CHAPTER 16

Additions to TAX
Civil Penalties
 25% penalty in case of failure to:
a. file the return and pay the tax on time
b. file the return with the proper person
c. pay on time the full amount of tax shown on any return
or full amount of tax in case no return is required to be filed
Civil Penalties
 50% penalty in case of:
a. willful neglect to file the return on time
b. false or fraudulent return is wilfully filed
Case 1 – Filing the return on time but through an
internal revenue officer than with whom the return is
required to be filed, without authorization

 The income tax return of Larry is required to be filed under

the jurisdiction of RDO Iloilo City. Without prior authorization
from the BIR, he filed his tax return and paid the tax in
Cagayan de Oro City. The tax due and paid per return is
P50,000. How much is the amount still due?

Income tax due per return P 50, 000

Add: 25% surcharge 12, 500
Total amount due 62, 500
Less: Amount paid 50, 000
Amount still due P 12, 500
Interest
In case of deficiency and delinquency in the payment of tax, an interest at the
rate of 20% per annum shall be imposed from the date prescribed for payment
until the amount is fully paid.

 Deficiency interest: failed to pay:

a. the amount of the tax due on any return required to be
filed
b. the amount of the tax due for which no return is required
c. a deficiency tax, or any surcharge or interest thereon on
the due date appearing in the notice and demand of the
Commissioner, there shall be assessed and collected on the
unpaid amount, interest at the rate prescribed until the
amount is fully paid, which interest shall form part of the
tax.
Case 2 – Late filing and late payment of the
tax

 Zuma Blay filed his 2011 income tax return and paid the tax on
July 15, 2012. The income tax due per return is P200, 000. How
much is the total amount due including penalties and interest?

Income tax P200, 000

Add: Penalties & Interest Surcharge
for late filing & late
payment (200, 000 x 25%) 50, 000
Interest (200, 000 x 20% x 3/12) 10, 000 60,000
Income tax payable as of July 15, 2012 P 260, 000
Case 3: Late filing and late payment due to willful neglect

Illustration 16-3:
Oyang neglected to file his income tax return for the calendar year
2010 which was due for filing on April 15, 2011. He was notified by the
BIR of his failure to file the return, for which reason, he filed his return
and paid the tax, only after the said notice, October 15, 2012. The tax
due per return is P100, 000. How much is the total tax due, including
penalties and interest but excluding compromise penalties?
Answer:

Income tax due per return 100, 000

Add: Surcharges
Late filing and payment (100,000 x 50%) 50,000
Interest ( 100,000 x 20%x 18/12) 30,000 80,000

Total Amount Due 180,000

Case 4: No penalty out there is interest on deficiency tax

Illustration 16-4:
Poypoy filed his income tax return for calendar year 2010 and
paid the tax of P100,000 on April 15, 2011. Upon pre-audit of his
return, it was disclosed that he erroneously computed the tax due.
The correct amount of tax due is P120,000. The taxpayer is
assessed for deficiency income tax in a letter of demand and
assessment notice issued on June 20, 2012. How much is the
amount still due on July 15, 2012?
Answer:

Tax due per pre-audit 120,000

Less: Amount assessed and paid per tax return filed 100,000
Deficiency Income Tax 20,000
Add: Interest ( 20,000 x 20% x 15/12) 5,000
Amount still due 25,000
Case 5: Late payment of a deficiency tax assessed

Illustration 16-5:
Multimedia Corporation received formal letter of demand and
assessment notice requiring it to pay a deficiency tax assessment of
P100,000 on or before June 30, 2012. The Corporation failed to pay on
time and the assessment has become final and collectible. How much is the
total amount due on Multimedia Corporation if it pays its tax assessment
only on August 15, 2012?
Answer:

Deficiency tax 100,000

Add: Surcharges
Late payment (100,000 * 25%) 25,000
Interest ( 100,000 * 20%* 1.5/12) 2,500 27,500
Total amount due 127,500
 Case 6: False or Fraudulent
Return is Filed
There should be a surcharge of 50% and interest on basic tax

 Prima Facie Evidence for False or Fraudulent return:

a. Substantial underdeclaration (more than 30% ) of taxable

sales, receipts or income.
b. Substantial overstatement ( more than 30%) of deductions
 Illustration

Jann filed and paid his income tax return for

taxable year 2011on April 15, 2012. The amount
of tax paid is P100,000, while the correct amount
of the tax due is P180,000. The preliminary
assessment was sent to hi, but he did not file
any protest. A final assessment was issued
requiring him to pay his liability on July 15, 2013.
How much liability should appear in the notice of
assessment?
 Correct amount of tax due 180,000
Less: Amount of tax paid 100,000
Deficiency tax 80,000
Add: Surcharges
False/ Fraudulent return ( 80,000 x 50%) 40,000
Interest (80,000 x 20% x 15/12) 20,000 60,000
Payable, July 15, 2013 140,000
Case 7: Duly authorized partial or
installment payment of tax liability
No 25% surcharge shall be imposed for payment of the tax
since its deadline for payment has been duly extended

Provided, that the request to make partial or installment

payment has been made before the original deadline for
the payment of the tax due.
Illustration
Ice Corporation, due to financial incapacity, requested for a permit
to pay its income tax liability per return for calendar year 2012 on
the amount of P1,000,000, in four monthly installments, starting
April 15, 2013. The request has been duly approved by the BIR.
Compute tax payable by installment on the following dates:

a. April 15, 2013

b. May 15, 2013
c. June 15, 2013
d. July 15, 2013
a. Installment payment on April 15, 2013 ( 1,000,000/4)
250,000

b. Income tax due for return 1,000,000

Less: tax paid on April 15 250,000
Balance as of, April 15, 2013 750,000
Add: Interest ( 750,000x20%x 1/12) 12,500
Amount due on May 15, 2013 762,500
Less: Installment payment on May 15 262,500*
Balance as of May 15, 2013 500,000

*Installment payment on May 15 ( 250,000 + 12,500) 262,500

c. Balance as of May 15, 2013 500,000
Add: Interest ( 500,000x20%x1/12) 8,333
Amount due on June 12, 2013 508,333
Less: Installment payment on June 15, 2013 258,333
Balance as of, June 15, 2013 250,000

d. Balance as of June 15, 2013 250,000

Add: Interest ( 250,000x 20%x1/12) 4,167
Installment payment on July 15, 2013 254,167
Case 8: Partial Payment of tax due without
prior BIR permit for extended payment

25% penalty – late filing and late payment plus 20% per
annum based on the income tax due per return
Illustration
Jovita Corporation received a notice from the BIR to file
its 2010 income tax return ( which the corporation failed
to file on April 15, 2011) and pay the tax of P1,000,000
plus the 25% surcharge and 20% interest.
On July 15, 2012 the corporation made a partial payment
of P400,000 only.
Assuming that the BIR demanded payment of the unpaid
balance of its tax obligation payable by January 15,
2013, how much is the amount still due on Jovita
Corporation?
Income tax due per return 1,000,000
Add: Surcharges
Late Filing and payment
( 1,000,000x 25% ) 250,000
Interest
( 1,000,000x20%x 15/12) 250,000 500,000
Amount due as of July 15, 2012 1,500,000
Less: Partial payment on July 15 400,000
Balance as of July 15, 2012 1,100,000
Add: Interest 110,000
Amount still due 1,210,000