RESA

The Review School of Accountancy

Tel. No. 735-9807 & 734-3989

TAXATION TAMAYO/LIM/CAIGA/MANUEL/BUEN

TAX-1601 ANSWERS: ADDITONS TO TAX

5. Exercises

a. The income tax return for the calendar year 2018 was due for filing on April 15, 2019. The tax due was P100,000.
The taxpayer voluntarily filed his tax return without notice from the BIR only on June 30, 2019.
How much was the total amount due?

Answer:
Tax per return P100,000.00
Add: Surcharge for late filing and payment of tax (25% x 100,000) 25,000.00
Interest on delinquency (April 15 to June 30, 2018) 2,493.15 27,493.15
Total amount due P127,493.15

Computation of interest
April 15 to June 15 (2 months) (100,000 x 12% x 2/12) P 2,000.00
June 15 to June 30 (15 days) (100,000 x 12% x 15/365) 493.15
Total P 2,493.15

Notes: 1) The 25% surcharge is for late filing and late payment.
2) Interest is for delinquency for a period of 2 months and 15 days.
3) Interest rate is 12% (6% x 2).

b. The taxpayer's 2018 percentage tax return is required to be filed through the authorized agent bank under the
jurisdiction of RDO East Makati. Without prior authorization from the Commissioner, the taxpayer files the return and
pays the tax through an authorized agent bank under the jurisdiction of RDO Davao City. The tax due and paid per
return is P100,000.
How much is the amount still due?

Answer:
Tax per return P100,000
Add Surcharge for filing with a wrong venue (100,000 x 25%) 25,000
Total 125,000
Less: Amount already paid 100,000
Amount still due P 25,000

Notes: 1) The surcharge is for filing the return with wrong venue.
2) No interest is collected because the taxpayer is not delinquent nor deficient nor asked for extension for
payment of the tax that would necessitate the collection of interest.

c. (Adapted) Taxpayer filed on time his income tax return for calendar year 2018 and paid P100,000 on April 15, 2019.
Upon pre-audit of his return, it was disclosed that he erroneously computed the tax due. The correct amount of tax due
is P120,000. The taxpayer is assessed for deficiency income tax in a letter of demand and assessment notice issued on
June 30, 2020.
How much was the amount still due?

Answer:
Tax due per assessment P120,000.00
Tax per return 100,000.00
Deficiency income tax 20,000.00
Add: Interest on deficiency (April 15, 2019 to June 30, 2020) 2,898.63
Amount still due P 22,898.63

Computation of interest
April 15, 2019 to April 15, 2020 (1 year) (20,000 x 12%) P 2,400.00
April 15, 2020 to June 15, 2020 (2 months) (20,000 x 12% x 2/12) 400.00
June 15, 2020 to June 30, 2020 (15 days) (20,000 x 12% x 15/365) 98.63
Total P 2,898.63

Notes: 1) No surcharge is computed because of the following reasons:

a) Taxpayer is not late in filing and/or paying the tax.
b) Taxpayer has not committed willful neglect nor filed a fraudulent/false return.
c) Taxpayer is not a non-VAT entity issuing VAT invoice or receipt.
d) Taxpayer has committed an honest mistake which is not considered fraudulent.
2) Interest rate is 12% (6% x 2) for deficiency for the mistake which is not fraudulent.

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d. (Adapted) XYZ Corporation filed its income tax return for calendar year 2017 with a net taxable income of P500,000. At
the applicable income tax rate of 30% for the year 2017, its income tax amounted to P175,000. However, upon
investigation, it was disclosed that its income tax return was false or fraudulent because it did not report a taxable
income amounting to another P500,000. On its net income of P1,000,000, per investigation, the income tax due is
P350,000. Deducting its payment per return filed, the deficiency, excluding penalties, amounted to P175,000. It was
duly informed of this finding through the Preliminary Assessment Notice. Failing to protest on time against the
preliminary assessment notice, a formal letter of demand and assessment notice was issued on May 31, 2019 calling for
payment of the deficiency income tax on or before June 30, 2019.

How much was the total amount due?

Answer:
Deficiency income tax P175,000.00
Add: Surcharge for filing false or fraudulent return (175,000 x 50%) 87,500.00
Interest on deficiency (April 15, 1998 to June 30, 1999) 42,271.68 129,771.68
Total amount due P304,771.68

Computation of interest
April 15, 2018 to April 15, 2019 (1 year) (175,000 x 20%) P 35,000.00
April 15, 2019 to June 15, 2019 (2 months) (175,000 x 20% x 2/12) 5,833.33
June 15, 2019 to June 30, 2019 (15 days) (175,000 x 20% x 15/365) 1,438.35
Total P 42,271.68

Notes: 1) Surcharge is computed because of false/fraudulent return. Substantial under declaration of taxable sales,
receipts or income (e.g. failure to report sales, receipts or income in an amount exceeding 30% of that
declared per return) shall constitute prima facie evidence of a false or fraudulent return. P500,000 out of
P1,000,000 is 50% under declaration of income.
2) Interest is on deficiency caused by the under declaration of income.

e. (Adapted) Using the same data in the preceding letter d, assuming that the calendar year 2017 deficiency income tax
assessment against XYZ Corporation was not paid by June 30, 2019, the deadline for payment of the assessment and
assuming further that this assessment had already become final and collectible. The corporation paid its tax assessment
only by July 31, 2019.

How much was the total amount due excluding suggested compromise penalty for late payment?

Answer:
Deficiency income tax P175,000.00
Add: Surcharge for filing false or fraudulent return (175,000 x 50%) 87,500.00
Interest on deficiency (April 15, 2018 to July 31, 2019) 45,284.25 132,784.25
Total amount due 307,784.25
Add: Interest on delinquency (June 30, 2019 to July 31, 2019)
(304,771.68 x 20% x 1/12) 5,079.54
Total amount due P312,863.79

Computation of interest on deficieny (April 15, 2018 to July 31, 2019)

April 15, 2018 to April 15, 2019 (1 year) (175,000 x 20%) P 35,000.00
April 15, 2019 to June 15, 2019 (3 months) (175,000 x 20% x 3/12) 8,750.00
June 15, 2019 to June 30, 2019 (16 days) (175,000 x 20% x 16/365) 1,534.25
Total P 45,284,25

Notes: 1) This above computation is based on the new Revenue Regulations.

2) Surcharge is for fraudulent return (see letter d).
3) The interest on deficiency is for the period April 15, 2018 to July 31, 2019.
4) Interest on delinquency is for the taxpayer’s failure to pay the assessed tax on the due date per assessment
(June 30, 2019). Therefore, the taxpayer is delinquent for one month because it pays the assessed tax on
July 31, 2019 only.

f. (Adapted) DEF Corporation due to financial incapacity, requested that it be allowed to pay its income tax liability per
return for calendar year 2018, in the amount of Pl,000,000 in four (4) monthly installments, starting April 15, 2019. Its
request had been duly approved pursuant to Sec. 53 of the Tax Code.

How much was the amount due on:

1) April 15, 2019? 3) June 15, 2019?
2) May 15, 2019? 4) July 15, 2019?

Answers:
1) Amount due, April 15, 2019 (1,000,000/4) P250,000.00

TAXATION – ADDITIONS TO TAX

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Note: No surcharge nor interest is included because the installment is paid on time.

2) Total tax due, April 15, 2019 P1,000,000.00

Less: Payment, April 15, 2019 250,000.00
Balance, April 15, 2019 750,000.00
Add: Interest on extended payment (April 15 to May 15, 2019) (750,000 x 12% x 1/12) 7,500.00
Total amount due, May 15, 2019 P 757,500.00

Second installment due P 250,000.00

Add: Interest on extended payment 7,500.00
Amount due, May 15, 2019 P 257,500.00

Notes: 1) The tax due on April 15, 2019 is P1,000,000 but only P250,000 is paid, thus, leaving an unpaid balance of
P750,000.
2) The interest on extended payment is for one month based on the unpaid balance of P750,000 .
3) The amount due on May 15, 2019 is P257,500 computed as follows:
Second installment P 250,000.00
Add: Interest on extended payment 7,500.00
Total P 257,500.00

3) Total tax due, May 15, 2019 P757,500.00

Less: Payment, May 15, 2019 257,500.00
Balance, May 15, 2019 500,000.00
Add: Interest on extended payment (May15 to June 15, 2019) (500,000 x 12% x 1/12) 5,000.00
Total amount due, June 15, 2019 P505,000.00

Third installment due P 250,000.00

Add: Interest on extended payment 5,000.00
Amount due, June 15, 2019 P 255,000.00

Notes: 1) The total amount due on June 15, 2019 is P505,000 but payment is only P255,000 leaving an
unpaid balance of P500,000.
2) The interest on extended payment is for one month based on the unpaid balance of P500,000.
3) The amount due on June 15, 2019 is P255,000.00 computed as follows:
Second installment P 250,000.00
Add: Interest on extended payment 5,000.00
Total P 255,00.00

4) Total tax due, June 15, 2019 P505,000.00

Less: Payment, June 15, 2019 255,000.00
Balance, June 15, 2019 250,000.00
Add: Interest on extended payment (June 15 to July 15, 2019) (250,000 x 12% x 1/12) 2,500.00
Total amount due, July 15, 2019 P252,500.00

Notes: 1) The total amount due on June 15, 2019 is P505,00.00 but payment is only P255,000.00 leaving
an unpaid balance of P250,000.
2) The interest on extended payment is for one month based on the unpaid balance of P250,000.
3) The amount due on July 15, 2019 is P254,166.67 computed as follows:
Fourth installment P 250,000.00
Add: Interest on extended payment 2,500.00
Total P 252,500.00

g. (Phil. CPA Modified) Mr. Juan Kuan filed his donor's tax return and paid the tax thereon in the amount of P100,000 on
July 15, 2018. The date of donation was March 16, 2018.

How much was the total penalties in the form of interest collectible from him?

Answer:
Interest on delinquency (April 15, 2018 to July 15, 2018) (P100,000 X 12% X 3/12) P3,000.00

h. ( Phil. CPA Modified) Mr. Nama Thay died on October 15, 2018. The administrator of the estate filed the estate tax
return and paid the tax shown thereon in full on April 15, 2019. In February, 2020, the administrator received an
assessment notice and demand from the BIR to pay deficiency estate tax of P20,000 on or before April 15, 2020.

How much was the total amount of tax payable as shown in the assessment notice?

Answer:
Deficiency estate tax P 20,000.00

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Add: Interest on deficiency (April 15, 2019 to April 15, 2020) (P20,000 X 12%) 2,400.00
Total amount of tax payable per assessment P 22,400.00

i. A taxpayer did not file his monthly VAT declaration for the month of January, 2018, which was due for filing on
February 20, 2018. He was notified by the BIR of his failure to file the declaration, for which reason, he filed his
declaration and paid the tax only after the said notice on June 30, 2019. The tax due per monthly VAT declaration was
P100,000.

How much was the total amount due on June 30, 2019?

Answer:
Tax per return P100,000.00
Add: Surcharge for willful neglect to file return (100,000 X 50%) 50,000.00
Interest on deficiency (Feb. 20, 2018 to June 30, 2019) 27,214.62 77,214.62
Total amount due P177,214.62

Computation of interest
Feb. 20, 2018 to Feb. 20, 2019 (1 year) (P100,000 X 20%) P 20,000.00
Feb. 20, 2019 to June 20, 2019 (4 months) (P100,000 X 20% X 4/12 6,666.67
June 21, 2019 to June 30, 2019 (10 days) (P100,000 X 20% X 10/365) 547.95
Total P 27,214.62

END

THOT: If the going seems easy, you’re going DOWNHILL.

TAXATION – ADDITIONS TO TAX

TAX-1601 ANS