Chapter 7

Question 1

What are the characteristics of regular income tax?

Answer 1

General in coverage
A net income tax
Creditable withholding tax
Annual Tax
Progressive or Proportional tax

Question 2

Is regular income tax always a net income tax?

Answer 2

GR: Yes
XPTN: The optional 8% income tax where the gross income is used instead of net income

Question 3

Who are required to file an income tax return and pay regular income tax?

Answer 3

1. Individuals
   A. RC
   - Pure compensation income earners
   - Business or professional income earners
   - Mixed income earners
   B. NRC (within)
   C. Aliens (within)
2. Non-individuals
   A. Domestic corporations (global)
   B. Foreign corporations (within)
   C. Partnerships
   D. Estates and Trusts engaged in trade or business

Question 4

Who are not required to file income tax return?

Answer 4

1. Minimum wage earners
2. Gross income not exceeding 250,000
3. Compensation from one employer not exceeding 60,000
4. Individual with income subjected to final withholding tax
5. Pure compensation income earners qualified for substituted filing

Question 5

This is an imposition on residual profits or gains after deduction for expenses of business or practice of profession.

Answer 5

Regular Tax

Question 6

These are advanced taxes that must be deducted against regular income tax due in computing the tax still due to the government.

Answer 6

Creditable withholding tax

Question 7

What kind of tax is imposed on individuals and on corporations? What percent is the tax?

Answer 7

Individuals - progressive
Corporations - proportional (25%)

Question 8

This constitutes all items of income that are neither excluded in gross income nor subjected to final tax or capital gains tax.

Answer 8

Gross Income

Question 9

These are expenses of the conduct of business or exercise of profession.

Answer 9

Allowable deductions

Question 10

These are those expenses that an individual spends that are not connected to the furtherance, maintenance, or development of his trade, business, or profession.

Answer 10

Personal expenses

Question 11

Can individuals who are not engaged in business claim deductions from gross income?

Answer 11

Generally, no.

Question 12

What are the 3 types of individual taxpayers?

Answer 12

229

Question 13

This income arises from employer-employee relationship.

Answer 13

Compensation Income

Question 14

What are the classifications of gross income?

Answer 14

Compensation income
Business income

Question 15

This income arises from selling of goods or rendering of services for a profit.

Answer 15

Business income

Question 16

Is deduction against compensation allowed?

Answer 16

No

Question 17

Are expenses related to the employment of individual taxpayers deductible against compensation income?

Answer 17

No it is considered a personal expenses

Question 18

Write formula for purely compensation income earner

Answer 18

230

Question 19

Write formula for purely business or professional income earners.

Answer 19

230

Question 20

What rule is used in computing the taxable income of individual taxpayers?

Answer 20

Classification and Globalization ruleW

Question 21

What does the globalization rule on mixed income earners say?

Answer 21

The income from both sources are totaled or globalized. Loss from business or professional income should not be offset against compensation income.

Question 22

Write formula for mixed income earners

Answer 22

231

Question 23

What is the treatment if there is a net loss in the income of a mixed income earner?

Answer 23

It is not offset against compensation income. It is not deductible.

Question 24

Is the taxable income of corporations computed in the same was ay pure business or professional income earner?

Answer 24

Yes

Question 25

The taxable income is computed based on the taxpayer's accounting method. If no such method is employed or the method does not clearly reflect the income, what happens?

Answer 25

The Commissioner's opinion of method is used

Question 26

This pertains to the acquisition cost of the goods sold for merchandising or the manufacturing cost of ht goods sold in the case of manufacturing.

Answer 26

Cost of Sales

Question 27

The cost of goods sold may be determine by the specific identification using perpetual inventory system with the aid of?

Answer 27

Point-of-sale machines

Question 28

What is the formula for COGS using periodic inventory system?

Answer 28

BI Net Pur. Freight in TGAS Less:EI COGS

Question 29

This pertain to all direct cost of rendering the services such as cost of labor, materials, and overhead costs.

Answer 29

Cost of Services

Question 30

This pertain to revenue from the sale of service.

Answer 30

Fees

Question 31

This pertain to cash collection from he sale of goods or services.

Answer 31

Receipts

Question 32

This is a general term which pertains to the gross inflow of benefits or the total return arising from the primary operations of the business.

Answer 32

Revenue

Question 33

This pertain to revenue from the sale of goods.

Answer 33

Sales

Question 34

What basis of accounting is denoted by the terms fees or sales or revenue?

Answer 34

Accrual basis

Question 35

What basis of accounting is denoted by the terms receipts?

Answer 35

Cash basis

Question 36

Are revenues or receipts from incidental or secondary activities included in the category Sales/revenue/receipts/fees?

Answer 36

Yes

Question 37

Revenue vs Gross Income

Answer 37

235

Question 38

If one is a business income earner and a professional income earner, does she need to maintain separate records?

Answer 38

Yes

Question 39

What is the reason fro the difference in tax return format between individuals and corporations?

Answer 39

OSD or Optional Standard Deduction

Question 40

Write graduated tax table

Question 41

Which law introduced the 8% optional tax?

Answer 41

TRAIN Law

Question 42

The 8% income tax is in lieu of?

Answer 42

1. progressive income tax 2. 3% percentage business tax on sales or receipts

Question 43

This is a form of bundled tax which enables one-time compliance for two taxes which would otherwise require separate filing and payments.

Answer 43

8% optional tax

Question 44

What is the tax rate for MSMEs with not more than 100 million pesos assets excluding land and not more than 5 million taxable income?

Answer 44

20%

Question 45

What percent is the Minimum Corporate Income Tac?

Answer 45

2%

Question 46

Do special corporations pay tax?

Answer 46

Yes but their tax rates are lower

Question 47

Exempt corporations should report their results of operations through what form?

Answer 47

BIR Form 1702-EX

Question 48

Should exempt corporations still report their results of operations despite not having taxable income?

Answer 48

Yes

Question 49

When is the deadline for filing the income tax return?

Answer 49

15th day of the 4th month following taxable year (April 15 of following year if calendar year ginamit)

Question 50

Aside from the annual consolidated income tax return, corporations and individuals engaged in business and those engaged in practice of a profession are required to file?

Answer 50

3 quarterly returns

Question 51

What form of return for individual taxpayers?

Answer 51

BIR Form 1701Q

Question 52

What form of return for corporate taxpayers?

Answer 52

BIR Form 1702Q

Question 53

This is the method where income and expenses for the fiscal year shall be deemed to have been earned and spent equally for each month of the period.

Answer 53

Pro rata method

Question 54

True or False: The pro rata method is applicable only to fiscal year method corporate taxpayers

Answer 54

False. It is without regard to reporting method whether fiscal or calendar

Question 55

When is the due date of quarterly income tax return?

Answer 55

45 days from the end of the first three quarters (individuals) 60 days from the end of the first three quarters (corporations)

Question 56

Read requisites for substituted filing.