Chapter 14 Income Taxation For Individuals

CHAPTER 14
REGULAR INCOME TAXATION

WHERE ARE WE?
• Final Income Tax
• Capital Gains Tax
• Regular Income Tax
• Individuals
• Corporations
• Special Corporations
• Fringe Benefit Tax
REVIEW OF THE CORE VALUES
• Integrity
• Objectivity
• Obedience / Compliance
• Christ-centeredness
REGULAR INCOME TAX FOR INDIVIDUALS
REPEAL OF PERSONAL EXEMPTION
• Personal exemption is now repealed to simply the tax system.
• In lieu of personal and cost of living expenses of individuals, the train
law provides for the P250,000 annual income exemption for every
individual.
• Amount is inserted in the tax table
• No more accounting of personal exemptions
TAXPAYERS SUBJECT TO PROGRESSIVE
INCOME TAX
1. Citizen
1. Resident Citizen
2. Non-resident citizen
2. Aliens
1. Resident Alien
2. Non-resident alien engaged in trade or business
3. Taxable Estate
4. Taxable Trust
CLASSIFICATION OF INDIVIDUAL INCOME
TAXPAYERS
1. Pure compensation income earner – subject to withholding
tax
2. Pure business or professional income earner
3. Mixed income earner
Computation of Compensation Withholding
Tax of Employee (Income Earner)
• On a ¼ sheet of yellow paper, determine the amount of lowest (front
page) and highest (back page) amount of compensation that you may
earn when you are already working for a possible employer. For this
purpose, kindly use semi-monthly payroll period.
• Using the Revised Withholding Tax Table on page 343 of your

textbook, compute for the amount of monthly withholding tax that is
attributable for your most reasonable lowest and highest amount of
compensation.
• Lowest Possible –
Php 25,000.00 monthly or Php 12,500 semi-monthly
• Highest Possible –
• Lowest Possible –
• Monthly = Php 0.00 + 20% (Php 25,000 – Php 20,833) = Php 833.40 monthly tax
• Semi-monthly = P 0.00 + 20% (Php 12,500 – Php 10,417) = Php 416.60 semi-monthly tax
• Highest Possible –
• Monthly = Php 10, 833.33 + 30% (Php 150,000 – Php 66,667.67) = Php 35,833.03 monthly tax
• Semi-monthly = P 5,416.67 + 30% (Php 75,000 – Php 33,333) = Php 17,916.77 semi-monthly tax
TREATMENT OF WITHHOLDING TAX ON
COMPENSATION
1. Full Payment – if the employee has no other income and the tax is
correctly withheld
2. Tax Credit – if the employee has other taxable income or if the tax is
not correctly withheld
SUBSTITUTED FILING – employee that has no other taxable income. BIR

Form 2316 is an enough evidence of tax compliance of the employee ,
provided that the employer withheld the correct tax.
CORRECT TAX DUE NOT WITHHELD BY
EMPLOYER
• Concurrent Employer
• Successive Employment during the Year
• Incurrence of Error
ILLUSTRATION 1: CONCURRENT
EMPLOYMENT
• Employer A – P450,000 , Tax Withheld P42,500
• Employer B – P350,000 , Tax Withheld P20,000
ILLUSTRATION 2: CONCURRENT
EMPLOYMENT
• Employer A (new) – P225,000 , Tax Withheld P21,250.50
• Employer B (old) – P175,000 , Tax Withheld P10,000.40
Annual – P400,000
Tax Due – P30,000
Tax Payable (Refundable): P30,000 - (P21,250.50+10,000.40)
(P1,250.90) or P1,250.90 refundable
ILLUSTRATION 3: EMPLOYEE ERROR
• Employer withheld a total of P35,000 out of his P460,000 taxable
compensation income
EMPLOYEE HAS OTHER TAXABLE INCOME
• Casual Sources
• Engagement in business or practice of profession
• If the employee has other taxable income, the employee is mandatorily required
to file an annual income tax return to incorporate other income sources in his
return . This referred to consolidated tax return.
• The consolidated tax return may either be:
• BIR Form 1700 – if the employee is not engaged in business or profession
• BIR Form 1701 for mixed income earners – if the employee is also engaged in the business or
profession.
• The withholding tax on compensation (BIR Form 2316) given by the employer
shall be claimed as tax credit.
PURE BUSINESS AND / OR PROFESSIONAL
INCOME EARNER
Quarterly Tax Returns Deadline
1st Quarter ITR – 1701 Q May 15 of the same calendar year
2nd Quarter ITR – 1701 Q August 15 of the same calendar year
3rd Quarter ITR – 1701 Q November 15 of the same calendar year
Annual ITR – 1701 A April 15, next year

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CHAPTER 14

REGULAR INCOME TAXATION

• Using the Revised Withholding Tax Table on page 343 of your

SUBSTITUTED FILING – employee that has no other taxable income. BIR

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