Year-End Adjustment 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.
YEA-Annualized Method 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.
YEA-Annualized Method 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
YEA-Annualized Method 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.
YEA-Annualized Method 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.
Annualized Withholding Tax - Formula Gross Compensation (prev. + present) Pxxx Less:Non-Taxable/Exempt Compensation xxx a)13th month pay & other benefits xxx b)Other non-taxable benefits xxx c)SSS, GSIS, PHIC, Pag-ibig and Union Dues (Employees share only) xxx xxx Less: a) Personal and additional exemption xxx b) Health/Hosp. Premium payment xxx xxx Taxable Compensation Income xxx Tax due xxx
INCOME TAX TABLE OVER BUT NOT OVER AMOUNT RATE OF EXCESS OVER Not over 10,0000 5% 10,000 30,000 500 + 10% 10,000 30,000 70,000 2,500 + 15% 30,000 70,000 140,000 8,500 + 20% 70,000 140,000 250,000 22,500 + 25% 140,000 250,000 500,000 50,000 + 30% 250,000 500,000 over 125,000 + 34% 500,000 33% in 1999 32% in 2000 and thereafter
BASIC CONCEPT OFYEAR -END ADJUSTMENT 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 30,000 34,500 0__ 2,500 (2,000) Compensation Income-net Less: Exemption (single) Taxable Income Tax Due Less: Tax Withheld Jan-Nov EVEN PAYABLE REFUNDABLE
Sample Problem 1 Mr. Dexter, head of the family with a qualified dependent brother receives P12,166.67 (net of SSS, Philhealth, HDMF) as monthly regular compensation starting January 1, 2002, he filed his resignation effective June 30, 2002. The tax withheld from January to May was P2,900.
Computation: Total compensation (Jan. - June) P73,000.00 Less: Personal Exemption 50,000.00 Net Taxable Compensation P23,000.00 Tax Due P 1,800.00 Tax Withheld from Jan. to May 2,900.00 To be refunded on or before 6/30/02 (P1,100.00)
Sample Problem 2 Mr. Jacob, 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.
Computation: Total Compensation (Jan - Nov) P203,500.00 Add: Dec. compensation 18,500.00 Gross Compensation P222,000.00 Less: Personal/additional exemption 150,000.00 Total Compensation P 72,000.00 Tax due P 8,900.00 Less: Tax Withheld 8,158.00 Collectible W/tax for Dec. salary P 742.00
Annual Information Return • Manual Submission - 3 copies of 1604CF/1604E Including the alphalist of employees and income payees. • Diskette/CD & email Submission thru email@example.com
Where to file? B I R Revenue District Office West- Bonifacio St. Davao City East – Torres St., Davao City
Annual Information Return WAGESEXPANDED • What to use: 1604CF 1604 E + alphalist + alphalist • When to submit: On or before on or before Jan. 31 ff year March 1 ff year • Where to submit: RDO RDO • Retention 3 yrs same