MARY JOY P.

JUNIO, CPA Notre Dame of Midsayap College Midsayap, Cotabato

Separation pay
Separation pay is taxable if

voluntarily availed of. Examples of involuntary separation: a. Death b. Sickness c. Disability d. Reorganization/merger of company e. Company at the brink of bankruptcy

Pension
This is stated allowance paid regularly to a person on his retirement or to his dependents on his death, in consideration of past services, meritorious work, age, loss, or injury

Vacation and sick leave

Rules: 1. If paid or availed of as salary of an employee who is on vacation or on sick leave, taxable. 2. Monetized value of 10 days or less, not taxable 3. Terminal leave, not taxable

Thirteenth month pay and other benefits

Not taxable if the total amount received is P30,000 or less. Any amount exceeding P30,000 is taxable.

Overtime Pay
Premium payment received for working beyond regular hours of work which is included in the computation of gross salary of employee

Profit Sharing
It is the proportionate share in the profits of the business received by the employee in addition to his wages.

Awards for Special Services

Amount received as an

award for special services of employee, or suggestions to employer resulting in the prevention of theft and robbery

Beneficial payments
Such as where an

employer pays the income tax owed by an employee are additional compensation income

Other forms of compensation

Shares of stock received as

compensation Employee stock option Cancellation of debt Insurance premiums as compensation Income tax paid as compensation

GI from Business and Profession

Business Defined Business means any commercial activity engaged in as a means of livelihood or profit of an individual or group of individuals. Profession Defined Profession is primarily any endeavour or work requiring specialized training in the field of learning, art or science engaged in as a means of livelihood or profit of an individual or group of individuals.

Gross Income from Business

1.Manufacturing 2.Merchandising or Trading 3.Servicing 4.Farming 5.Long-term contract

Income from whatever source

Means inclusion of all income not expressly exempted within the class of taxable income under the laws irrespective of the voluntary or involuntary action of the taxpayer in producing the gains, and whether derived from legal or illegal sources.

Income from illegal sources:

a. Gambling b.Kidnapping c. Extortion d.Smuggling e. Embezzlement

Embezzled funds
Are income without consent (express or implied) with an obligation to repay.