#AskTheTaxWhiz: How are withholding taxes computed?
Is there an easy way to know how our accounting office computes our withholding taxes? It seems we are the only ones not getting a tax refund. What document should we receive as proof of the taxes withheld from our salaries? Are we supposed to file this in lieu of our annual income tax return (ITR)?
Yes. You may access the BIR website and click on the icon of the withholding tax calculator found under the quick links section. However, the application is not downloadable. It is simply an automated computation of the withholding tax due based only on the information entered into by the user.
Further, the withholding tax due computed by the calculator cannot be used as basis for complaints of employees against their employers.
To access the withholding tax calculator, click here.
You may also access the following links for other tax calculators:
Your employer is required to issue a Certification of Compensation/Tax Withheld (or BIR Form 2316) on or before January 31 of the succeeding calendar year, as proof of the taxes withheld from your salaries.
If you are a regular employee without other sources of income or multiple employment, your employer is required to submit BIR Form 2316 to BIR office on your behalf, and the same shall serve as your ITR under the substituted filing system.
What is Republic Act No. 10653? Are all 13th month pay and bonuses exempted from income tax starting this year? How about the clothing, rice, and other allowances we are receiving? Is there a list of tax-exempt benefits?
Republic Act No. 10653 is an act adjusting the 13th month pay and other benefits ceiling excluded from the computation of gross income for purposes of income taxation, from P30,000 ($662.09) to P82,000 ($1,809.54).
The amount of P82,000 ($1,809.54) shall apply to the 13th month pay and other benefits paid or accrued beginning January 1, 2015.
The clothing, rice, and other allowances you receive are part of the de minimis benefits (facilities and privileges of relatively small value provided by an employer to employees as a means to promote their health, good will, contentment, or efficiency).
De minimis benefits are income tax-exempt. Here is the list:
- 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 officials and employees
- Medical cash allowance to dependents of employees not exceeding P750 ($16.55) per employee per semester or P125 ($2.76) per month
- Rice subsidy of P1500 ($33.11) or one sack of 50-kg rice per month amounting to not more than P1500 ($33.11)
- Uniforms and clothing allowance not exceeding P5000 ($110.34) 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 ($220.85) per annum
- Laundry allowance not exceeding P300 ($6.62) per month
- Employee 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 ($220.85) 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 ($110.34) per employee per annum
- Daily meal allowance for overtime work and night. Graveyard shift not exceeding 25% of the basic minimum wage
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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 firstname.lastname@example.org.
$1 = P45.31
Manager having trouble with tax work concept image via Shutterstock