Seminar on Year End Adjustment of

Withholding Tax on Compensation

PURPOSE:
TAX DUE = TAX WITHHELD

WHEN:
On or before the end of the calendar year, prior to the payment of compensation for the last payroll.
If terminated, on the day on which the last payment of compensation is made.

STEP 1 -

Determine the taxable regular and supplementary compensation paid to the employee for the entire calendar year; STEP 2 - If the employee has previous employment/s within the year, add the amount of taxable compensation paid to the employee by the previous employer.

STEP 3 Deduct from the aggregate amount of compensation computed in Step 2 the amount of the total personal and additional exemptions of the employee; Personal Exemptions: Single P50,000 Married P50,000 Additional Exemption: P25,000 for each qualified dependent

STEP 4 - Deduct the amount of premium payments on Health and/or Hospitalization Insurance of employees who have presented evidence that they have paid the same during the taxable year. Note: The deductible amount shall not exceed P2,400/annum or P200/month whichever is lower and total family gross income does not exceed P250,000 for the calendar year.

STEP 5 - Compute the amount of tax on the difference arrived at in Step 4, in accordance with the schedule provided in Sec. 24 (A) of the Code, as follows:

OVER BUT NOT OVER AMOUNT RATE OF EXCESS OVER Not over 10,000 30,000 70,000 140,000 250,000 500,000 10,0000 30,000 70,000 140,000 250,000 500,000 over 5% 10% 15% 20% 25% 30% 34%

500 + 10,000 2,500 + 30,000 8,500 + 70,000 22,500 + 140,000 50,000 + 250,000 125,000 + 500,000 33% in 1999 32% in 2000 and thereafter

STEP 6 - Determine the deficiency or excess, if any,

of the tax computed in Step 5 over the cumulative tax already deducted and withheld since the beginning of the current calendar year.

Gross Compensation (prev. + present) Less:Non-Taxable/Exempt Compensation xxx a)13th month pay & other benefits b)Other non-taxable benefits c)SSS, GSIS, PHIC, Pag-ibig and Union Dues (Employees share only) Less: a) Personal and additional exemption b) Health/Hosp. Premium payment Taxable Compensation Income Tax due

Pxxx xxx xxx xxx xxx xxx xxx xxx xxx xxx

OVER BUT NOT OVER AMOUNT RATE OF EXCESS OVER Not over 10,000 30,000 70,000 140,000 250,000 500,000 10,0000 30,000 70,000 140,000 250,000 500,000 over 5% 10% 15% 20% 25% 30% 34%

500 + 10,000 2,500 + 30,000 8,500 + 70,000 22,500 + 140,000 50,000 + 250,000 125,000 + 500,000 33% in 1999 32% in 2000 and thereafter

Compensation Income-net Less: Exemption (single) Taxable Income Tax Due Less: Tax Withheld Jan-Nov EVEN PAYABLE REFUNDABLE

Compensation Income-net A B C 230,000 230,000 230,000 50,000 50,000 50,000 180,000 180,000 180,000 32,500 32,500 32,500 32,500 0__ 30,000 2,500 (2,000) 34,500

Mr. Vic, head of the family with a qualified dependent brother receives P18,000 (net of SSS, Philhealth, HDMF) as monthly regular compensation starting January 1, 2012. On June 1, 2012, he filed his resignation effective June 30, 2012 and was not reemployed for the rest of the year. The tax withheld from January to May was P15,208.75.

Total compensation (Jan. May ) Add: Compensation to be recd (June) Gross compensation Jan-June Less: Personal Exemption Net Taxable Compensation Tax Due Tax Withheld from Jan. to May To be refunded on or before 6/30/12

P90,000.00 18,000.00 108,000.00 50,000.00 P58,000.00 P 6,700.00 15,208.75 (P8,508.75)

Mr. Alexander, married with 2 qualified dependent children received P18,500 monthly compensation (net of SSS, Philhealth, HDMF employees contributions). Taxes withheld from Jan. to Nov. were P8,158.00.

Total Compensation (Jan - Nov) Add: Dec. compensation Gross Compensation Less: Personal/additional exemption Total Compensation Tax due P Less: Tax Withheld Collectible W/tax for Dec. salary

P203,500.00 18,500.00 P222,000.00 150,000.00 P 72,000.00 8,900.00 8,158.00 P 742.00

Manual Submission 3 1604CF/1604E Including the employees and income payees.

copies alphalist

of of

Diskette/CD & email Submission thru esubmission@bir.gov.ph

Where to file?
BIR Revenue District Office 24 Valenzuela City

What to use:

WAGES 1604CF + alphalist

EXPANDED 1604 E + alphalist on or before March 1 ff year RDO

When to submit: On or before Jan. 31 ff year Where to submit: Retention same RDO 3 yrs

1. 2.

3.
4. 5. 6.

Non-withholding of tax Under withholding Non remittance Under remittance Late remittance Failure to refund excess taxes withheld

1.

Additions to the tax

a. Sec. 248 - 25%/50% penalty b. Sec. 249 - 20% interest c. Sec. 251 - in addition to the other penalties, be liable upon conviction to a penalty equal to the total amount of the tax not withheld, or not accounted for and remitted d. Sec. 252 - in addition to the penalties, be liable to a penalty equal to the total amount of refund which was not refunded to the employee resulting from any excess of the amount withheld over the tax actually due on their return

2.

Criminal Liabilities a. Sec. 255 for failure of any person required to pay any tax, make a return, keep any record, or supply correct the accurate information, or supply correct and accurate information, or withhold or remit taxes withheld withheld, or refund excess taxes withheld on compensation upon conviction thereof, be punished by a fine of not less than Ten thousand pesos (P10,000) and suffer imprisonment of not less than (1) year but

2.

Criminal Liabilities b. Sec. 256 in the case of corporations, the penal liabilities of any corporation, association or general co-partnership liable for any of the acts or omissions penalized under the Tax Code, in addition to the penalties imposed upon the responsible corporate officers, partners or employees,

2.

Criminal Liabilities b. Sec. 256 upon conviction for each act or omission, be punished by a fine of not less than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000).

2.

Criminal Liabilities c. Sec. 272 in case of public officers, upon conviction for each act or omission, be punished by a fine of not less than Five thousand pesos (P5,000) but not more than Fifty thousand pesos (P50,000) or suffer imprisonment of not less than six (6) months and one (1) day but not more than two (2) years, or both.

2.

Criminal Liabilities d. Sec. 275 no specific penalty is provided by law upon conviction for each act or omission, be punished by a fine of not less than One thousand pesos (P1,000) or suffer imprisonment of not more than six (6) months, or both.

Rozenn G. Novilla CPA, MPA

Revenue Officer III (Assessment Section) Revenue District Office NO. 24 Valenzuela City