Annualization is a process used by companies to compute their employees’ income tax for the year. This process also involves consolidation of employee’s income (taxable and non-taxable) for an entire year to identify who among the employees still have tax payables or eligible for a tax refund.
UNDER TAX COMPUTATION
- Use Annual Tax Table sets whether the system will use annual tax table in normal payroll run or not.
- Non-Tax Exemption Ceiling refers to the non-taxable limit of 13th-month pay and bonuses in a year. The ceiling should be 90,000.00 as per BIR rules (RR No. 11-2018)
- De Minimis Exemption Ceiling means maximum non-taxable De Minimis pay in a year. The company may have different de minimis exemption ceiling depending on payroll policy and setup.
- Start of Annualization pertains to payroll month system will start using annual tax table. Usually, it’s set on the month of December but it still varies depending on your annualization schedule.
Now you’ve understood how the Annualization works on Sprout Payroll. If you have questions or suggestions, do not hesitate to get in touch with us at firstname.lastname@example.org.