Module 1 Assessment in Income Taxation SUBMITTED BY: RIZALIN G. BENZON BS IN ACCOUNTANCY – 2 SUBMITTED TO: SB MOLINA DE PERALTA PROFESSOR ASSESSMENT Part 1: JUSTIFICATION 1. LOCAL TAX If I am going to acquire a community tax certificate or commonly known as cedula as one of my requirements for my government examination, I will classify it as a LOCAL TAX. For the word “local” I can already distinguish that it is a tax that is imposed by the local government units in every province, city, municipality, and barangay. Wherein, a community tax certificate is a document issued to individuals such as students like me upon payment of it for a minimum basic community tax of Php5. 2. VALUE ADDED TAX In the situation of Reiner wherein he bought a fuel for his car, the tax that was imposed in it was a VALUE ADDED TAX, because a value added tax is that the consumer pays when the product comes on the market that applies to the cost of the product. On the other side, Reiner pays a VAT, for it is passed on to the end consumer which is himself. It is a form of consumption tax making it the most common tax type because all final sales are almost always charged this kind of tax. 3. BUSINESS TAXES, FEES, AND CHARGES; BARANGAY PERMIT/CLEARANCE; REGULATORY TAX In putting up a business, like online selling is not a hard thing to do wherein fact you just need to register in DTI and get a barangay permit, and it’s done! Thus, the classification of the fees I paid are as mention above. I did mention those three because all of it has one goal and that is to regulate a certain business in a community whether it is an online selling or not. This may come as a surprise but registering your online business at the DTI actually does have some advantages. In particular, it lends your business a sense of legitimacy, giving your customers peace of mind that they’re transacting with someone trustworthy enough to be recognized by the DTI. 4. GENERAL, FISCAL OR REVENUE TAX As a compliant Taxpayer, I will classify my tax (as to purpose) as GENERAL, FISCAL OR REVENUE TAX in the sense that I am paying a tax on my income over the course of the year. Thus, the tax collected was used for the purpose of raising public funds for the service rendered of the government and also to promote the general welfare and the protection of its citizens and to enable it to finance its various types of activities. 5. PROPERTY TAX (AS TO OBJECT); REAL PROPERTY TAX (AS TO SCOPE) James paid a PROPERTY TAX (AS TO OBJECT) and REAL PROPERTY TAX (AS TO SCOPE) for his inherited land. These 2 taxes are distinguished in the scenario because as to object, James as the new owner of the land has the responsibility to pay for its taxes. Thus, as to scope, he must pay a real property tax because owners of real property need to pay every year so that the local government unit (LGU) will not auction off their property. 6. NO, IT’S NOT A FEE PAID TAX Upon entering to a private resort and gone for a swimming, you are not going to pay a tax. Where in the first place, I thought of putting “Amusement Tax” but according to a book, private resorts, swimming pools, bath houses, hot springs and tourist spots do not belong to the same category or class as theaters, cinemas, concert halls where you can show such performances (for you to pay such taxes). However, upon considering these things, it is clear that resorts, swimming pools, bath houses, hot springs and tourist spots cannot be considered venues primarily "where one seeks admission to entertain oneself by seeing or viewing the show or performances". While it is true that they may be venues where people are visually engaged, they are not primarily venues for their proprietors or operators to actively display, stage or present shows and/or performances. 7. FINES or PENALTY Of course! Failure of a motorcycle rider like me to wear the standard protective motorcycle helmet may lead for paying fines or penalty under the Land Transportation Office here in Philippines. Thus, considering to this kind of scenario all motorcycle riders, including drivers and back riders, shall at all times wear standard protective motorcycle helmets while driving along the road, whether long or short drives, in any type of road and highway since helmet aims to reduce the risk of serious head and brain injuries by reducing the impact of a force or collision to the head. 8. WHAT IS INCOME? Income is money or some equivalent value that a certain individual or business receives, usually in exchange for providing a good or service or through investing capital. However, income is also used to fund day-to-day expenditures. Wherein, the primary sources of income for those retirees were under investments, pensions, and Social Security. For individuals, income is most often received in the form of wages or salary. Business income can refer to a company's remaining revenues after paying all expenses and taxes. In this case, income is referred to as "earnings.” Most forms of income are subject to taxation. 9. WHAT IS CAPITAL? From a financial capital economics perspective, Capital is a key part of running a business and growing an economy. It is also a cash or liquid assets held or obtained for expenditures. Another point worth noting is that a capital can be a measurement of wealth and also a resource that provides for increasing wealth through direct investment or capital project investments. 10. DISTINGUISH CAPITAL FROM INCOME The difference between the two is that capital is the money you invest. However, income is what you earn out of the capital invested. Wherein, both this term defines the nature of money. Capital is the money invested or available to be invested. Income refers to flow of money, it could your salary or a firm's earnings. The amount you save from your income, again becomes your capital which you can use for investments or expenses in the future. Part 2: CASE STUDY Case No. 1 Knowing that you are not a compliant taxpayer, for late filing, you are already penalized with a 25% surcharge penalty, 12% interest penalty, and the applicable compromise penalty. Thus, the best thing that you can do about a missed tax return is to file it again immediately and if you failed to do so, for whatever the reason is, to prepare your required Annual Financial Statements then ask for a help to an expert and you just need a good working knowledge in dealing with it and in protecting your rights as a taxpayer. As I have said, you can always have a helpline and in case you need a hand, a number of tax practitioners are within your reach. It’s a bottom line is tax compliance so that if your books of accounts are in order and all taxes were fully accounted for, then, the entire process may just be a formality. On the other hand, for penalties are imposed whether the violation is an honest mistake or intentional. For honest mistakes, these penalties could be avoided by knowing about the right forms, rates, filing and payment methods, and deadlines beforehand. This information can be gathered by attending tax briefings, tax coaching sessions, or various tax seminars. Consequently, do not complain on social media because doing such nonsense things is a waste of time, do not blame others instead ask yourself what did you done wrong! Social media complaining is not a "solution" to a "problem" it only treats a "symptom". Above all, with respect to Section 5 of NIRC, just pay the required income tax and the incurred penalties to avoid such circumstances like this again. Case No. 2 The proper issuance of a letter of authority, which is a written official authority issued by the Bureau of Internal Revenue (BIR) to its representatives to conduct a tax audit, is a strict legal requirement for the validity of a BIR tax assessment. The LOA informs the taxpayer that an audit or examination of its books of account will be conducted by the BIR through the authorized representatives specifically named therein. Without a valid LOA, an assessment is void for violating the taxpayer’s right to due process of law. And if there is a circumstance that I receive such Letter of Authorization (LOA) issued by the Revenue Regional Director in relation to the Income Tax Return for taxable year 2019 for preparation and filing of the Annual Income Tax Return based on subject Annual Financial Statements, I will prepare for an Audited Financial Report, payment for the required tax, and also file a protest. Filing a protest in the sense that, for example, we assume that there is a tax discrepancy attached to it or maybe the tax that you’re paying is much higher than the other one. Also, the tax refund, if we are paying too much, because we do not know what is the basis of LoA if too much tax paid or not. Part 3: Taxpayer’s Profile 1. Tax Identification Number (TIN) 02000006074 2. Employer: LGU – Vigan City, Employer’s TIN Number: 000-560-081 Address: Burgos St., Corner Quezon Avenue, Brgy. I, Vigan City, Ilocos Sur, 2700 Form of Organization: Government Organization Local 3. Name of Business: TRIUMPHUS LEGAL CO. Form of Organization: SOLE PROPRIETORSHIP DATE OF INCORPORATION: Established 2025 4. Capitalization Estimated investment will be Php 500,000 Upon building my own corporation someday, of course there is a lot of thing to consider before thinking of the capital you will invest. First thing is to estimate your one-time startup costs, wherein you come up with a list of things you’ll need that will be one-time hits. For example, will you need office furniture? What kind of supplies or equipment do you need? One of the best ways to figure out startup costs is to talk to someone who has been in your shoes or talk with an owner that’s in the business and ask questions. Because there is nothing new under the sun, so don’t try to reinvent the wheel. While the internet is full of information, and that can seem like the easiest way to gather information, you shouldn’t discount first-hand accounts. Subsequently, is to estimate your working capital, wherein you’ll need to figure out how much money it takes to keep the business running. From rent to utilities, what kind of money will you need to pay your monthly expenses? You’ll want to come up with a line item list of things you’ll need to pay for, like payroll, taxes, cell phone bills, rent, utilities, and money to market your business. You don’t have to create this list alone; you can turn to an accountant or business consultant for help. Doing your research before you start your business can save you a lot of headaches and money down the road. Another point worth noting is to figure out a six-month cushion, in here let’s not forget that you have bills of your own to pay. Yes, you need money to keep the business afloat, but you’ll be dedicating a lot of time to your new business and revenue will likely start off slow. You’ll want to plan ahead, giving yourself enough money to cover your personal expense for at least six months. This way, you won’t be stressed about making a certain amount of money to survive. Added to the list is, to add forgotten fees. Yes! There are a lot of fees that entrepreneurs don’t think about. One of the “hidden fees” That’s just one of many fees that could come your way . Last on my list is to add a little extra for unexpected, because at some point during the launch of your business, you’ll think of a fee or an expense that you didn’t plan for. Add all of these numbers together and you’ll know how much capital you’ll need to start your business.