Abella, Angel June 9, 2021

Caparros, Denzel Kyle MA 101

Padaoil, Jybelyn Group 6
Paragas, Dannah Celeste 4.5.1 Case Study
Sinakay, Jonah

A client presented to you a sample 2316 of one of his employees:

Additional information:

 The basic monthly pay of Ella Te is P40,000 per month. Ella is required to work 20 days per month.
 She is given P5,000 fixed monthly housing allowance and an additional P10,000 fixed monthly allowance.
 Other compensation pertains to the miscellaneous compensation given to her by the employer. 
 Included in the other compensation computation is the conversion of leave credits of Ella. 
 Ella is entitled to 24 leave credits for 2020; 12 vacation leave credits and 12 sick leave credits. Ella used 1 sick
leave and 1 vacation leave during the year.
 Other components of the other compensation given to Ella were the travel expenses that she incurred in her
business meetings with clients during the year.

Requirements:

1) Comment on the accuracy and validity of the current 2316. List down your observations. What should be the
correct amount of tax to be withheld from the compensation income of Ella? Show your solution. (10 points)

As we observe, we noticed that the leave credits of Ella were included in the Other Compensation, which should
be put in the De minimis Benefits pertains to the Rule. Furthermore, Vacation leave credits in excess of 10 days is already
subject to tax, That’s the error in the Information 2316, that’s why it’s not accurate. The table below will show the
correct computation of total amount of Tax to be withheld from the compensation Income.
A. Non- Taxable/Exempt Compensation Income

13th Month Pay and Other Benefits 64,000

De Minimis Benefits 20,000
SSS, GSIS, PHIC AND PAG IBIG Contribution 21,900
Salaries and Other Form of Compensation 16,000

Total Non-Taxable Income 121,900

B. Taxable Compensation Income (

Basic Salary 480,000

Fixed Housing Allowance 60,000
Other Allowances 120,000
Overtime Pay 36,987
Total Taxable Compensating Income 696,987

C. Total Amount of Taxes Withheld as Adjusted

Gross Compensation Income 818,887

Less: Total Non-Taxable/Exempt Compensation 121,900
Taxable Compensation Income 696,987
Tax Due 104,246.75
30,000+25% of exes over 400,000
Total Amount of Taxes Withheld 104,246.75

2) Suggest ways on how to create tax shields for Ella (what are the ways to legally minimize the income tax of Ella).
List them down. Explain briefly if you need to. (20 points)
a) Ella Should have a retirement plan Contributions. This is one of the easiest ways to reduce taxes, reductions
occur directly on the Paycheck and don’t even appear on tax returns. it will seem that she has a lower salary
because her gross income is adjusted (lessened) due to her contribution for a traditional IRA (Individual
Retirement Account). Let’s assume that Ella is just starting to save for retirement in her 30s, and may want
 to save a little more than 15% of her monthly income to reach her goal. She earns PHP 40,000 a month,
PHP 6,000 will go to her retirement fund. That's PHP 72,000 annually and about PHP 1.44 million in 20
years.
b) She must combine her business trip and vacations; in that way she can reduced vacation cost by deducting
the percent of the expenses spent for business purposes.
c) She should also invest in other health insurance in which the maximum allowable exempt amount is 10,000
that will increase her non-taxable income and it will result in reducing her tax withheld or tax due.
d) Another one is that if the total of De Minimis and 13th Month Pay and other benefits does not exceed yet to
90,000 she can use all the remaining tax credit.

3. What will be the amount of tax to be withheld from the compensation income of Ella after implementing your
suggestions? Show your solution. (10 points)
(this part naman is naiminus yung 10,000 na medical insurance sa basic salary, not sure din kung imiminus ba or
isasama lng siya sa non-taxable, pki check naman po and paki ayos yung solution if ano mas tama Salamat)
I. Taxable Compensation Income (Basic salary was deducted because of the other medical insurance
contribution.)

Basic Salary 470,000

Fixed Housing Allowance 60,000
Other Allowances 120,000
Overtime Pay 36,987
Total Taxable Compensating Income 686,987

II. Non- Taxable/Exempt Compensation Income

13th Month Pay and Other Benefits 64,000

De Minimis Benefits 26,000
SSS, GSIS, PHIC AND PAG IBIG Contribution 21,900
Salaries and Other Form of Compensation 16,000

Medical Insurance 10,000

Total Non-Taxable Income 137,900

III. Total Amount of Taxes Withheld as Adjusted

Gross Compensation Income 824,887

Less: Total Non-Taxable/Exempt Compensation 137,900
Taxable Compensation Income 686,987
Tax Due 101,746.75
30,000+25% of exes over 400,000
Total Amount of Taxes Withheld 101,746.75

(this one is not sure kung imiminus ba yung sa retirement plan salary pki tignan nlng, tapos burahin kung mali
hahah)
IV. Taxable Compensation Income

Basic Salary (72,000 from retirement plan) (480K-72K) 408,000

Fixed Housing Allowance 60,000
Other Allowances 120,000
Overtime Pay 36,987
Total Taxable Compensating Income 624,987
 V. Non- Taxable/Exempt Compensation Income

13th Month Pay and Other Benefits 64,000

De Minimis Benefits 26,000
SSS, GSIS, PHIC AND PAG IBIG Contribution 21,900
Salaries and Other Form of Compensation 16,000

Medical Insurance 10,000

Total Non-Taxable Income 137,900

D. Total Amount of Taxes Withheld as Adjusted (752,887;

Gross Compensation Income 762,887

Less: Total Non-Taxable/Exempt Compensation 137,900
Taxable Compensation Income 624,987
Tax Due 86,246.75
30,000+25% of exes over 400,000
Total Amount of Taxes Withheld 86,246.75