Answer to Question #270486 in Accounting for Another you

Question

A. Compute for the tax dues on compensation and business income.

1. Ratsa Man, is the financial analyst of PAYT Company. He earned annual compensation in 2019 of 1,800,000.00, inclusive of 13th month and other benefits in the amount of 130,000.00 but net of mandatory contributions to SSS and Philhealth. Aside from employment income, he is engaged in a trading business, with gross sales of 2,800,000- His cost of sales and operating expenses are 1,200,000.00 and 800,000.00, respectively, and with non-operating income of 50,000.00.

Answer 1

Answer:

Basic pay = 1,800,000 – 130,000 = 1,670,000

Other benefit of 130,000 are exempt from tax.

 

Derive business income:

Gross sales =                                    2,800,000

Less: Cost of sales =                         1,200,000

Gross profit =                                   1,600,000

Less: Operating expenses                   800,000

Operating income                               800,000

Add: non-operating income                 50,000

Net operating business income          850,000

 

Taxable salary:

Income from salary                         1,670,000

Income from business                        850,000

Total taxable salary                         2,520,000

 

Up to 250,000                        Exempt from tax                                                          0

250,000 – 500,000                 5% (5% of 500,000 less 250,000)                                12,500

500,000 – 750,000                10% (10% of 750,000 less 500,000)                             25,000

750,000 – 1000,000              15% (15% of 1000,000 less 750,000)                           37,500

1000,000 – 1,250,000           20% (20% of 1,250,000 less 1000,000)                        50,000

1,250,000 – 1,500,000          25% (25% of 1,500,000 less 1,250,000)                       62,500

More than 1,500,000          30% (30% of 2,520,000 less 1,500,000)                       306,000

 

Cess                                     4% of total tax (4% of 493,500)                                    19,740

 

Total Income tax                                                                                                       513,240

 

Tax dues on compensation and business income = 513,240