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50 views20 pagesChapter 14
income tax
Uploaded by
maria selineCopyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
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/ 20
ater 4- Regular Income Taxation: Individuals
cra
ww APTER 14
gpGuLAR INCOME TAXATION: INDIVIDUALS
Objectives
al relevant to income taxation of individuals are already covered in
ous chapters. This chapter aims to provide an integration of all income tax
Bfes which are specifically relevant to individual taxpayers in order to simulate a
loser to reality depiction of individual income taxation in practice.
this chapter, readers are expected to demonstrate mastery on the following:
Determination of tax under the regular income tax option
2 Determination of ‘tax under the 8% income tax option
3, Preparation of quarterly and consolidated or adjustment return
4, Rules relevant to taxable estates and trusts
5, Rules on installment payment of the regular tax
INDIVIDUAL INCOME TAXATION
1
‘The Regular Income Tax for Individuals
The income tax of individuals [s determined through the following t2x table:
Year 2018 to Year 2022
(0%)
of excess above P25
[Taxable income |
1P250,000 and below | None (0%) _ Ps a
~~ "15% of excess above P250,000
00,000 to P800,000. | P22,500 + 20% of excess over P40
00,000 to P2,000,000 102,50 + 25% of excess ov
10 | 402,500 + 30% of excess over P2,000,000__
of excess ove ncome Texation: Individuals
~ Regular
4 - Regular y 14 ~ Regular Income 7,
ca
Tax
70 PROGRESSIVE INCOME
anpaveR UBIECT Te or invidal covers the allowing
The proses
1. ‘citizen
crierdent ti fe
eeresident citizen a
ae eitifated oF adustment rg
o rect tx 5 NOt Withheld
uien engaged in business Smplove? ‘or his spouse h;
in
43, Taxableestate pia cme
le cttax withhela
4 Taxable trust sree ptr 7 ng
CLASSIFICATION OF INDIVIDUAL INCOME TAXPAYERS fe erin te llowng aes a
For purposes ofthe regular tax, individual Income taxpayers are classfieg eae yond "be wed by
ner essive ent dur :
4. Pure compensation income ea ta ee
2. Pure business or professional income earner
3. Mixed income earner
PURE COMPENSATION EARNER
income of employees, except minimum wage earners,
‘0 withholding tax on compensation. Every employer Is mandatorily
deduct the withholding tax from the compensation income of their emp) stration 1: CONCUFTent employment
una is both employed in Yousee Com
jholding tax on compensation ingincome and withheld txin 299377 #4 Youbee Company. ie has the
e employee has no ather income and the tx is ey
the employee has other taxable income or if the tay ‘sable compensation income plitiet _Youhee
inl tax Rssuoan Basco
Rzsuo p 2oo09
Employees with no other income igi ctodated lo tate :
f the employee has no other taxable income, he may avail ofthe substituted OLE
ystem. Under this system, the withholding tax on compensation is consi amaaoa
enough evidence of tax compliance of the employee, provided that the employ | income tax due, per individual tax table ;
withheld the correct tax. tes Tex withheld by employes (¥2500-2q0m 102500
Income tax payable or (refundable) Zim
Conditions ofthe Substituted Filing System
. ‘received purely compensation income during the year. lastration 2: Successive Employment
the year, Zeus resigned
ent to Gagamba Comy
‘The amount of tax due from the emplayee at the end of the year equal : a
Table compensation income
Texwitheld from compensation
es BIR Form No, 2316 teach employee.
592
3 Individuals
chapter 14 Regular income TO
ee
a
2
nme raiete MEO)
Income tax due, per individual tax table P'e2s99
Income tax payable or (refundable)
compensation income.
‘Taxable compensation income
Income tax due, per individual tax table P. 45,000
Less: Tax withheld by employers ($6000)
(11,000)
Income tax payable or (refundable)
Jef shall use BIR Form 1700 as adjustment return.
‘Employees has other taxable income
Employees other income subject to regular tax may come from:
a. Casual sources
b. Engagement in business or practice of a profession
Ifthe employee has other taxable income, the employee is mandatorily re
file an annual income tax return to incorporate other income sources in
‘This is referred as a consolidated income tax return.
‘The consolidated Income tax return may elther be:
1. BIR Form 1700 ifthe employee is not engaged in business or professi
2. BIR Form 1701 for mixed income earners - if the employee is also er
business and or profession
The withholding tax on compensation (BIR Form 2316) given by the
shall be claimed as tax credit.
Mlustration ~ With other casual income
Mr. Sung Ki is a sales executive. He received the following compensation and
from his employer:
594
ed return covering his total 2020 Income toy
stration 3: Employer error
n'2022,Jefts employer withheld a total of P $6,000 out of his P4go.o45
‘Since the tax withheld is erroneous, Jeff shall ile an annual adjustment rty,
Festal tax du or lam refund or tax credit for excess withholding. asf
oo
penefits
port Ree cong,
pensation income
efits (pald pes
oo,
mee
sy deductlon fo
Ittpolding tax de
is other in
aeercame
ee
sot re sbjet fal tm Thee AE nly,
ered final taxes ae not-credtable "40 gona
ss
pecax credits shall e:
wenboling tax on Compensation (orm 2376)
bolding axon the ners (90615 up?
307)
ri’ taxable income shall be computed as:
Gress compensation income
tess: Mandatory deductions
‘Exempt benefits ae
‘taxable compensation income Hoon
‘Mr. Ki's income tax still due shall be computed as:
Income tax due P 156,250
Less; Tax credit ‘
Form 2316 P 125,750
4, Form 2307 13500 132250
bxzo00
‘neome tax still due
The consolidation procedures of employees engaged in business or practice ofa
Drofession
e discussed under mixed Income earners.
595
income from bonds (0765 ne
ise oFarts collection (aqn(°%) eagle
te)
P 90000
seo
Easzo00
the interest income
sont Chapter 14 ~ Reguler Income Taxation: Individuals
‘PURE BUSINESS AND/OR PROFESSIONAL,
INCOME EARNER
Individual taxpayers engaged in business or practic of
5 A Professio,
n
quarterly income tax returns (BIR Form 17016) sr
an annual tan
Fetus ag
Illustration 1 - Itemized deduction
a8. a self-employed taxpayer, had the following quarterly incom,
e
Mrs. Maciy
2023:
Gross receipts
Less: Cost of services
Gross income
Less: Expenses
- Business expenses
- Personal expenses
Total
Net income
Withholding tax
Her quarterly and annual taxable income and tax due shall be compute
cumulative year-to-date taxable income as follows: ]
Gross receipts
Less: Cost of sales
Gross income
Less: Deductions
Taxable net income
The taxable income from bi
usiness or profession may be computed Using:
ional standard deduction
Jan.=March _April-june _luly- Sept.
P 600,000 P 520,000 P 550,000 a
P_490.000 P 320,000 P 300,000 Pai
130,000 P 120,000 P 4%
P 100,000 P
P 4,000 P 10,000 P_—‘15,000 P.
—1stOt_ _2ndOt._ _ardOt_ A
P 600,000 P 1,120,000 P 1,670,000 P
120,000 ___320,000 ___570,000
tor 14 ROBUIar Ing
pater Income ty
jetaxdue
om credits
we Tew this quarter
cwTprior quarters 4009 5
ca
>
19500 »
* gah credits
timated taxpaid 1530p
wes ai prior quarters "
Paxstilldue = ~~ gy
ene 2g ce,
tion 2 - Optional sa
ean an ota
ctor Sand en
EPP,
speqatery 20d anal by Ste
ith
etd shan
goss recelPts a avd
Ger050 - 409% 7
ble net income
sme tax due
ier Tax credits
CWT this quarter
* cwTprior quarters :
‘Toal credits Paes pia aa
Pason p—gglld aso 3 eston
Less: Estimated tax paid 2500? “€2900 24000, P T5He
inprior quarters % ‘y .
income taxstill ue Eo tt 20 20000
Excess quarterly estimated tax
‘The excess quarterly estimated tax payments over the ‘may
the option of the taxpayer, be carted forard to quate ee wey
taable year or claimed through tax refund. The option must be
annual adjustment return. Once the option to carry-over i
ievocable for that period,
The option to refund
The option to end may be in the form of cash ora tax credit certificate, If the
lected, the excess refundable amount should not be carried
ootion to refund
‘ver as tax credit to the succeeding quarters ofthe fllowing year
597 ser 34 ROBIN Income
Mm
The a NOM eee
WithhonPeSation in
woulg 2x on cage i mixed income earners wil be suber t
rt then COMPEnsation by Mt dt n compensato
For yt ht en sn ees Mt rei] yi tn
CEEUM. It shall be jeMPeNSAtion income shall not be reported in yes wn] fs
ATMErS shall use qen*Uaed only in the annual consolidated return, wie Wang] ne
BIR Form 1701, ined bag on METAX
10} OPT
3% INCE ION
0 RIN law Introduced a heyy
18 7Eh income fx. The option
ofOhr income t@X return op i
os ‘the option shall be irreyocy
oe
Oe -it
eae tina
L ir incor
Re ete
£306 general percentage tax ats
pestration
0 fax :
Fehr Our discussion, let us assume the same data in the previo
lat Mrs. Macipag is also employed with the following income in 2
xable compensation P 250,000 P 260,500 P ze
Withholding tax on compensation (Form 2316)
OUR he,
hace tattle
. jnannuel option
{tis valid for as long as the
taxpayer Becomes aVAT tamayer dunn
4, pid quarterly and annually
scope: A
b
a. Pure business or professional income
b. Mixed income earners
P 480,000 P 320,000 P 300.000 Pag
100.000 130.000 __120.000 __ 4000
380.000 2190000 2— 180.000
40
4,000 P 10,000 P_—15,000 P
1OUVAT taxpayer du
© regular during
year ltcome tax once the
Form 2307s Pp
‘Quarterly eax
Mrs. Macipag shall report her quarterly income from business or profess
the same quarterly income tax due as computed in the previous illustration:
Jan=March April-June. _July- Sept.
Quarterly income tax due P_19,500 256,500 P___92,500 pusiness Tax: A Basic Overview
‘side from income tax, individuals engaged in bs
AnauaLincome tax % arealso required to pay a busines tax which sets Sn
‘The taxable income of Mrs. Macipag for the year shall be computed as: 12% value added tax (VAT), 3% percentage
‘Taxable compensation income B_987,000 pes of bustobed isspayers
Gross income P 1,310,000 1, Exempt businesses ~ not subject to VAT or percentage tax
Less: Deductions 490,000 Examples:
Taxable income - business 220.000 4. Businesses selling agricultural products in orignal state
Total taxable income 21,907,000 I contract growers
ers or bookstores
2. Business specifically subject to other percentage taxes -not subject to VAT
Mrs, Macipag shall file BIR Form 1701 for her consolidated income. Her annual]
but subject to percentage tax of various rates
tax still due shall be computed as:
598 599 > if their anm
taxpay
Percent
00 and ae, = AF thee a
Busing
Ss taxati
& Transfer Tax
Normal
mn 18 an advanced tax topte which wil
businesses
ual sales exceed P3,000,099
900 op.
nual sales do not «
* opt to voluntary registers VAT taxpaye
ney, bus and ca for hirg
‘OF horse race track
8
be di
tion by the same author acon se
taxpaya’: Be or professional practitioners start small
thelr business or practice gains traction and tee gts
‘threshold, they are manders or SVATtanpayert®
Covered businesses:
Only vatable businesses who are below the P3M annual Vi
rily required to register as VAT taxpayers
/AT threshold and gy
et
‘egister as VAT taxpayer can opt to be taxed under the 8% inewra tax,
Thus, the option is not available to:
VAT-registered business taxpayers
VAT-exempt business taxpayers such as:
a. Exempt businesses
b. Businesses sj ly subject to other percentage taxes
3. Individuals receiving income not subject to business tax, such as:
a. Partners receiving share in net income of a general professional Peay
Co-owners receiving share of income in co-owned properties
Venturers receiving share in net income of an ex
|. Heirs or beneficiaries of trust receiving income
trusts
‘Tax obligations of individual non-VAT taxpayers:
Regular tax option.
joint venture ~
ton om ig
é
Regular income tax | 3 quarterly 1701Qs andi
annual 1701 or 17014
Percentage tax T 4 quarterly 15519
VAT-registered taxpayers pay VAT and regular income tax.
iy
ty
i BUSINESS OF profess
piegtectively deny the
v0 con, the S2me being o
ote tax shall be computed fr
ie
90st apayer Who spy
ssp sales dlscounts, P09 py TSE In bay
750.000 Tn Othe income se Sales op
meee aa e900, net of
pe Wtncome WOU be compeg a, satempensesof
seaes/recelPs/FEvEnU¢5fog
Heer now OPeTatng ine
taxable income
1 gnmual exempt income
petttal K
ezply by: Optional income ax rate
axde
isedincomecarner
sensation income isnot subjec
(ete 6% Income tax. Due tothe, tenes e itcanno be subjected
separately determined using the income tate wnat al be
the business oF Profession shall be separately computed Fee sae ae fom
élassfeation rule as discussed in prior chapters mustbegbon en Poe
Since the use of the income tax table in computing the tx due
secvely allowed the empayer eam of 0080 anal ee see
embedded in the tax table, there wil be no more P2S0000dedueton tenis
against the basis of the 8% income tax Furthemore, f the aero
compensation income does not exceed P250,000, the unutlized deduction cannot
te deducted against business income since the TRAIN law didnot contemplate a
deduction cross-over.
Mustration 1
A mixed income earner realized P920,000 from compensation, P2,000,000 in sales,
100,000 other income subject to regular ax and inured 480,00 in expenses = Reg
ular | regular Inc =
The inc Income Taxatig a REBUT Ome Teton a
me gn uals
'3% due under the ay oe gg income
Taxable pate end oc,
Leger 18 2 ensetion Met al FCI Bettas 12009
BESS: Lower tay patio? come 2 Come from deposits me
Residual come =O a be (aera of machiNey Belo 6 yea een
Ply by: iio0 te orbonds hed for 2yeace™® 00
Tax due comeeental taxrrate Gain OF income from bonds 20000
a Pensation income sotecome 14209
ro 1 pean
Aang Sales or gross 1 em ‘tax Option P'1552,000
id: Other non-operanie es P 2,000,000 pega income of Mi
Total erating income P ?toe.000 peel net income of Me Cadena shale onan
Multi n re 8S follo
tty by Oona income txt P 2,100,000 antsy Revens/ REEDS / Fes 23806 ae py 8
~ business — 5 J ecS8l280 of sales or services +P200%9
Total tax due <—Ass.ong | Ms Coston romm operation ae
io E0059 | Goss wale deductions (Busines expenses) P 1,400,000
lon2 + ss 200.000
A mixed income. income acing income P
‘earner realized P2,000,000 in sales, 100,000 in other ncomegy, | Nig. Non-operating 800.000
tore, 000, 2 come mS chine
ular taxand eamedP150 000 compensation fom parce emplymegg As] Mponssleatmachingy, |b aang
Ka, sale of bonds long-ter y
Tomb Income ainon income from bonds narterm) 10,000
Taxable net income P 150,000 Ine come —14000 __ 64.000
i: Lower tax bracket in tax table a sable B_a64.000
( 100,01
‘Tax due - compensation income = oP income tax:
Gross sales or gross receipts P- 2,000,000 » raxable net income P sepod'
Ada: Otter ‘income subjecttoreguartax 100.000 Less: Lower limit of the income bracket
‘otal P 2,100, ‘where the taxable income qualifies 00,000
Mulply by: Oponal income ax rte nS ee ce P cage tee
rax due ~ business itiply by: bracket marginal rate 25% 6.000
Total tax due tone
dt Income tax due pouas
Note: The P100,000 excess of P250,000 over the compensation income cannot be dedutns i.
against the basis of the 8%. No deduction cross-over is allowed. 4 3% business tax:
nie Net Sales/Revenues/Receipts/Fees P 2,600,000
INTEGRATED ILLUSTRATION ft. : ly by: ae a rate —_%
otal percentage tax due
Integrated Illustration 1 - Pure business or professional income earner ie . baa
Mr, Cardenas, a proprietor of a furniture shop, recorded the tng oa Total taxes under the regular tax option P196500
platement during the year: oa ‘The regular income tax would be pad in three quarter tax fling (1701Q) and an
Net sales of finished goods, net of P 18,000 CWTs P. 2,382,000, annual income tax return (1701). The 3% percentage tax will be paid in four
Sales of scraps and trimmings ——200,000 ‘quarterly percentage tax returns (25510).
Total Sales/Revenues/Receipts/Fees P 2,582,000»
Less: Cost of sales or services 1.200.000 ~ ‘The 8% Income Tax Option
Gross Income from Operations P 1,382,000 Under the 8% income tax option, he would pay the following:
603 _ Regular Income Taxation
HO ng
rer a
i Je Tax Option
Q 0
ne 0818 PAY he lwing
runilll Pepsin
P 40,000 008 wer limit of he Income bracket "1200,
ace 10000 Sbotretetarable omega,”
he in incom, —14.000 : pty
Mutiny poo™® (loss) © **™Ption Papen pseeSyy py. bracket marginalrate 400999 * 102500
TagtPl by: Op 101924 “Compensation income
ue mal incom, Pag due =
tax rate Paatened cs zee
Mr Carden a sois/evenves/RECHPs/Fexy P2050
ed ail toa peter non-operating Income suber 2%O00
‘d to file BIR Form and Pay the commuted P1829 ale of machinery YS oregartax
wi ‘551Qs, ‘tax BIR Form 1701A. No ‘There i, gain & sale of bonds 40,000
Wile tt appears thatthe me] Gain OF come from bonds 30000
ays the 8:
for oS cae. ee ae PON I the Deter opto nthe tsa oe Patt
TerStPe Which opto fe Year wherein the option is made, you couig Sta} yultiply BY: Fees
| formation syste men fOuld Yield the lesser tax, except only if you hi rldnotyg | Mi que ~ business income =.
| : s that enabies accurate forecasting of future performance waste | Tl tk dU — 220
tegrated Illustration 2 -Mixed Jnall file and pay th Euan
To falters our rato 2 “Mbt income earner yearns Pay the tax under BIR Form 170
except Mr. Can ion, we shall assume the same data inthe previous iy g ISITION TO TH
Cardenas also earned Pi,200,00 in compensation income In 2024.8 uM TRAN F VALUE ADDED 1
pen in2024, WTERIM exceeding the P3M VAT threshold eee fe fy shew
aorly
jpaividal r eotatvakig
to change registration frm non-VAT ta VAT ape hen
before the end of
pak Tax Option baie
- Cardenas would pay the follow ; following the month th
ing for 2024: oath fo taxpayer exceeded the
@. Regular income tax: a ‘mupayer shall pay regular Income tax for ieee ace ge ral
‘Taxable compensation income P 1,200,000 ‘Bi pay VAT prospectively starting the month he became a VAT txpayer The S96
200.00 ae tax payments shall be considered as tx cred against the eglarncome
P 2,064,000 tof. The taxpayer shal be required to pay the 3 percentage a for sles or
tx fies gonerated before becoming VAT taxpayer,
“where the taxable income qualifies 2.000.000 P
Excess uF 64000 Mera ure busines i
Multiply by: bracket: i Mr, Chinito, a income earner, opted to the 8% income tax in the first.
Se eee —ie an fare of 2024, In June of 2024, he exceeded th 3M VAT threshold
b, 3% business ta» ‘ales P 1200000 P 2,000,000 P 1,000,000,
Net Sales/Revenues/Receipts/Fees Cost of sales —‘o000 __Loono00 __‘son.990
Multiply by: Percentage tax rate Gross profit P 600,000 P 1,000,000 P 500,000
‘Total percentage tax due Gain on sale of domestic stocks 20,000 30,000
Geinon sale of used equipment co sAng AY son,
Total taxes paid under the regular option P_499,700 Total income nae P 620,000 P 1,040,000 P $30,000
: less Expenses __szpon0 __‘4s0000 __gon000
Mr. Cardenas shall file and pay the income tax under BIR Form 1701 and thebus® | yerincome Paono00 F—ssoon0 E—230000
Ww
tax using BIR Form 25519.
604 EE
regular Income Taxation
ot
guly 10 September)
fod
Chapter
14 Regular Income Taxation: Individual:
2" Quarter :
Me. Chino fey 2 March) re
inito’s first quar ie
1g Of FF ern operations 3200000
‘ome exemption i erty ca
= fee Loess en him, am
ett grating COME SOE 0 ep ag P3800
Nj, Nome ancome x soon
¥ B—szs009
pen
p07 eger income tax due of Mr. Chinit shal be,
computed as:
2-4 Quarter (April to June)
Je subject regula
tax
%
Mr. Chinit
(Mé-hinito exceeded the P2M VAT tres. He sl
‘0 pay percentage tax on sale or receipts made since January 1. ia
‘The percentage tax due shall be: wf com,
otal sales from January to une Pp 3,200,000 ponent inetpracket Ps74pag sue
Multiply by: Percentage tax rate _———__3% wer p—itamw > rons
Percentage tax due Ez 36.000 PSs ay neementa trate 174000 ne
‘The taxable income of Mr. Chinito in the second quarter shall be computed 35 flog, toe 406, 2 Quarter ree
Sales P 3,200,000 sa still due aso
P 1,600,000 jnito shall separately pay the quarter
sp. cinito hall be followed unt the gana ee 222500 nce tx
income tax return.
these P
Less: Cost of sales
P 70,000
FATES AND TRUSTS
{pxABLE EST
Gross income from operations
Less: Deductions (business expenses)
96.000 _66.000
734,000
Percentage tax expense z
Net income
‘Add: Non-operating income subject to regular tax
Taxable net income Bb 774.000
‘The 2x! quarter income tax due of Mr Chinito shall be computed as:
Income — —Tax due —
ple Estates
fe is an income taxpayer if under judicial setiement or admi
il setdeent isn aay Tae coe of ete
settlement is taxable tothe hels. =
wal
jnestal
Ste under ©
nder extra-judl
taable Trusts
Je trust is not a taxpayer and is treated as a pass-through entity whose
Taxable income P_ 774,000
Less: Lower tax bracket 400.000 P 22,500
Excess P_ 374,000 pesca
is 5 Fiano ‘acome is taxable to the grantor-trustor,
snierevocable trust is a separate and distinct taxable entity (BIR Ruling 003-05,
taxpayer.
‘hy 22, 2005). A taxable trust is treated as an
me taxable to an estate or trust under the NIRC
unborn or unascertained
Multiply by: Incremental tax rate
Total tax due
Less: Tax due in 1* Quarter 76.000
Income tax still ue 21300
ely pay the P96,000 percentage tax which shall be asses
pay the VAT
Mr. Chinito shall separa
pon VAT registration with the P21,300 income tax. Mr. Chinito shall
ded tax wil be discussed in Business & Transfer Taxa
effective July 2024, Value a
income accumulated in trust for the benefit of
person or persons with contingent interests and income accumulated or held
for future distribution under the terms ofthe wll or trust
607 Chapt
er 14
Regular Income Taxation: Individuals
: Operating Distribution
Tt ‘Pesenaton —Tnustee_ income —to-Gindy—
Trust2 revocable ry P 400,000 P 40,000
Trusty Tevecable 8) 600,000 60,000
Revocable g 400,000 coh
The tr
the propeses ,P7wst 4 and Trust 2 shall prepare t3x retHS COVEINE the agg
"ty held under their control as follows: %
: pans
Pperain P 400,000 P 600,000
€8S: Special ed deduction 60.000
Incomi nef
Taxableincome Mon beneiary caso esaoun
Income tax due per tax table ep1ssoo b—
For purposes of income taxation, the income of Trust 1 and Trust 2 will be
‘Consolidated as follows:
Consolidated
_trustt_ _Trust2_ —_Thust _
Taxable net income E_seo000 2 s40000 2200000
Income tax due P 127,500
Allocated tax due P 51,000 P 76,500
Less: Income tax paid i600 __50.500 67,000
Income tax still due z-34500 B—26000 P6050
‘The consolidated tax dues allocated to Trust 1 and Trust 2 as follows:
= Trust 1 = P360,000/P900,000 x P127,500 = P51,000
- Trust 2 = P540,000/P900,000 x P127,500 = P76,500
‘Trust 3 is not taxable as it is revocable. The entire P400,000 income
including the P80,000 income distribution to Cindy will be included in
income of Don Ambrocio.
Mlustration 2: Trusts with retention of
#
Z
‘Mr. Masagana designated two trusts as fol
Trust | Beneficiary
Trrevocable as to corpus and income, however,
‘Trust | Cassandra | Mr. Masagana reserves the power to revest to
‘1 | (daughter) _| himself 1/4 of the corpus upon the happening of
‘some specified contingencies.
Irrevocable as to corpus and income except tha
‘trust | Alexander | P30,000 ofthe annual income will be used to pay |
2 (con) | the fe insurance premium of Mr. Masagana.
ts will not be consolidat
eS ss grantor shall include in is ic
et eps OVeT RICA the gran
te ehe PG for the benefit of a
fie core eit of the
i i Frantor
Sth
"able ince),
income
08 neler itemized deducting * 7008 pgM2
we pertaining to grantor s "
ceribution to beneficiaries 30,000 30,000
wo pet income ow —100,000
2 reserved powerto
antor has vole one quarter
‘tbe 000 income pertaining t such pare isola tec in Trt,
pon es which 100 %4), shall be taxable
mj g00 Income WHIc shal be reser fe emento
SrAavettone tae
trust funds
saploye® ves’ trust which forms ;
oyees’ art of a pensio
» ee ‘employer for the benefit of some or all ofhigew ar
pane anes imposed under the NIRC. See 6 Mi}
fis exemption Covers nal tax, capil ans tx and
pute of Exemption of Employes
bvontibutions are made tothe tit bythe employer, empl
the purpose of distributing to such employees the earnings and Se
the fand accumulated by the trust in accordance with such plan,
2 Under the trust instrument, itis impossible at any time prior to the
or profit sharing
satisfaction of all liabilities with respect to employees under the trust,
part of the corpt i
for or diverted to purposes other than for the exclusive benefit
employees.
3 Any amount actually distributed to any employee or distr
shall be
taxable to him in the year in which so distributed to the extent that it exceeds
the amount contributed by such employee or distributee. _- Regular Income
yh Taxation: ing
ia
Return
Married inated Taxpayers jw sQUITY RETIREM EN
bot lividuals sh; ‘contribution are ACO
bots ll es run be nae yar see ott ed ag
Pective total tavehhee sePerately their individual incor tx aseq me, OMS ete issuance pteeo™but Orr
he return, each g able income, Where it is impracticable for the spougg’ thy ao tr
,e definitely sre rouse May file a separate return of income any Incomy tom lassific
by either of buted to oF identified as income ‘exclusively earned gr s<3ty nl pensation earner
for the puree Spouses the same shal be divided equally between the alg, jp Dusiness/profesion
of determining their respective taxable incomes: ong | ye earner *
1.
Chapte,
rd R
'6ular Income Taxation: individuals
Mlustration
Mr. and Mrs. c
Mrs. Cruz have a house for rent earning them P1,400,000 a yea Mr,
sig
accountant whi :
2ggamtant while Mrs. Cruz is an employed nurse. MF. Coz earned P3600
100 direct costs and P600,000 expenses. Mrs. Cruz also earned Pet
ion
slack had the followin
gaa "data during 2023
‘compensation. Mr. and Mrs. Cruz compiled the following:
For MoCo — Mrs.Cout smpensation
Pome P 140,000 seSeprealth & HOME Pstaoo9
padments under 170195 340,000 PF ging tax on comPensation income P1500» “ipane
Form 2316s ‘P.250.000 | tte contributions to PERA account 23000 10,00
Pasooo 2-20.00 per comron to PERA scout e000 gpd
re fr health insurance 7
The income tax and still due from the spouses shall be reported 25 Follows: iene Bot ad Ba ane 20400
Mr Gru _ Mrs ng shall be computed as follows:
‘Taxable compensation income 20 21200 asd a
Net sales/revenues/recelpts/fees P 3,600,000 cass coaxable compensation Pson00
Less: Cost of sales or services 990.000 J compensation income 15.000 i000
Gross Income from operations 2700000 Pg | 2B ts000 2 anon
Less: Allowable deductions 600.000 Ye tax due, per tax table
‘Net income P 2,100,000 P _h ts P 39500 P 2
adi : ox Taxcredl 4500
id: Non-operating income (rental income) Cr Gurron compensation haere
rr PZo9mm | 5% on Qualified PERA contribution eyed
PLetoom | Total eax credits =e
tustill due and payable E_izo00
2s 22300
Taxable income - business
642,500 P37
Total taxable income
Income tax due P
Less: Tax credit __480.000 FE
Tax still due B_162.500 1 Up to the PL00,000 maximum allowable contributions (P200,000 for OFWs)
Pp 290000 yas PERA contributions. The A celeewaeaion
ea ence be computed oy fom te ane rbel e PERA corintor
redhgthase made by the emloe
pln ttanbelxone been
‘Aggregate amount payable
Income of unmarried minors from property received from pa!
The income of unmarried minors derived from property receive.
parent shal be included n the return ofthe parent except ‘when:
1. The donor's tax has been paid on such property. —_
2. The transfer of such property is exempt from donor's tax. =
rents
‘d from a livig | 3 Portion contributed by the emy
1
jisability
return, the return may be made by his
teturn of Persons under Di
by the guardian or other person
tthe taxpayer is unable to make his own
‘uly authorized agent or representative or
613
612 PAYMENT OF THE REGULAR iNcomE Tax
23s
: sneha, £2000, individual taxpayers (except
ent Salle paid at the time the oa
ue on or ober 15 flow
before October 15 following the close of
Chapter 14 ~ Regular Income Taxation: Individuals
rey. The, PrlPal ang,
charged with the
care of his person or property a
Tepresentative or guardian assut sibil cle
guard iming the responsiOli© ® or fraudulent retume’l |
d ’
» phe itis not paid on
iment or before the da
vost Lnpald becomes due ana ate ed ots payment the whole
eax le together with the delinquency
be responsible for penalties provided for erroneo
sF eof the
urn shall Be Prima facie
Signature in the return is
is presumed correct,
evidence foal purposes that the return was actual yy him te
zl
ATTACHMENT TO THE ANNUAL INCOME TAX RETURN son t ili
xi hi taxpayer availing of the installment
For taxpayers claiming the itemized deduction are, shal Aap rt) "Ea che year 2023. He made meeps ome tax had ata
attachment form. The atacen: frm shows tet Gslosres tent Tat tthe th P2000 ate ery exited tx payments of
luctions in the annual income tax returMs Pi 4 4 acc
regulations. This is mandatory and shall Dé filed a fe Income jy | #7" os installment which st Ibe due upon fling ofthe annual
return. The required attachments were ‘discussed in Chap! 0 5 pel 15: ‘2024 shall be: income tax return on
70 rst installment (P10,000/2) oe
WHEN AND WHERE 70 FILE AND PAY TAX (crs) taxpayers we 2 5,000
1. For Electronic Filing and Payment System (©! sas ye sgitable withholding taxes P 2,000
the 15 de i x day the allen individual eae
& Resident citizen cResidentalien 6 fyeday the individual txpayer ne lpin,
Non-resident alien 4. Non-resident citizen a follow “Shis income ta, 0
ofthe followings not subject "return,
@ Acitizen who went on tour abroad 2 jpesidentalien
}. Accitizen of the Philippines who establishes to the satisfaction of thy b. Kon-resident alien engaged in trage
fact ofhis physical presence sbroad witha definite intention toresgg Rt] c. Not resident alien not engaged ney Ses,
© Acttizen of the Philippines who leaves the Philippines during thetaygta] fe orbusness
toreside abroad % go24, analfen who has been inthe country
4. Accitizen of the Philippines who works and derives income abroad ang, 11 ID” pesident ctizen NRA Eng 12028: cassie
employment requires him to be physically present abroad most of gy 2 esidentalien ome asa
during the year oy B
pentane a go2A,an American Who had been a resien
3. Which of the following is an individual whose resider nthe Pha | 2 isa ‘nthe Philippines since A
but who is not a citizen thereof? 202" -sident citizen. NRA. wot 14,
a Resident citizen Residentaalien 2 reentalien. ee
b. Non-residentalien Non-resident citizen b ee “NRA NETS
f choice: Theory ~ Part 2
4. Anon-resident alien is considered engaged in trade or business in the Philp, | yt! ae is both digas
ithe i ayer who ngaged in busin
if he stayed therein for t Acar ect to the withholding taxon ess and employments not
‘¢ more than 183 days.
wes sala
4 more than 180 days. wie by his employe.
required to file quarterly income tax
b Fequired to consolidate his query nes eae
reporting.
4 required to file an annual consolidated income taxretum
a. atleast 183 days.
b. atleast 180 days.
(On which ofthe following dates shall a citizen who left the PI
year be classified as a non-resident citizen forthe year?
a May31 July 15
be July 31 4 November 30
‘Am alien shall be classified as resident in 2024 if he arrived in the Philippines
‘hich ofthe following dates? ra
‘warterly mized income for quarterly tax
nes during
2. Which of the following may be subject tonal tax?
3. 13%month pay and other benefits
h. Supplemental compensation
¢. Fringe benefits
‘a. December 30,2023 «.July 15,2024 8}
b. January2024——. The taxpayer must have only one employer during the Year.
‘he taxpayer has no other soure of eos ncome subject rong
ag. hancompensation a,
l. The employer did not commit errors in the computation of the
income tax.
juired to file an annual
lowing employees is not r
ina
Those with concurrent employment during the year
» Those with successive employment during the Year
Those deriving income distribution from a general professional
taxable truss, or taxable estates
|. Those earning purely compensation income when the employer ey
withheld the tax
Which individual income taxpayer can claim tax credit for foreign taxes pai
6 Which of the
‘¢ Non-resident citizen
d.Allof these
a. Resident citizen
ion claimable by individual income:
b. Resident alien
What is the optional standard deduct
who are engaged in business?
a. 25% of gross income
b. 25% of sales or receipt
vidual income taxpayers submit their annual or
40% of gross income
d.40% of gross receipt or sales
”. When should indi
return for the year 2024?
a. April 15,2024
b. November 15, 2024
April 15,2025
4G. 15% day of the fourth month following the fiscal year ofthe taxpayer
410. Which ofthe following taxes isa resident citizen or alien subject?
1. Final tax c Regular tax
d.allof these
11. Anon-resident alien, not engaged in trade or business is not subject to
regular tax.
d.None of these
a finaltax.
b. capital gains tax.
je RI ay
ot i
ice: Theory - ts
ii enor reat ay
Witsoe cMPEDSAEO eh
5 Pee Petes, 7
& xed income camer vel
ee
, etiam can
ee eee
> Fhinimum wageearner
© None of these
indi é
ti a ey
‘Form 1700 Corts shalagg Mt PY then
2 Form it orm 1704s alse epular
Form Form 1702
ed in prof
“purely engaged i profession oping to be
era Pam tht noes we
p. Form? Form 1702
ists and estates shall use which tax form
5 T Form 1700
a. For Form 17014
b. Form 1701 4. Form 1702
"Bax on
-ompensaton?
4, Anadjustment return is leas ikely tobe require
ta stve employee receives conpenten ere
1b. The employee has two successive employers duri enplyes
2 The employer has under-withheldthetar
d. The employer has over-withheld the tax
1. Aminimum wage earner whois subjected to withholding tax shall
a, file an adjustment return and pay residual tax
b. file a quarterly income tax return.
file an adjustment return and claim tax refund
¢
d. donothing.
& IFhusband and wife are both employed, which is correct regarding their income
tax exemption in the tax table?
a ach spouse shall be entitled toa P250000 income tax exemption inthe tx
table.
Each family is allowed P500,000 income ax exemption inthe tax abe-
i Chapt
ter
14~ Regular income Taxation Individuals ser 4- REBIAY nc
’ ton
I
cS Bit
se hasand or he we can tke araaBe Fhe PS, Teste
a lon in the tax tak 5 o, A
RY the husband shall be alowed te 7250000 income a ray i”: A er Sot
: nl november 15 ofthe
me favember25 ofthese 7
9A husbana
famed P450,000 taxable income, His wife also
{2xable income. Which cree | oy
2 Thrower apres tae fr he uss.
Gk age husband pays tax while the wife is exempt.
& The wife pays the tax while the husbands exempt
|. Both spouses will report tax due.
10. If the husband is employed with P 700,000 taxable income
‘unemployed, he shall wil be actually subject tx on
3 P700,000 ofincome. _c. P 350,000 of income.
'b. P450,000 of income. _d. P 200,000 of income.
he i
5
11. Which ofthe followin
of the following scenario wil still require an adjustment
employee even ifthe employers correctly withheld the taxon thelr ors
Payments? comet
Employee has concurrent employment
'. Employees had successive employees during the year
© The employee earned income from other sources
4. Allofthese
js not allowed the oj
2 te Ohta
aeons
Piero te
12. An employee who earned income from other sources shall use which
‘amy on
iy, Statement 1: There is no need tof
return?
a Form 1700 Form 17014 ‘on compensation and the expanded
b. Form 1701 Form 1702 Statement 2: A businessman who i dy
not flea consolidated retum if the ame
13, Which isa source of ax credit against the tax due under Form 1701 withholding tax
a. Form2316 17019 a True; True apnea
b. Form 2307 4-Allofthese b. True; alse drasctae
14, Which is a tax credit against the tax due under Form 1700? ial |
a. Form2316 17019 5 outing pid stating July 1 and |
b. Form 2307 4. All ofthese Pied oe
‘business reported the following quarterly net |
15. The first quarter income tax return is due i
a. April 15 of the same year 2003 | 2008-2024
b. April 25 of the same year
c May 15ofthe same year
d._ May 25 ofthe same year Y so 4 ROBB Toa
tion,
Chi
‘apter 14 — Regular Income Taxation: Individuals rad is
: ris taxable income,
Compute the taxable netinco on April 15,202 com, 000
a. 750000 mae 2390000 < Patong
b. P810,000 €.P850,000 e 8.9
" sjow is the summay
2 Jerson, a resident citizen, had the following income: spown Pe mimaried reo
hliines Abzoad © ges rt
Compensation income 280,000 = gostof sate P oopgg mbites:
Rental income 30,000 100,000 Goss profit 300.00
Royalties - books 32,000 25,000 a once ene pty
Domestic dividends 9,000 - Ct iets wea
Foreign dividends - 40,000 ‘Government priority project 100,009
ie . + on-accredited non-profit ins
smpute his taxable income assuming she is a resident citizen, ~ foreign foundation tion 000
a. P330,000
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