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TAX REPORTING BY INDIVIDUAL

TAXPAYERS
Net Sales/Revenues/Receipts/Fees xxxx
Add: Other taxable income from operation not subject to final tax xxxx
Total Sales/Revenues/Receipts/Fees xxxx
Less: Cost of sales or services xxxx
Gross Income from Business/Profession xxxx
Add: Non-operating Income xxxx
Total Gross Income xxxx
Less: Allowable deductions xxxx
Net Income xxxx
NON-OPERATING INCOME

 Gains from dealings in properties


 Income distribution from a general
professional partnership, taxable trust
or estate, or from an exempt joint
venture
 Casual active income
 Passive income not subject to final tax
PRINCIPLES OF DEDUCTIONS

Deductions from Gross


income:
Business
Practice of profession
WHAT IS A BUSINESS?

Habitual engagement
Commercial activity
Regular sale of goods & services
BUSINESS EXPENSE VS PERSONAL
EXPENSE
Business Expense: Personal Expense
Cost of doing: Living & family
Trade expenses of
Business individual
Practice
taxpayers.
of
profession
Allocation of common expenses

Between:
Business
Personal use
BUSINESS EXPENSE VS BUSINESS CAPITAL
EXPENDITURE
Acquisition of intangible properties
Expenses to promote business goodwill
Rental Payments on finance lease that
transfers ownership
RULES ON DEDUCTING CAPITAL
EXPENDITURES
Non-depreciable asset
Depreciable properties
Intangible assets
Inventory
Prepaid expenses
SPECIAL CONSIDERATIONS WITH
DEDUCTIONS
Property repairs & improvement
Property acquisition-related costs
Securities issue costs
Manufacturing expense
Effects of accounting methods
Effects of VAT
GENERAL PRINCIPLES OF
DEDUCTIONS FROM GROSS INCOME
Expenses must be legitimate, ordinary,
actual and necessary(LOAN)
The Matching Principle
The Related Party Rule
GENERAL PRINCIPLES OF
DEDUCTIONS FROM GROSS INCOME
The Withhold Rule
Penalties for non-withholding or late
remittance of withholding tax
Period for which deductions and credits
are taken
NON-DEDUCTIBLE EXPENSES
Personal, living, or family expenses
Amount paid out for new buildings or for
permanent, or betterments made to
increase the value of any property or
estate.
NON-DEDUCTIBLE EXPENSES
Any amount expended in restoring property or in
making good the exhaustion thereof
Premiums paid on any life insurance policy covering
the life of any officer or employee, or any person
financially interested in any trade or business
carried on by the taxpayer, individually or
corporate, when the taxpayer is directly or indirectly
a beneficiary under such policy
TAX REPORTING CLASSIFICATION OF
DEDUCTIONS
Cost of sales or cost of services
Regular allowable itemized deductions
Special allowable itemized deductions
Net Operating Loss Carry Over (NOLCO)
MODE OF CLAIMING
DEDUCTIONS
Itemized deductions
Optional standard deductions