FABM2 Tax Computation Module 16
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Questions and Answers

Which of the following best defines mixed-income earners in the context of income taxation?

  • Taxpayers whose taxable income is exclusively from investments.
  • Taxpayers whose income comes solely from business activities.
  • Taxpayers who earn income from both self-employment and compensation. (correct)
  • Taxpayers only receiving compensation from employment.

What is the total taxable income calculated for Ms. Ysabelle?

  • P2,588,105.00 (correct)
  • P2,000,000.00
  • P1,219,100.00
  • P1,350,000.00

Which of the following statements is true regarding the 8% income tax rate?

  • It offers higher deductions compared to graduated tax rates.
  • It is applicable only if the taxpayer's income is solely from salary.
  • It serves as an alternative to graduated tax for business income earners. (correct)
  • All taxpayers can opt for the 8% income tax rate regardless of income type.

What defines Mixed Income Earners as per R.R. 8-2018?

<p>Individuals earning from both compensation and self-employment. (D)</p> Signup and view all the answers

What is the maximum amount excluded from taxable income as non-taxable 13th month pay and other benefits?

<p>P90,000.00 (B)</p> Signup and view all the answers

What must Mixed Income Earners file annually?

<p>BIR Form No. 1701 (B)</p> Signup and view all the answers

Which tax rates apply to Mixed Income Earners as per R.R. 8-2018?

<p>Graduated income tax rates apply. (D)</p> Signup and view all the answers

What percentage tax must a taxpayer pay on their gross sales under the amended tax law?

<p>3% (C)</p> Signup and view all the answers

How should the taxable income from compensation and business be treated for tax calculation purposes?

<p>They must be combined to compute the tax due. (D)</p> Signup and view all the answers

How does Module 14 differ from Module 15 in terms of tax computation focus?

<p>Module 14 focuses on employed individuals while Module 15 focuses on self-employed taxpayers. (C)</p> Signup and view all the answers

What is the correct statement regarding taxation for self-employed taxpayers?

<p>They are subject to certain tax rates based on their gross income. (D)</p> Signup and view all the answers

Using the information provided, how much is the income tax due calculated for Ms. Ysabelle?

<p>P678,193.60 (A)</p> Signup and view all the answers

Which of the following expenses must be deducted to calculate the net income from operations for Ms. Ysabelle?

<p>Cost of Sales and Operating Expenses (B)</p> Signup and view all the answers

What is the primary focus of Module 16 in relation to income earners?

<p>Liabilities of mixed-income earners. (D)</p> Signup and view all the answers

Which statement best describes the income tax rates under R.R. 8-2018?

<p>They are graduated rates based on income levels. (A)</p> Signup and view all the answers

What distinguishes a self-employed individual from an employee regarding tax computation?

<p>Self-employed individuals have more complex tax obligations. (C)</p> Signup and view all the answers

What distinguishes mixed-income earners from purely self-employed individuals regarding the P250,000 exemption?

<p>The P250,000 exemption does not apply to mixed-income earners. (D)</p> Signup and view all the answers

Under which condition can an individual choose to be taxed at an 8% income tax rate?

<p>If they are a purely self-employed individual. (A)</p> Signup and view all the answers

How is the total tax due for an individual comprised of different income types determined?

<p>By adding the tax from both compensation and self-employment. (C)</p> Signup and view all the answers

What happens to the excess of the P250,000 over actual taxable compensation income for mixed-income earners?

<p>It is not deductible against business income. (C)</p> Signup and view all the answers

What does the graduated income tax rate apply to for an individual with gross sales exceeding the VAT threshold?

<p>To both compensation and business income. (D)</p> Signup and view all the answers

Which of the following statements is true regarding self-employment tax liabilities?

<p>Self-employed professionals can choose between graduated rates or flat rates. (A)</p> Signup and view all the answers

What is the tax treatment for income from business or profession if the gross sales do not exceed the VAT threshold?

<p>It may choose between graduated rates or an 8% option. (A)</p> Signup and view all the answers

Which section of the Tax Code provides the tax rates for compensation income?

<p>Section 24(A)(2)(a). (C)</p> Signup and view all the answers

Flashcards

8% Income Tax Rate

A lower income tax rate (8%) available to taxpayers with business income, in lieu of graduated or percentage tax.

P250,000 deduction

A P250,000 deduction allowed for self-employed or professional income, but not for mixed income.

Graduated Income Tax Rates

Tax rates that increase as income increases, applicable to certain income sources.

Percentage Tax (Section 116)

A specific tax rate on gross sales (3%) as per Section 116 of the Tax Code.

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Taxable Compensation Income

Compensation income after deducting non-taxable components (e.g., 13th-month pay).

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Net Income from Operation

The profit after deducting cost of sales and operating expenses from gross sales.

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Combined Taxable Income

The total taxable income from compensation and business for calculating income tax.

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Tax Liability Calculation

Calculating income tax due using various rates and thresholds, combining income types (compensation and business).

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Self-employed

Individuals who work for themselves, own a business, or practice a profession.

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Mixed-Income Earners

Individuals earning income from both employment and self-employment (business, profession, etc.).

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BIR Form No. 1701

Tax form required annually for mixed-income earners.

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Gross Taxable Income

Total income minus allowable deductions.

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Tax Due

The calculated amount of tax owed.

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Graduated Income Tax Rates

Tax rates that increase based on income level.

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VAT Threshold

The amount of income that triggers VAT (Value-Added Tax) obligation.

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RR 8-2018

Revenue Regulations 8-2018, the guide for computing mixed-income earners tax.

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8% Income Tax Option

A lower 8% tax rate on gross sales/receipts for business/professional income, instead of graduated rates.

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VAT Threshold

The amount of gross sales/receipts above which the graduated rates apply

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Mixed-income earners

Individuals with both compensation and self-employment/professional income.

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Compensation Income Tax

Tax on income from employment using graduated rates

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Graduated Tax Rates

Progressive tax rates that increase with income.

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Self-employed Income Tax

Tax on business/professional income, possibly with an 8% option

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Taxable Income Combination

Combining compensation and business/professional income to calculate total tax.

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P250,000 Exemption (Self-Employed)

Exemption that may apply for 8% self employed tax, not applicable to mixed income.

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Study Notes

FABM2 Senior High School - Procedures in the Computation of Gross Taxable Income and Tax Due

  • Self-Learning Module 16, Quarter 2: This module is the last part of computing taxable income and tax due, focusing on mixed-income earners.

  • Recap of Module 15:

    • Self-Employed Individuals: Defined and discussed.
    • Annual Income Tax Return: Requirements for taxpayers with gross sales exceeding the VAT threshold.
    • Current VAT Threshold: This value is not provided.
    • Self-Employed Tax Calculation: Example calculation with a taxable income of P1,689,800.00.
    • 8% Income Tax Rate: Calculation example for a self-employed individual with a taxable amount of P900,000.00.

  • Module 16 Focus: Computation of liabilities of mixed-income earners. The content differs from Module 14 (employed individuals) and Module 15 (self-employed).

  • Similarities of Modules: All three modules use the same income tax rates from R.R. 8-2018 (graduated income tax rates).

  • Mixed-Income Earners: Defined as individuals earning compensation from employment and income from a business, profession, or other sources. They file BIR Form No. 1701 annually.

Income Tax Rates (Effective January 1, 2018 - December 31, 2022)

  • This section details graduated income tax rates in a tabular format. Ranges of taxable income and corresponding tax rates are clearly listed.

  • Tax Due Calculation: The formula is Tax Due = a + (b x c), where a, b, and c are specific values determined from the applicable income range or bracket.

  • Individual Citizen/Resident Alien Earning Income from both Compensation and Self-Employment/Professional Practice:

    • Compensation income is taxed based on Section 24(A)(2)(a) of the Tax Code.
    • Self-Employment Income:
      • Can be taxed using either graduated income tax rates or an 8% rate on gross sales (applicable if gross sales/receipts below VAT threshold).
      • If gross sales/receipts exceed the VAT threshold, graduated rates are used.

  • Illustrative Problem No. 1 (Ms. Ysabelle):

    • Compensation Income: P1,350,000.00, including 13th-month pay (net of deductions).
    • Business Income: Gross sales of P2,220,000.00, cost of sales P1,000,900.00, operating expenses P500,995.00, and non-operating income P610,000.00 in 2019.
    • Tax Calculation: Details provided showing how to calculate taxable compensation and business income, tax due on each, and total tax due. This provides a practical example of how to calculate the combined income taxes for mixed-income earners.

  • Illustrative Problem No. 2 (Mr. Manolo):

    • Compensation Income: P1,399,000.00 (including 13th-month pay).
    • Business Income: Gross sales P3,700,000.00; cost of sales P1,290,000.00; operating expenses P650,000; non-operating expenses of P120,000.
    • Tax Calculation: A detailed breakdown of compensation income, business income (gross, cost of sales, expenses, and net income), and total tax due calculation, is provided, focusing on the combined tax due from both sources of income.

  • Important Considerations:

    • Income tax rates have to be applied based on R.R. 8-2018.

  • Note: The provided documents are specific to the Philippines' tax code for a particular period.

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FABM2 Q2 M16 Senior High School PDF

Description

This quiz covers the procedures for computing gross taxable income and tax due for mixed-income earners, as outlined in Self-Learning Module 16 for Quarter 2. It reviews key concepts from Module 15 and discusses the calculation of tax liabilities specific to self-employed individuals. Test your knowledge on how to apply the 8% income tax rate and other essential tax requirements.

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