Individual Tax Payer Part 2

Individual Tax
Payer
PART 2
Individual Tax Payer Part 2 2

Objectives

 Understand difference between Final Withholding

Tax and Creditable Withholding Tax
 Understand the quarterly tax returns
 To be able to how a married couple file their taxes.
 To be able to know the place where to file the ITR
 FWT VS. CWT
Certain incomes such as those
enumerated under section 24(B) of
Tax Code, as summarized in Table 2-
3 are subject to final taxes instead of
basic tax or graduated tax rates
3
A certain income not subject to final
withholding taxes on passive income
and capital gains tax, are subject to
creditable withholding taxes.
CWT is not an internal revenue but a
method of collecting income tax “in
advance” from the recipient of income
through the payor thereof, which is
constituted by law as the withholding
agent of the government.
 Formula 4

Gross Compensation income Pxxx

Gross Business/professional income xxx
Less: Allowable business/professional expenses (xxx)
Taxable net income xxx

Income tax Due (graduated tax rate) xxx

Less:
Creditable Withholding taxes
CWTx on compensation income Pxxx
CWTx withheld at source xxx
other tax credits
Prior year’s excess credit xxx
Tax payment for the previous quarter(s)xxx
Foreign income tax credit xxx (xxx)
Income Tax Payable Pxxx
 CWT PURCHASE OF/ PAYMENT OF 5
PROFESSIONAL FEES
INDIVIDUAL PAYEE
Gross income for current year <=3M 5%
Gross income for current year >3M 10%
NON INDIVIDUAL PAYEE
Gross income for current year <=720K 10%
Gross income for current year >720K 15%
RENTALS 5%
GOODS 1%
SERVICES 2%
INCOME PAYMENT TO BENEFICIARIES OF ESTATE/TRUST 15%

INCOME PAYMENT TO PARTNERS OF GPPs

Gross income for current year <=720K 10%
Gross income for current year >720K 15%

CERTAIN INCOME PAYMENTS MADE BY CREDIT CARD COMPANIES 1%

IMPORTANT TO REMEMBER
 ILLUSTRATION 6

A resident citizen employee provided the following data for 2023 taxable year:
Compensation income (gross of deductions below) P450,000
Deductions made by the employer
SSS premium contribution 6,000
PhilHealth contribution 8,400
Pag-ibig contribution 2,400
Union dues 1,200
Income Tax withheld 15,000

Required:
How much is the income tax payable of the employee?
Compensation income (gross of deductions below) P450,000
Less: Income exempt from tax
SSS premium contribution (6,000)
SOLUTION: PhilHealth contribution (8,400)
Pag-ibig contribution (2,400)
Union dues (1,200)
Taxable income 432,000
Tax due:
Tax on 1st 400,000 P22,500
Excess: 32,000 x 20% 6,400
Total tax due 28,900
Less: Tax withheld by the employer (15,000)
Income tax payable 13,900
 Education 교육 7

QUATERLT TAX RETURNS

Income tax returns for income derived from business and/or practice of
profession are required to be filed on a quarterly basis (regardless of the
results of operations) as follows:

Quarter Date
1st Quarter May 15
2nd Quarter
August 15 (45 days after end of Quarter)

3rd Quarter November 15 (45 days after end of Quarter)

Final adjusted/annual return
April 15 of the succeding year
 Formula 8

Q1 Q2 Q3 Q4
Gross income (CUMMULATIVE AMOUNT) xxx xxx xxx xxx
Business expense (CUMMUATIVE AMOUNT) (xxx) (xxx) (xxx) (xxx)
Taxable net income xxx xxx xxx xxx

Basic Income tax due Pxxx Pxxx Pxxx Pxxx

Less: Creditable withholding taxes
Prior year’s excess credit (xxx) (xxx) (xxx) (xxx)
Quarterly withholding taxes (xxx) (xxx) (xxx) (xxx)
Quarterly tax payment - (xxx) (xxx) (xxx)
Foreign tax credit (xxx) (xxx) (xxx) (xxx)
Income tax payable xxx xxx xxx xxx
 Married Tax Payer 9

Income Tax Due of Married Taxpayers

Under RA 10963, husband and wife, shall compute
separately their indivdual income tax based on their
respective total taxable income: Provided that if any
income cannot be definitely attributed to or identified as
income exclusively earned or realized by either of the
spouse, the same shall be divided equally between the
spouse for the purpose of determining their respective
taxable income.
Basic Tax Filing of ITR 10

FOR PURELY. COMPENSATION INCOME EARNERS:

Once a year only (unless qualified for substituted filing) > On or before April 15 of the following
year.

FOR BUSINESS INCOME EARNERS including income from Practice of profession:

The individual taxpayer is required to file a quarterly tax return on or before the following dates
(regardless of the results of operations):

1st Quarter May 15

2nd Quarter Aug. 15 (45 days after end of Quarter)
3 Quarter
rd
Nov. 15 (45 days after end of Quarter)
Final adjusted/annual return April 15 of the succeeding year
FWT Filing of ITR 11

‘For Final and Creditable Withholding taxes, the return

shall be filed and paid not later than the last day of the
month following the close of the taxable quarter during
which the withholding was made. The power of the
Secretary: of Finance to require withholding agents to
pay or deposit taxes deducted or withheld at more
frequent intervals is repealed under RA10963.
CGT Filing of ITR 12

a) Shares of stock
• Ordinary Return - within 30 days after each transaction
• Final Consolidated Return - on or before April 15 of the
following year

b) Real Property - within 30 days following each sale or other

disposition

Manner of Filing
a) Manual Filing
b) Electronic Filing and Payment System (EFPS)
c) eBIR Forms
CGT Filing of ITR 13

Payment Generally, the income tax payable shall be paid at the time the retum is filed
(also known as "Pay as you file system). The deadline for filing is discussed in the
preceding page. However, RA 10963 (TRAIN Law) provides, that, when the tax due is
in excess of P2,000, the individual taxpayer may elect to pay the tax in two equal
installments as follows

Place of Filing Income Tax Return

The Income tax return shall be filed and paid with any of the following;
(1)authorized agent banks,
(2)Revenue District Officer,
(3)Collection agent;
(4)Duly authorized city or municipal Treasurer
CGT Filing of ITR 14

For "With Payment" Returns

File the return in with the Authorized Agent Bank (AAB) of the place where the taxpayer
registered or required to be registered. In places where there are no AABS, the return shall be
filed directly with the Revenue Collection Officer or duly Authorized Treasurer of the city or
municipality in which such person has his legal residence or principal place of business in the
Philippines, or if there is none, filing of the return will be at the Office of the Commissioner.

For "No Payment" Returns (refundable, break-even, exempt and no operation)

File the return with the concerned Revenue District Office (RDO) where the taxpayer is
registered. However, "no payment" returns filed late shall be accepted by the RDO but shall be
filed with an AAB of Collection Officer/Deputized Municipal Treasurer (in places where there
are
no AABS, for payment of necessary penalties.
 Persons Required to file Income Tax Return 15

1) Individuals engaged in business and/or practice of profession. regardless of

the results of operations.
2) Individuals deriving compensation from two or more employers
concurrently or successively at any time during the taxable year.
3) Employees deriving compensation income, regardless of the amount.
4) Individuals deriving other non-business, non-profession-related income in
addition to compensation income not otherwise subject to final tax
5) Individuals receiving purely compensation income from a single employer.
6) Non-resident alien engaged in trade or business in the Philippines deriving
purely compensation income, or compensation income and other non-
business, non-profession-related income.
 Persons not Required to file Income Tax Return (RR 8-2018) 16

1) An individual earning purely compensation income whose

taxable income does not exceed P250,000.
2) An individual whose income tax has been correctly withheld
by his employer.
3) An individual whose sole income has been subjected to final
withholding tax.
4) Minimum wage earners
 Reference 17

Book:
Tabag, E. and Garcia, E. J. (2022) Income Taxation With Special Topics

Multimedia:
Enrico D. Tabag: https://youtu.be/Xo3lF3CUOVs
Sir Win’s Accounting Lecture: https://youtu.be/rPw8-TAP3_s
 18

Thank You!
Cuadro, Justine Mae A.
Gensaya, Sheehan
Teope, Emerliza