Saturday, March 17, 2012

How to compute withholding tax

After our office hours, our HR and Accounting departments joined forces in conducting symposium on tax refunds. It is for us to understand how our payroll come up with their computed withholding taxes and tax refunds. I  am  sharing this to you so that you will also understand how your tax is computed. By the way, this sample computation is for pure compensation income only.  Click each for contribution tables: SSS,PhilhealthHDMF.

Example: You are single without dependent, semi-monthly paying for taxes, SSS, Philhealth, HDMF, with basic monthly salary of P15000.00.

Basic salary = 7500
SSS            = 250.00
Philhealth   = 87.50
HDMF         = 150.00

Formula:

Basic Salary – SSS – Philhealth – HDMF= Total taxable; in case you have an absent or late, you should also less it to your basic.

7500 – 250 – 87.50 – 150.00= 7012.50

Using revised withholding tax table of 2009, look for the S/ME (semi-montly) with amount less than that of computed total taxable, which is 5000.




Revised Withholding Tax Tables
Formula:

Tax rate at that level: 354.17+20% excess over 5000


7012.50-5000 = 2012.50 


2012.50 x 0.20 = 402.50 


402.50 + 354.17 = 756.67 = withholding tax


Note: this will vary depending on your absences, and tardiness.

When we have computed our withholding tax, we checked if it is the same  with our pay slips. Yes, my computation is similar from my pay slip so it means by next year, I will no longer expect a tax refund as what I received last January.


Feel free to comment here if you have questions in your mind.
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