Income Tax Return

INCOME TAX RETURN

INCOME TAX RETURN 

Definition:

It is the income of a person that he/she shall pay to the BIR (Bureau of Internal Revenue) depending the on how much he/she earns annually.

INCOME TAX RETURN •WORDS TO REMEMBER! GROSS INCOME ALLOWABLE EXPENSES aka “PERSONAL EXEMPTIONS” TAX DUE TAXABLE INCOME ALLOWABLE DEDUCTION

INCOME TAX RETURN 

GROSS INCOME:

It is the annual income of an employer or employee. 

ALLOWABLE EXPENSES:

These are the separate taxes we pay that is excluded from the taxable income we pay. 

TAX DUE:

It is the payment due we have to pay annually to the BIR. 

TAXABLE INCOME:

It is the difference of the Gross Income minus the Allowable Expenses. 

ALLOWABLE DEDUCTION:

These are taxes we pay to some public or private firms or insurance company for that is excluded from the taxable

INCOME TAX RETURN ₱ 50,000(ALLOWABLE EXPENSES): Single, Married, Widow 

INSURANCE COMPANY or FIRMS(ALLOWABLE DEDUCTION): SSS, PHIL HEALTH, PAG – IBIG 

HOW TO COMPUTE? 

PROBLEM SAMPLE:

 Mr. Fisher is a single man and an employee of the Manila Heart Center in Manila. His yearly salary is ₱ 480,000. He pays ₱ 20,000 for his SSS, Phil Health, and Pag – Ibig yearly. How much does he have to pay for his tax1:due? Solution GROSS INCOME – (ALLOWABLE DEDUCTION + ALLOWABLE EXPENSES) = TAXABLE INCOME

₱ 480,000.00 – ₱ 70,000.00 ₱ 410,000.00

₱ 50,000.00 (ALLOWABLE EXPENSES) + ₱ 20,000.00 (ALLOWABLE DEDUCTION)

₱ 70,000.00 (A.E. and A.D.)

HOW TO COMPUTE? Solution 2:

Compute for the range percentage of TAXABLE

INCOME

₱ 410,000.00 (TAXABLE INCOME)TAXABLE INCOME PERCENTAGE To compute we have to equally distribute the amount of the TAXABLE INCOME through the chart provided on the right side.

RATE ₱ 10,000 – 5% = ₱ 500 ₱ 30,000 – 10% = ₱ 3,000

₱ 10,000 (5%) ₱ 30,000 (10%)

₱ 70,000 – 15% = ₱ 10,500

₱ 70,000 (15%)

₱ 140,000 – 20% = ₱ 28,000

₱ 140,000 (20%)

₱ 250,000 – 25% = ₱ 62,500

+ ₱ 160,000 (25%) ₱ 410,000

Hence

₱ 160,000 falls under the range 0f 25% because it is between ₱ 140,000 and ₱ 250,000

₱ 500,000 – 30% = ₱ 150,000

HOW TO COMPUTE?

Continuation.. Solution 2:

Compute for the range percentage of TAXABLE

INCOME ₱ 10,000 (5%)

₱ 10,000 (5%) = ₱ 500

₱ 30,000 (10%)

₱ 30,000 (10%) = ₱ 3,000

₱ 70,000 (15%)

₱ 70,000 (15%) = ₱ 10,500

₱ 140,000 (20%)

₱ 140,000 (20%) = ₱ 28,000

+ ₱ 160,000 (25%) ₱ 410,000

₱ 160,000 (25%) = ₱ 40,000 ₱ 10,000 x .05 = ₱ 500

HOW TO COMPUTE

₱ 30,000 x .10 = ₱ 3,000 FOR THE PERCENTAGE OF THE ₱ 70,000 x .15 = ₱ 10,500

“TAXABLE INCOME”

₱ 140,000 x .20 = ₱ 28,000 ₱ 160,000 x .25 = ₱ 40,000

HOW TO COMPUTE?

olution 3: Add all the computed PERCENTAGE ₱ 10,000 x .05 = ₱ 500

₱

₱ 30,000 x .10 = ₱ 3,000

₱ 3,000.00

₱ 70,000 x .15 = ₱ 10,500

₱ 10,500.00

₱ 140,000 x .20 = ₱ 28,000

₱ 28,000.00

₱ 160,000 x .25 = ₱ 40,000

500.00

+ ₱ 40,000.00 ₱ 82,000.00

“₱ 82,000.00”TAX DUE that Mr. Fisher has to pay

JOURNAL 

PROBLEM SOLVING:

 Mr. Howard is a hard working single man and a Health Worker at St. Lukes Hospital. His yearly salary is ₱ 240,000. He pays ₱ 20,000 for his SSS, Phil Health, and Pag – Ibig yearly. How much does he have to pay for his tax due? 5pts: Given: (GROSS INCOME, ALLOWABLE EXPENSES, and ALLOWABLE DEDUCTION)

5pts: Complete Solution: GROSS INCOME – (ALLOWABLE DEDUCTION + ALLOWABLE EXPENSES) = TAXABLE INCOME (Computation of the distribution of Percentage of the TAXABLE INCOME) 5pts: FINAL ANSWER(TAX DUE)