What Happens When Withholding Taxes Are Calculated Wrong?

Part of the obligations of any employer to their employees is computing and paying their withholding taxes properly. Failure to do so with accuracy and in a timely manner could mean paying a hefty fine or serving a sentence of one to 10 years.

Employers properly paying withholding tax are not a moral obligation, but a legal one. According to Section 80(A) of the Philippine Tax Code, employers are legally bound to remit the withholding tax with the right amount to the BIR.

Withholding Tax Violation

There are typically six types of tax violations that employers may be at fault, and they are:

  1. Non-withholding – When employers do not deduct the taxes from the employees’ taxable income
  2. Underwithholding – When employers do not deduct the right amount of taxes from the employees’ taxable income
  3. Non-remittance – When employers do not remit the withholding tax
  4. Underremittance – When employers do not remit the correct amount of the withholding tax
  5. Late remittance – When employers do not remit the withholding tax on the due date
  6. Failure to Refund the Excess Amount – When employers refuse/neglect to refund the excess amount that was taxed

If the employer is at fault with any of the violations mentioned above, their sanctions are at the mercy of the law. The guilty employers may be eligible for the following penalties and/or sentences:

  • -Additional 25% of the amount that the employer neglect to pay.
    However, the amount goes up to 50% when the employer did not pay for the fraction or full amount for the purpose of fraud
  • -Additional 25% per year until the amount is fully paid
  • -Additional 100% of the total amount for employers who willfully avoided paying for tax evasion purposes. Other penalties may also be added to such cases
  • -Additional 100% of the excess amount if employer willfully refuses to pay
  • -Minimum of P10,000 fine and a prison sentence of one to 10 years for employers with criminal liabilities
  • -A minimum of P50,000 and maximum P100,000 fine for corporations with criminal liabilities

How to Reduce Payroll Errors

Bringing down the number of occurrences of payroll errors or eliminating them altogether requires following through with good practices. Below are set of ways to reduce payroll errors:

  • -Be knowledgeable about the Philippine payroll regulations and company policies.
  • -Ensure all employee data being used in the calculations are accurate.
  • -Be aware of all the payroll deadlines such as payouts, government reports, and tax remittances.
  • -Perform regular internal audits.

Paying the employee’s withholding taxes with the correct amount and in a timely manner is the only way to be free from being punished by the law. Whether it was out of human error or on purpose, the repercussions could be substantially damaging to any business or corporations, not only financially but also in reputation and legal records.

Getting payroll done right is an important aspect of any business, and JustPayroll.ph can help. We could provide you with the tools (Philippine payroll software and biometric device) and services (outsourced payroll services and consultations) that’ll ensure that payouts and remittances to government entities are done on time without any discrepancies.

Discover how easy payroll can be by choosing us, simply give us a call at +63 (02) 808-4707 or fill out the form below to get in touch with our payroll customer care.

About the JustPayroll.ph Writer - Rayan Ramos

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JustPayroll Team