., it's better for SARS to get some money from you than to get nothing if you are sequestrated).
- You don't have assets that could be sold to cover the debt.
This is a complex legal process, and you will absolutely need the help of a registered tax practitioner.
The Worst Option: Doing Nothing
If you ignore a letter of demand from SARS, they will escalate their collection actions. This can include:
- Appointing a third party: SARS can legally instruct your employer to deduct the debt from your salary or your bank to pay the money directly from your account.
- Issuing a judgment: This will blacklist you and destroy your credit record.
- Attaching and selling your assets: In extreme cases, a sheriff of the court can be sent to sell your assets to cover the debt.
Conclusion:
If you owe SARS money, be proactive. Get all your returns filed, log in to eFiling, and apply for an Instalment Payment Agreement. It's a manageable process that keeps you compliant and prevents much more serious consequences.
Disclaimer:This article is for informational purposes only and does not constitute financial or tax advice. Tax laws are complex and subject to change. We strongly recommend consulting with a registered tax practitioner to address your specific circumstances. TaxClaw.ai is a tool to assist you in managing your tax obligations and is not a substitute for professional advice.