The South African Revenue Service (SARS) already holds most of the information required for the 2026 tax return before taxpayers begin filing through eFiling. Employers, banks, medical schemes, retirement funds, and investment platforms are legally required to report directly to SARS. By the time taxpayers start the filing process, SARS has auto-assessed over 6 million individuals-including provisional taxpayers-using this pre-populated data.
AI assistants and new reporting tools
Under section 26 of the Tax Administration Act, institutions must provide returns covering employment income (IRP5 or IT3(a)), interest (IT3(b)), investment gains (IT3(c)), medical aid contributions (IT3(f)), and offshore accounts under the OECD’s Common Reporting Standard. The system now incorporates AI tools such as Lwazi, an assistant designed to help taxpayers resolve queries, and WhatsApp for document submission and notice delivery.
For the 2026 Filing Season, SARS expanded its auto-assessment program, leveraging third-party data to pre-fill returns for millions of taxpayers. Within the first day of the July 2026 filing window, nearly 2 million taxpayers were auto-assessed, with roughly R8 billion in refunds distributed within 72 hours. If the figures align with what SARS expects, no further action is required, though silence is treated as acceptance of the assessment.
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What the auto-assessment misses
However, auto-assessments do not account for certain income sources. Rental earnings, freelance income, unreported foreign income, and crypto-asset gains are not automatically included. The Crypto-Asset Reporting Framework (CARF), introduced in March 2026, mandates that South African crypto providers report user transactions starting in 2027. Nevertheless, taxpayers remain responsible for declaring gains and losses on their ITR12 forms.
One frequent misconception is that incorrect third-party data can be edited directly on the tax return. This is not possible. If an employer’s IRP5 or a medical scheme’s certificate contains errors, taxpayers cannot correct them themselves. The originating institution must identify and resubmit the accurate data to SARS. Taxpayers can only supplement their returns with income or deductions that the agency has not yet received.
Penalties and pre-verification alerts
Misunderstanding this process—such as altering pre-filled figures instead of addressing the source—often results in delays. SARS now employs a pre-verification declaration alert to highlight discrepancies before assessments are finalized. Under Chapter 16 of the Tax Administration Act, even unintentional errors can lead to penalties, ranging from 10% for understatement to 200% for intentional evasion. Since April 2026, genuine mistakes no longer guarantee full protection from penalties, though they may reduce liability for substantial understatements.
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The stricter SARS’s data controls become, the more challenging it is to submit a return that conflicts with its existing records. The most effective precaution before filing is to review third-party certificates-such as IRP5s, medical aid statements, retirement fund documents, and investment summaries-well in advance. If an auto-assessment looks wrong, resolve it at the source: ask the employer, fund, or scheme to correct and resubmit, rather than trying to edit SARS’s own data. Taxpayers should also compile documentation for income SARS does not automatically capture, including side income, foreign accounts, or crypto transactions, and include these in their filed return.
If SARS identifies a discrepancy through the declaration alert questionnaire, this tool is intended to resolve issues before the agency’s system does. Corrections are due by 23 October 2026 for non-provisional taxpayers and 22 January 2027 for provisional taxpayers, and addressing a discrepancy before SARS flags it is far simpler than resolving it afterwards. Addressing mismatches early prevents the more complex process of resolving them later.
