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.