#AskTheTaxWhiz: Is 13th month pay really taxable?
I know 13th month pay is mandatory but almost one-third of it goes to taxes. Is it really taxable? How about other bonuses?
In excess of the P30,000 ($672.81*) ceiling, yes. The 13th month pay and other bonuses in excess of the threshold will be added to the taxable compensation income subject to withholding tax. The ceiling will be increased to P82,000 ($1840.30) once the proposed bill has been signed into law by the President, effective next year.
How does the accounting office compute withholding taxes from our salaries? How do I know if they are deducting the correct amount of taxes?
Based on your basic salary, qualified dependents, and schedule of payroll, the accounting office will refer to the withholding tax table to determine the amount of taxes to be withheld.
Every January, employers must release to you a tax refund, if any, and Bureau of Internal Revenue (BIR) Form 2316 as proof of the withholding taxes from our salaries. This will be used to reconcile the taxable compensation income reported to BIR versus the total salary received and taxes withheld as supported by your pay slip.
What are de minimis benefits? Are they also taxable? Are employers required to provide those benefits to employees? If we donate to charity, can it be used to reduce our taxes?
De minimis benefits are facilities or privileges offered by an employer to his employees, as a means of promoting the health, goodwill, contentment, or efficiency of his employees. These are the following de minimis benefits an employer may opt to give, but not mandatory:
- Monetized unused vacation leave credits of private employees not exceeding 10 days during the year
- Monetized value of vacation and sick leave credits paid to government officialsand employees
- Medical cash allowance to dependents of employees not exceeding P750 ($16.82) per employee per semester or P125 ($280) per month
- Rice subsidy of P1500 ($33.65) or one sack of 50-kg rice per month amounting to not more than P1500 ($33.65)
- Uniforms and clothing allowance not exceeding P4000 ($89.73) per annum
- Actual medical assistance, ex: medical allowance to cover medical and health care needs, annual medical / executive check-up, maternity assistance, and routine consultations, not exceeding P10,000 ($224.32) per annum
- Laundry allowance not exceeding P300 ($6.73) per month
- Employees achievement awards, ex: for length of service or safety achievement, which must be in the form of a tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding P10,000.00 ($224.32) received by the employee under an established written plan which does not discriminate in favor of highly paid employees
- Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 ($112.16) per employee per annum
- Daily meal allowance for overtime work and night. Graveyard shift not exceeding 25% of the basic minimum wage
No. Employees are not allowed to claim deductible expenses. Only personal exemption (P50,000; $1121.58) and additional exemptions (P25,000 [$560.79] per child, maximum of 4) are available to employees to reduce their income tax.
Got a question about taxes? #AskTheTaxWhiz! Tweet @rapplerdotcom or email us at firstname.lastname@example.org. – Rappler.com
Mon Abrea is a former BIR examiner and an advocate of genuine tax reform. He serves as chief strategy officer of the country’s first social consulting enterprise, the Abrea Consulting Group, which offers strategic finance and tax advisory services to businesses and professionals. Mon's tax handbook, Got a Question About Taxes? Ask the Tax Whiz! is now available in bookstores nationwide. Follow Mon on Twitter: @askthetaxwhiz or visit his group’s Facebook page. You may also email him at email@example.com.