Problem 1
Mr. Alvarez had the following income during the year:
Gross compensation income including P25,000 13th month pay
Less tardiness or absences
Net compensation income
SSS deductions
Philhealth deductions
Pag-ibig deductions
Union dues
Withholding tax
Net pay
Compute the following:
a). Total exclusion from gross income
b). Taxable net income
c). Income tax due
ANSWERS
a). 13TH month pay
sss deductions
Philhealth
Pag-ibig
Union dues
Total exclusions
P325,000
10,000
P315,000
12,000
9,000
10,000
5,000
40,000
P239,000
P25,000
12,000
9,000
10,000
5,000
P61,000
b). Net compensation income
Less exclusions
Taxable income
P315,000
61,000
P254,000
c. Income tax due
(P254,000 – P250,000) x 20% = P800
Ms. Abrial is the owner of Bebe Party Favors store. She also works as a party host. In
2018 her store's gross sales amounted to P1,200,000 while her gross receipts as party
host amounted to P450,000. She has signified her intention to be taxed at 8% income
tax rate in her first quarter income tax return. What is Ms. Abrial income tax liability for
2018.
Assume that Ms. Abriel (above) failed to signify her intention to be taxed 8% income tax
rate on gross sales/receipts in her first quarter income tax return. Cost of sales incurred
in 2018 amounted to P850,000 while operating expenses P380,000. Compute for Ms.
Abriel income tax due for 2018. Compute Ms. Abrial income tax liability in this case.
Points: 20
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ANSWERS
a) Use 8% fixed rate
Gross sales
Gross receipts
Total taxable income
P1,200,000
450,000
P1,650,000
Income Tax due: (1,650,000 – P250,000) x 8% = P112,000
b) Use graduated tax table
Gross receipts
Gross sales
Less COS
Net income
Less Operating expenses
Net loss
Taxable income
Income Tax due:
1st P400,000
Excess P20,000 x 25%
P450,000
P1,200,000
850,000
P 350,000
380,000
30,000
P420,000
P30,000
5,000
P35,000
In 2018, Mr. Bonaro, Senior Manager of Bosley, Inc. earned an annual compensation of
P1,800,000, inclusive of 13th month pay and other benefits amounting to P130,000 but
net of mandatory contributions to SSS, Philhealth and HDMF. Aside from being
employed, he is also into the business of selling travel accessories. His gross sales for
the year was P2,700,000. His cost of sales and operating expenses were P1,200,000
and P700,000, respectively while non-operating income was P250,000.
A. Compute for the income tax due for 2018 assuming that he signified his intentions to
be taxed at 8% income tax rate on his gross sales for his income from business.
On Compensation income:
Annual compensation
Less Non-taxable benefit
Taxable compensation income
Income tax due on compensation:
Ist P800,000
Excess P910,000 x 30%
P1,800,000
90,000 (maximum)
P1,710,000
P130,000
273,000
P403,000
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On business income:
Gross sales
Add non-operating income
Taxable business income
P2,700,000
250,000
P2,950,000
Income tax due: P2,950,000 x 8% =
P236,000
Total income tax due:
P403,000 + P236,000 = P639,000
B. Had Mr. Bonaro opted not to be taxed at the 8% income tax rate based on gross
sales and other non-operating income, what will be his income tax due for 2018?
Taxable compensation income
Add taxable business income:
Gross sales
Less COS
Net Income
Less operating expenses
Net income
Add non-operating income
Total taxable income
P1,710,000
P2,700,000
1,200,000
P1,500,000
700,000
P 800,000
250,000
Income tax due:
1st P2,000,000
Excess P760,000 x 32%
Points: 20
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1,050,000
P2,760,000
P490,000
243,000
P733,200