Taxation on Individuals: Compensation and Business Income Kur da Pio has asked y
ID: 2340900 • Letter: T
Question
Taxation on Individuals: Compensation and Business Income Kur da Pio has asked you to prepare his income tax return for the year ended (current year). The following pertains to his compensation income and business income. a Business income from his mini-department store attended to by his wife 455,000 b Monthly salary as supervisor in a manufacturing company 45,000 c 13th month salary for the current year 45,000 d Interest income from bank deposits for four quarters (net of withheld tax) 2,566 e Living quarter & meals during overtime jobs ( for convenience of employer) 27,600 f Monetized unused vacation leave payment for 10 working days 15,000 g Medical cash allowance to dependents (P125 per month) 1,500 h Rice subsidy per month (good variety) 1,500 i Uniforms and clothing allowance for the year 4,000 j Actual medical assistance on healthcare needs and check-ups 10,000 k Laundry allowance per month 300 l Employee achievement award for safety achievement with monetary value 10,000 m Christmans gifts and company anniversary celebrations (P2,500 each) 5,000 n Other benefits not included as part of de minimis (from E to L) 12,000 o 14th month bonus 45,000 p Advance rental deposit received under property lease 25,000 r Royalty received for property which produces timber 30,000 s Third prize award from a commercial contest 10,000 t Damage recovered in a patent infringement suit 45,000 u Lotto winnings 12,000 v Cost of Sales (80% of Business income for the year) 80% 364,000 w Business expenses - allowed as deductions 45,500 x Taxes - allowed as deduction (not part of business expense) 18,200 y Bad Debts - allowed as deduction (not part of business expense) 4,550 z Charitable contributions to accredited associations for religious purposes 10,000 aa The taxpayer is married with five (dependent) children - refer to (latest) basic & personal exemption bb Premium paid on health and hospitalization insurance 2,400 cc Withheld tax on compensation (by his employer) during the year 81,000 Instructions: The answer sheet outlined below is your guide to answering these questions 1 Gross Business Income (prepare your schedule of computation below) 2 Gross Compensation Income (prepare your schedule of computation below) 3 Other Income received (prepare your schedule of computation below) TOTAL GROSS INCOME (as computed for your guide) 788,000 4 Less: Total allowed business deductions (excluding charitable contributions) - schedule 5 Less: Charitable contribution allowed based on 10% limit (as computed for your guide) 2,275 6 Less: Basic personal exemption (prepare schedule of computation below) 7 Less: Additional exemptions (prepare schedule of computation below) 8 Less: Premium paid on health and hospitalization insurance (if any) TOTAL ALLOWABLE DEDUCTIONS (as computed for your guide) 220,525 9 NET TAXABLE INCOME 10 TOTAL TAX DUE [(Refer to Sec 24 (A)] 11 TOTAL TAX STILL PAYABLE Instructions: Using BIR form 1701, transfer your DETAILED computations/anwers indicated above to the proper columns as indicated. NOTE: ALL YOUR ANSWERS MUST BE BASED ON LATEST "TRAIN" LAW… IF THE QUESTION IS NO LONGER APPLICABLE IN "TRAIN" LAW EXPLAIN THE DIFFERENCE and INDICATE "NO LONGER APPLICABLE" as the case maybe… Taxation on Individuals: Compensation and Business Income Kur da Pio has asked you to prepare his income tax return for the year ended (current year). The following pertains to his compensation income and business income. a Business income from his mini-department store attended to by his wife 455,000 b Monthly salary as supervisor in a manufacturing company 45,000 c 13th month salary for the current year 45,000 d Interest income from bank deposits for four quarters (net of withheld tax) 2,566 e Living quarter & meals during overtime jobs ( for convenience of employer) 27,600 f Monetized unused vacation leave payment for 10 working days 15,000 g Medical cash allowance to dependents (P125 per month) 1,500 h Rice subsidy per month (good variety) 1,500 i Uniforms and clothing allowance for the year 4,000 j Actual medical assistance on healthcare needs and check-ups 10,000 k Laundry allowance per month 300 l Employee achievement award for safety achievement with monetary value 10,000 m Christmans gifts and company anniversary celebrations (P2,500 each) 5,000 n Other benefits not included as part of de minimis (from E to L) 12,000 o 14th month bonus 45,000 p Advance rental deposit received under property lease 25,000 r Royalty received for property which produces timber 30,000 s Third prize award from a commercial contest 10,000 t Damage recovered in a patent infringement suit 45,000 u Lotto winnings 12,000 v Cost of Sales (80% of Business income for the year) 80% 364,000 w Business expenses - allowed as deductions 45,500 x Taxes - allowed as deduction (not part of business expense) 18,200 y Bad Debts - allowed as deduction (not part of business expense) 4,550 z Charitable contributions to accredited associations for religious purposes 10,000 aa The taxpayer is married with five (dependent) children - refer to (latest) basic & personal exemption bb Premium paid on health and hospitalization insurance 2,400 cc Withheld tax on compensation (by his employer) during the year 81,000 Instructions: The answer sheet outlined below is your guide to answering these questions 1 Gross Business Income (prepare your schedule of computation below) 2 Gross Compensation Income (prepare your schedule of computation below) 3 Other Income received (prepare your schedule of computation below) TOTAL GROSS INCOME (as computed for your guide) 788,000 4 Less: Total allowed business deductions (excluding charitable contributions) - schedule 5 Less: Charitable contribution allowed based on 10% limit (as computed for your guide) 2,275 6 Less: Basic personal exemption (prepare schedule of computation below) 7 Less: Additional exemptions (prepare schedule of computation below) 8 Less: Premium paid on health and hospitalization insurance (if any) TOTAL ALLOWABLE DEDUCTIONS (as computed for your guide) 220,525 9 NET TAXABLE INCOME 10 TOTAL TAX DUE [(Refer to Sec 24 (A)] 11 TOTAL TAX STILL PAYABLE Instructions: Using BIR form 1701, transfer your DETAILED computations/anwers indicated above to the proper columns as indicated. NOTE: ALL YOUR ANSWERS MUST BE BASED ON LATEST "TRAIN" LAW… IF THE QUESTION IS NO LONGER APPLICABLE IN "TRAIN" LAW EXPLAIN THE DIFFERENCE and INDICATE "NO LONGER APPLICABLE" as the case maybe…Explanation / Answer
Calculation of Taxable Income and Tax
Head (a)
Business Income
455,000.00
BUSINESS INCOME
455,000.00
Head (b)
Salary Income
45,000.00
Add:
Living qtr meals
27,600.00
Add:
Vacation leave payment
15,000.00
Add:
Medical cash allowance
1,500.00
Add:
Uniform & clothing allowance
4,000.00
Add:
Laundry allowance
3,600.00
Add:
Employee achievement award
10,000.00
SALARY INCOME
106,700.00
Head (c)
Other Income
Interest received
2,566.00
Gifts
5,000.00
Other benefits
12,000.00
Bonus
45,000.00
Third award
10,000.00
Damage in patent recovered
45,000.00
Rice subsidy
18,000.00
Bad-debts disallowed
4,550.00
Lotto winning
12,000.00
OTHER INCOME
154,116.00
Head (d)
Rental Income
Deposit
25,000.00
RENTAL INCOME
25,000.00
Head (e)
Professional & royalty
Royalty income
30,000.00
PROFESSIONAL INCOME
30,000.00
GROSS INCOME
788,000.00
less:
Deductions allowed
Cost of sales
- 364,000.00
expenses
- 45,500.00
Charitable cont.
- 10,000.00
Premium paid
2,400.00
less:
Deductions allowed
220,525.00
Taxable Income
567,475.00
Tax Payable
Base rate
30,000.00
25% of excess of 400000
41,868.75
TOTAL TAX PAYABLE
71,868.75
WITHHELD TAX
81,000.00
TAX REFUND
9,131.25
Calculation of Taxable Income and Tax
Head (a)
Business Income
455,000.00
BUSINESS INCOME
455,000.00
Head (b)
Salary Income
45,000.00
Add:
Living qtr meals
27,600.00
Add:
Vacation leave payment
15,000.00
Add:
Medical cash allowance
1,500.00
Add:
Uniform & clothing allowance
4,000.00
Add:
Laundry allowance
3,600.00
Add:
Employee achievement award
10,000.00
SALARY INCOME
106,700.00
Head (c)
Other Income
Interest received
2,566.00
Gifts
5,000.00
Other benefits
12,000.00
Bonus
45,000.00
Third award
10,000.00
Damage in patent recovered
45,000.00
Rice subsidy
18,000.00
Bad-debts disallowed
4,550.00
Lotto winning
12,000.00
OTHER INCOME
154,116.00
Head (d)
Rental Income
Deposit
25,000.00
RENTAL INCOME
25,000.00
Head (e)
Professional & royalty
Royalty income
30,000.00
PROFESSIONAL INCOME
30,000.00
GROSS INCOME
788,000.00
less:
Deductions allowed
Cost of sales
- 364,000.00
expenses
- 45,500.00
Charitable cont.
- 10,000.00
Premium paid
2,400.00
less:
Deductions allowed
220,525.00
Taxable Income
567,475.00
Tax Payable
Base rate
30,000.00
25% of excess of 400000
41,868.75
TOTAL TAX PAYABLE
71,868.75
WITHHELD TAX
81,000.00
TAX REFUND
9,131.25
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