Apportionment of Increased Personal and Additional Exemptions in 2008
- Increased personal and additional exemptions for individuals cannot be claimed in full for 2008.
- Apportioned according to RR No. 10-2008 rules.
- Transitory allowance reflected on the new Annual Income Tax Return Form 1701 (July 2008 version) for Self-Employed Individuals, Estates, and Trusts.
Optional Standard Deduction (OSD) Rates for Individuals
- From January 1 to June 30, 2008: OSD limited to 10% of gross income (gross sales less cost of sales).
- From July 1 to December 31, 2008: OSD increased to a maximum of 40% of gross sales or gross receipts net of returns, discounts, and allowances.
- When gross sales or receipts represent total income for the entire year and are not allocable to specific months, computation is:
- 10% of 50% of gross income plus
- 40% of 50% of gross sales or receipts.
Optional Standard Deduction (OSD) for Corporations
- Corporations opting for OSD can apply the 40% OSD only from July 1, 2008 onward.
- For the period prior to July 1, 2008, itemized deduction method remains in effect.
Filing and Amending Income Tax Returns for 2008
- Taxpayers preparing 2008 income tax returns must observe the above guidelines if returns have not been filed yet.
- Taxpayers who made errors or inadvertent mistakes in previously filed returns may amend their returns and pay any deficiency basic income tax without penalties.
- Deadline for amendments and payment without penalties: July 15, 2009.
- Authority for penalty waiver rests on Commissioner’s power under Section 204(B) of the 1997 Tax Code, as amended.
Administrative and Public Guidance
- The Circular calls for wide dissemination to ensure proper compliance.
- Issued by the Commissioner of Internal Revenue to ensure uniform application of tax rules related to exemptions and deductions for taxable year 2008.