Season 7 - 8% income tax option PDF

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PHILIPPINE ASSOCIATION of CERTIFIED TAX TECHNICIANSONLINE SEMINARJanuary-February 2021SEASON – 8% INCOME TAX OPTIONProblem 1Mr. A, an accountant, owns a small grocery. During the taxable year, he had the following gross receipts:Option 1 – 8% of gross sales/receipts Option 2 – Graduated ratesGross s...

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PHILIPPINE ASSOCIATION of CERTIFIED TAX TECHNICIANS ONLINE SEMINAR January-February 2021

SEASON – 8% INCOME TAX OPTION Problem 1 Mr. A, an accountant, owns a small grocery. During the taxable year, he had the following gross receipts: Option 1 – 8% of gross sales/receipts Option 2 – Graduated rates Gross sales (million)

Gross receipts (000)

1

P 1.8

P500

P 630

2

2.0

400

1,300

3

2.5

750

1,200**

4

2.6

1,100

2,450**

5

1.2*

250*

Cost (000)

Option? (Y/N)

Income tax due

Bus tax due

860

* Failed to signify intention to be taxed at 8%. ** Net of VAT SCHEDULE OF INCOME TAX RATES Over P 250,000 400,000 800,000 2,000,000 8,000,000

Not over P 250,000 400,000 800,000 2,000,000 8,000,000

Tax Exempt P 30,000 130,000 490,000 2,410,000

Plus

Of excess over

20% 25% 30% 32% 35%

P 250,000 400,000 800,000 2,000,000 8,000,000

Problem 2 1. Ka Wani is a government employee. He is not engaged in business nor has any other source of income other than his employment. For 2018, Ka Wani earned a total taxable compensation income of ₱900,000. How much is the income tax due? 2. CC is an accountant who is engaged in public practice. Her total gross receipts amounted to ₱4,250,000.00 for taxable year 2018. Her recorded cost of service and operating expenses were ₱2,150,000.00 and ₱1,000,000.00, respectively. QUESTIONS: a. HOW MUCH is the income tax due on CC? b. What business tax is due?

3. In 2018, Mama San owns a videoke bar with gross receipts of ₱2,500,000. Her cost of sales and operating expenses are ₱1,000,000 and ₱600,000, respectively, and with non-operating income of ₱100,000. How much is the income tax due and business tax due on Mama San?

4.

In 2018, Dean Medel, professor of accounting in one university, earned annual compensation of ₱900,000, inclusive of 13th month and other benefits in the amount of ₱120,000 but net of mandatory contributions to SSS, Philhealth and Pag-Ibig. Aside from employment income, he practices his profession as a CPA, with gross receipts of ₱2,200,000. His cost of services and other operating expenses amounted to ₱600,000 and 250,000, respectively, and with nonoperating income of ₱100,000. COMPUTE for the a. Total income tax due if he opted to be taxed at 8%. b. Total income tax due if he opted to be taxed at the graduated rates. c. Business tax on the profession.

Problem 3 Val, Filipino residing in Manila had the following data during the year: Gross receipts - profession Expenses, profession Cost of services Winnings in a raffle Prize won in a contest Cash dividend received from C Corp., domestic company Salary as part time accounting teacher (net of P2,400 WT) Rental income (net of 5% WT) Depreciation of rental equipment

P 950,000 120,000 60,000 100,000 5,000 6,000 37,600 38,000 8,000

1. Income tax payable using the graduated rates if Val is single, supporting his brother, 30 years old, mentally defective and a senior citizen. a. P 144,100 c. P142,100 139,700 d. 195,160 b . 2. Income tax payable if Val availed of the 8% income tax option a. P 207,640 c. P79,600 b 139,700 d. 75,200 . Problem 4 The taxpayer is a resident citizen who is married, with gross receipts from profession of P500,000 and expenses with supporting receipts of P180,000. 1.

If the taxpayer chose the itemized deductions from gross income, the taxable income is: a. P247,600 c. P267,600 b. P320,000 d. P270,000

2.

If the taxpayer chose the optional standard deduction, the taxable income is: a. P247,600 c. P267,600 b. P300,000 d. P270,000

3.

The income tax due if the taxpayer availed of the 8% income tax option c. P20,000 a. P14,000 b. P40,000 d. None

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