What to expect when you’re expecting: Things to remember about payroll and individual income tax



“What to Expect When You’re Expecting” was a hit movie in 2012 about the interconnected lives of five couples experiencing the thrills and surprises of expecting a baby. This 2017, we are expecting big surprises and thrills as well as we open a new year of exciting adventures.

Some of us may be eyeing a promotion, or opening that dream business, or working toward becoming the next employee of the month. Regardless of your personal dream or resolution, I’m sure we are all hoping that 2017 will be a better year for all of us. To make this year truly count, let’s look at some of the things you can expect for the taxable year 2017.

1: Your annualization – You will either get a refund or pay more
Employers claim refund for excess taxes withheld on compensation as a result of the year-end adjustments for calendar year ended December 31, 2016. As a result of the annualization of income taxes at the end of the calendar year, those who are eligible for tax refunds should receive their refunded excess withholding taxes on or before 25 January 2017, or else their employers will be liable to corresponding penalties.

Annualization is a process where an employee’s income for the year is computed to determine if he is eligible for a refund or should, instead, incur additional tax deductions. This process includes the preparation of the alphalist – a list of all employee information, including work history.

2: BIR Form 2316 – Who, when, and what to file
Individuals employed by only one employer for an entire year are entitled to substituted filing. This means your employer is required to issue you a 2316 certificate at the end of the taxable year for all taxes required to be withheld from your salary. This is due on or before January 31 of the succeeding year.

According to Revenue Regulation No. 2-2015, large taxpayers are now required to submit scanned copies of BIR Form 2316 on or before February 28 for all employees qualified for substituted filing. On the other hand, non-large taxpayers have the option to submit either scanned or hard copies. These taxpayers, however, are not allowed to submit hard copies once they have opted for the scanned copies. Specific instructions and guidelines for scanning and storing the copies, naming the files, and labeling the DVD-R are provided in the regulation.

The good thing about substituted filing is that we are spared from the hassle of queuing up to file our own income tax return (ITR), but there are instances when things do not go as planned.

If your employer refuses to give you your 2316 certificate, you can file a written complaint with the Bureau of Internal Revenue (BIR) branch where your company is registered. In case you decide to move to a different company, you should give your new employer a copy of the complaint. Now in case your employer commits the grievous mistake of not withholding taxes on your compensation, then you will have to file your income tax return.

Certain considerations such as the applicable tax rate, qualified dependents, leaves and absences, and many others are included in the preparation of this form per employee. Knowing how your employer arrived at the final amounts will not only ensure accuracy, but will also reflect on how seriously you take responsibility for your own taxes.

3: April 15 – The day of reckoning
For individuals—except those who qualify for substituted filing —April 15 is a busy day. BIR offices and accredited banks are jampacked with taxpayers catching the deadline for ITR filing. Just remember, you are required to file your ITR if you are any of the following:

You were employed by two or more employers any time during the taxable year.

You are self-employed, either through conduct of trade or professional practice.

You have mixed income, meaning you were an employee and a self-employed individual during the taxable year.

You derive other non-business, nonprofessional-related income, in addition to compensation income not subject to final tax.

You are married, employed by a single employer, and your income has been correctly withheld but your spouse is not entitled to substituted filing.

You are a marginal income earner.

Your income tax during the past calendar year was not withheld correctly.

You must also remember that there is a penalty for late submission and payment of tax and social security contributions: 25 percent surcharge for failure to file and pay the amount of tax, and a monthly penalty of 3 percent for overdue contributions.

Getting it right
Given the complexity of preparing the payroll register, most companies avail of the services of a payroll provider who determines the applicable rates and computes the final payroll file. Although the responsibility for the final amounts still lie with management, these service providers prepare the necessary working files for their clients’ approval. In doing so, it is important to keep in mind the considerations stated above in order to arrive at an accurate computation of the final amount for release.

So there you go, some of the updates and reminders for 2017. We hope that no matter where your dreams take you this year, you will remember that excellence is achieved by paying attention to details.

Happy New Year, everyone!

The author is a Senior with the Tax & Corporate Services division of Navarro Amper & Co., the local member firm of Deloitte Southeast Asia Ltd. – a member firm of Deloitte Touche Tohmatsu Limited – comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.


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