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    CORRECTION To Module 4

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    Ryhbskkmyrt

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    CORRECTION To Module 4

    Uploaded by

    Ryhbskkmyrt
    9 views2 pages

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    9 views2 pages

    CORRECTION To Module 4

    Uploaded by

    Ryhbskkmyrt

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    CORRECTION:

    This is in connection with the discussion of Optional Standard Deduction on Module


    4 page 73

    Illustration 2. Using the Optional Standard deduction


    Let us assume the same data in the preceding problem, except that the taxpayer
    opted to use the optional standard deduction.
    (Computation of taxable income using OSD as presented in the module)
    Sales P 2,000,000
    Cost of sales 800,000
    Gross Income P 1,200,000
    Less: Optional Standard Deduction ( 2,000,000 x 40%) 800,000
    Taxable Net Income P 400,000

    Correct computation should be;

    Sales P 2,000,000
    Less: Optional Standard Deduction ( 2,000,000 x 40%) 800,000
    Taxable Net Income P 1,200,000

    Based on the amendment of Republic Act. No. 9337, OSD is now applied at forty
    percent (40%) of net sales without deducting cost of sales or service for individuals.

    Using the individual tax table on page 64, effective January 1, 2018, Jolo’s income
    tax due
    would be computed as follows:
    Income Tax Due
    Taxable income 1,200,000
    Less: lower limit of the applicable tax bracket 800,000
    130,000
    Excess 400,000
    Multiply by incremental tax rate 30%
    120,000
    Income tax due (Corrected) P
    250,000
    With OSD, you can declare up to 40% of your gross sales/receipts (for individual
    taxpayers) or gross income (for partnerships and corporations) as business
    expenses, of which the remaining 60% will then be taxable.
    Along with the fact that you no longer need to substantiate the 40%, taxpayer is still
    required to keep records of actual business expenses as a requirement for BIR
    examination purposes.

    A taxpayer who elected to avail of the OSD:


     Shall signify in his/its return such intention, otherwise he/it shall be
    considered as having availed himself of the itemized deduction.
     Once the election to avail of the OSD or itemized deduction signified in the
    return, it shall be irrevocable for the taxable year.
     The election to claim either OSD or the itemized deduction for the taxable
    year must be signified by checking the appropriate box in the income tax
    return filed for the first quarter of the taxable year.
     Once the election is made, the same type of deduction must be consistently
    applied for all the succeeding quarterly returns and in the final income tax
    return for the taxable year.
     A taxpayer who fails to an income tax return for the first quarter of the
    taxable year, shall have to claim itemized deductions for the rest of the year.
     An individual taxpayer who is entitled to and claimed OSD shall not be
    required to submit with his tax return such financial statements otherwise
    required under the Code.

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