2020

“Taxes, after all, are dues that

we pay for the privilege of
membership in an organized
society.
-Franklin D. Roosevelt

Tax
ACCOUNTING

Knows.
 WHAT IS TAX ACCOUNTING?
Tax is a compulsory contribution from individuals and or business organizations from the purpose of financing the expenditure of the govern-
ment. It is also the most important source of government revenue.
Tax Accounting refers to the rules used to generate tax assets and liabilities in the accounting records of a business or individual. It is derived
from the Internal Revenue Code (IRC), rather than one of the accounting frameworks, such as GAAP or IFRS. It is also the preparation of tax returns
and rendering of tax advices, such as determination of tax consequences of certain proposed business endeavors. (Millan, 2019)
SOME FUN FACTS TO LIGHTEN UP TAX
TIME!
 The word “tax" came from the Latin word “taxo”
means “I estimate”.
 Governments have been imposing taxes for
thousands of years. There are recordings of tax
payments made in Mesopotamia circa 2500 B.C.
At the time, people who didn’t have money to pay
taxes often had to pay with livestock, food, or
labor.
 Even Albert Einstein found taxes inscrutable . He
once said, “The hardest thing in the world to
understand is the income tax” (that is according to
Leo Mattersdorf, the math genius’ tax preparer).
 Excise taxes are known as “sin taxes”. These are
the taxes placed on tobacco, alcohol, and gam-
bling.
 As Benjamin Franklin said, “In this world nothing
can be said to be certain, except death and tax-
es”. Although he’s often credited with the idea,
that line come from a 1789 letter, and similar
quotes date to 1716 and 1724.
 Aside from the nation of Eritrea in Africa, the
United States is the only country that requires
citizens to pay taxes on their income if they work
and live outside the country. Some wealthy indi-
viduals have renounced their citizenship and have
moved to another country to avoid paying taxes.
 Fortune tellers, astrologers, and witches were
added to Romania’s labor code in 2011, meaning
they have to pay income tax and contribute to the
country’s social programs. Some witches cast
curses on the government in response — alt-
hough others felt it legitimized their work.
 In Roman times, urine and the ammonia within it
were collected for uses such as tanning and
laundering. Emperor Verpasian imposed tax on
the buyers of urine from public urinals. Today
words for “urinal” in French, Italia, and Romanian
are derived from the emperor’s name.
CONSUMPTION TAX
Consumption tax is a broad category of tax,
levied or collected for the purchase of good or service. It is
charged when the customers spend money, and is as-
sessed on earned money. Examples of consumption taxes
include retail sales taxes, excise taxes, value-added taxes,
use taxes, taxes on gross business transfer (taxes), and
import duties. Consumption taxes are paid fro by custom-
ers rather than businesses, even though they may original-
ly be paid by a business that passes the tax along to the
consumer in the selling price. Consumption taxes are
generally not collected by vendors at the retail level, who
then pay the national or state taxing authority.
TYPES OF CONSUMPTION TAX:
 Exempt sales
Exempt sales or VAT-exempt sale is a sale of
goods, properties or services and the use or lease of proper-
ties that are not charged with output tax. VAT-exempt transac-
tions include sale or importation of agricultural and marine
food products, fertilizers, educational services rendered by
private institutions accredited by the Department of Education,
CHED, and TESDA, sale of real properties, and sale or lease
of goods and services to senior citizens and persons with
disabilities, among other transaction.
 Percentage tax
Percentage tax is a business tax imposed on per-
sons or entities that sell or lease goods, properties or services
in the course of trade or business whose gross annual sales
or receipt do not exceed P550,000.00 and are not VAT-
registered. This tax is quarterly. Some of the persons and
companies required to file or pay for this tax include those
who engage in car rentals, franchise grantees of gas, water
utilities, life insurance business, bank, non-bank financial
intermediaries performing quasi-banking functions, pawn-
shops and other non-bank intermediaries.
 VAT on sales
Value-added tax (VAT) is a form of sales tax. It is a
tax on consumption levied on sale, barter, exchange or lese of
goods or properties and services in the Philippines and on
importation of goods into the Philippines. It is an indirect tax,
which may be shifted or passed on to buyer, transferee, or
lessee of goods, properties or services.
“Output tax” means the VAT due on the sale, lease
or exchange of taxable goods or properties or services by any
person registered or required to register under Section 236 of
the Tax Code.
“Input tax” means VAT due on or paid by a VAT-
registered on importation of goods or local purchase of goods,
properties or services, including lease or use of property in the
course of his trade or business. It shall also include the transi-
tional input tax determined in accordance with Section 111 of
the Tax Code, presumptive input tax and deferred tax from
previous period
 Excise tax
An excise tax is a legislated tax on specific goods or
services at purchase such as fuel, tobacco, and alcohol.
Excise taxes are primarily for businesses. Consumers may
not see the cost of excise taxes are paid by merchants who
then pass the tax on to consumers through higher prices.
Merchant pay excise taxes in product pricing which increases
the retail price overall. There are some excise taxes however
that are paid directly by a consumer including property taxes
and excise on certain retirement account activities.
INCOME TAX
Income tax is a tax on a person’s income, emolu-
ments, profits arising from property, practices of profession,
conduct of trade or business or on the pertinent items of
gross income specified in the Tax Code of 1997, as amended,
less the deductions if any, authorized for such types of in-
come, by the Tax Code, as amended, or other special laws.
DONOR’S TAX
Donor’s tax is a tax on a donation or gift, and is
imposed on the gratuitous transfer of property between two or
more persons who are living at the time of the transfer. It shall
apply whether the transfer is in trust or otherwise, whether the
gift is direct or indirect and whether the property is real or
personal , tangible or intangible.
ESTATE TAX
Estate tax is a tax on the right of the deceased
person to transmit his/her lawful heirs and beneficiaries at the
time of death and on certain transfers, which are made by
laws as equivalent to testamentary disposition. It is not tax on
property. It is a tax imposed on the privilege of transmitting
property upon the death of the owner. The estate tax is based
on the laws in force at the time of death notwithstanding the
postponement of the actual possession or enjoyment of the
estate by the beneficiaries.
TRANSFER TAX
Transfer tax is any kind of tax that is levied on the
transfer of ownership or title of property from one entity to
another. Transfer taxes are usually non-deductible, although
they may be added to the basis on the sales of securities and/
or investment property. It is also considered as excise tax in
some states.
DOCUMENTARY STAMP TAX
Under the National International Revenue Code, a
documentary stamp tax is imposed upon documents, instru-
ments, loan, agreements, and papers, and upon acceptances,
assignments, sales and transfers of the obligation. The
amount of tax is either fix or based on the par of face value of
the document or instrument, right or property incident thereto.
DST is imposed on each and every transaction so failure to
pay in one transaction is a distinct offense. DTS is paid manu-
ally or through electronic filing and payment system, or
through the loose documentary stamps for the purpose de-
pending on the type of of taxable transaction.

WHAT DOES TAX ACCOUNTANT DO?
If you are studying accounting, it is important to
learn what a tax accountant does before you decide that
this is the occupation you would like to pursue after gradua-
tion. As an accountant who specializes in taxation, you will
work with either individuals or corporations to handle taxes,
financial records and also audits.
In tax accounting, you can work with individuals or
with companies as a direct employee or as an independent
contractor who runs their own business. If you decide to
work with individuals, you may be in charge of tax prepara-
tion where you will help your clients to lower their tax obliga-
tion when filing. If you choose to got to the corporate route
and you work for a company, you may work as a supervisor
in the accounting department or as a member of the team in
the department. You will need to know the governmental
regulations in accounting as well as all of the Generally
Accepted Accounting Principles (GAAP) to be successful in
this role.
If you want to become a tax accounting profes-
sional, you will need to earn your degree in accounting ad
then get on-the-job experience. Once you have degree, you
will bw prepared to work with tax returns or company tax
record keeping with a firm or directly with a company.
COMMON TYPES OF TAXPAYERS:
 SELF-EMPLOYED
Single proprietors are persons engaged in trade
or business not including performance of services as em-
ployee.
 PROFESSIONALS
Professionals are self-employed individuals in the
practice of profession or calling not including performance
of service as employee.
 MIXED INCOME
Mixed Income Earners are persons who are any
two of the following: Professional, Single Proprietors, and
Local Employees.
 EMPLOYEES
Local Employees are citizens of the Philippines
who work and derived income fro an employer based within
the Philippines.
 UNDER E.O 98
Persons Registering Under E.O. 98 are those
individuals who are securing TIN to be able to transact with
other government offices such as LTO, NBI, DFA, and
others.
10 KEY TAX TERMS TO HELP YOU CUT
THROUGH THE JARGON
 AGI
Adjusted Gross Income, is all the income you
receive over the course of the year, including wages, inter-
est, dividends, and capita; gains, minus things such as
contributions to a qualified IRA, some business expenses,
moving costs and alimony payments.
 TAX CREDIT
Tax credits are much like credits you get from a
store. After you calculate you tax bill, you can use the credit
to reduce the amount that you owe.
 TAX DEDUCTIONS
Tax deductions are expenses the Internal Reve-
nue Services allows you to subtract from your AGI to arrive
at you taxable income.
 STANDARD DEDUCTION
This is a fixed dollar amount that taxpayers can
subtract from their own income. The standard deduction is
available to all filers and is determined by the taxpayer’s
filing status.
 ITEMIZED DEDUCTIONS
These are expenses that can be deducted from KEY TERMS IN ACCOUNTING FOR INCOME
your AGI to help you reach a smaller income upon which TAX:
you must calculate you tax bill.
 ACCOUNTING PROFIT
 EXEMPTION
Accounting profit means profit, which is showing
This is an amount the IRS lets you subtract from in profit and loss statement after considering all the income
your income to reflect all the people who count on your and expenses but before tax.
income.
 TAXABLE PROFIT
 PROGRESSIVE TAXATION
Taxable profit means profit, which is arrived as
This is the system in which higher tax rates are per tax laws and on which tax needs to pay as per tax law.
applied as income levels increase. The U.S. tax system
uses progressive taxation with tax brackets starting at 10  CURRENT TAX
percent and rising to 39.6 percent for the wealthiest taxpay-
ers. The current tax is a tax, which is payable or paid
on taxable profit as per the applicable tax rate of the current
 VOLUNTARY COMPLIANCE year.
This describes the philosophy upon which our tax  DEFERRED TAX
system is based: U.S. taxpayers voluntarily comply with the
tax laws and report their income and other tax items. Deferred tax which arises due to timing differ-
ences. Temporary/ timing differences are the differences
 WITHHOLDING between the carrying amounts of asset and liabilities in the
financial statement and amount of assets and liabilities
Also known as pay-as-you-ear taxation, the with-
holding method enables taxes to be taken out of your wag-
attributed for tax purpose (also called Tax Based).
es or other income as you earn it and before you receive
your paycheck.
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TOPICS INCLUDED: Estate Tax

Fun Facts about Tax Accounting Documentary Stamp Tax

TYPE OF TAXES Role of Tax Accountant

Consumption Tax Common type of Taxes

Except Tax 10 Key tax terms to help you cut

through the jargons
Percentage Sales
Key terms in Accounting for Income
VAT on Sales Tax
Excise Tax
Income Tax

Transfer Tax
Donor’s Tax

www.bankrate.com (10 Key Tax Terms To Know)

www.wallstreetmojo.com (Key Terms in Accounting for Income Tax)
https://www.accountingtools.com/articles/tax-accounting.html (Tax accounting--- AccountingTools)

https://www.fool.com/retirement/2017/04/10/10-facts-about-taxes-you-didnt-know.aspx (10 Facts About

Taxes You Didn’t Know | The Motley Fool)

https://images.app.goo.gl/Qv1PQEaJtp78SvSr9

https://www.topaccountingdegrees.org/faq/what-does-a-tax-accountand-do/ (What Does a Tax Account-

ant DO?- Top Accounting Degrees)

https://blueorchidaccounting.com.au/2018/06/30/21-fun-facts-to-lighten-up-tax-time/ (21 Fun Facts to

Lighten Up Tax Time – Blue Orchid Accounting)

https://image.app.goo.gl/7qaaQcWECsj2nXpb9

https://image.app.goo.gl/uSL75EHmsmMw7tjMA
Prepared by:
https://image.app.goo.gl/Gly1Xha3CvSmcria6
Keziah S. Sapul
https://www.bir.gov.ph/index.php/tax-information/donor-s-tax.html

https://www.bir.gov.ph/index.php/tax-information/estate-tax.html Donna May M. Bandoja

https://www.bir.gov.ph/index.php/tax-information/value-added-tax.html Junnel A. Saudan

https://www.referenceforbusiness.com/encyclopedia/Con-Cos/Consumption-Tax.html#ixzz6HATarbW4 Cherrymae A. Lumague

https://www.bir.gov.ph/index.php/tax-information/percentage-tax.html Roselyn G. Billones
Bachelor of Science in Accountancy
Institute of Business, Science, and Medical Arts
Fransisco St., Marfrancisco, Pinamalayan, Oriental Mindoro