Report of a Salaried Employee of All Income in the Year Earned

June 26, 1959 BIR RULING NO. 337-59 Mrs. Leonor B. Pasao 1048-Int. 2 Rivero St. Cavite City M a d a m : This had reference to your letter of January 14, 1959, requesting ruling on the following queries: "1) We at Sangley are paid every other Friday covering a period of two weeks, with a week intervening for paper work before we actually receive our remuneration. For example our wages for the period 15 to 28 December 1957 was received on 3 January 1958 . But our pay for period 14 to 27 December 1958 which would have been paid on January 2, 1959 was given to us on 31 December 1958 by special request to celebrate fittingly the New Year Eve. Our headache now is whether to report these wages received in calendar year 1958 or deduct the amount which covered the period in December 1957 (15 to 28 Dec. 1957 ) for income tax return purposes. "There are two schools of thought here. One maintains that there are always 26 paydays in a year; that reporting for calendar year 1958 all monies merely received in that year, but partly overlapped two weeks of 1957 is not the intent of our income tax laws. The other plainly believes that all monies actually received in a calendar year should be reported regardless part of it covered the previous year. May I have your advice on this matter? "2) We old-timers at Sangley are covered with retirement benefits, i.e., 6% of our pay is deducted for contribution to the Retirement Funds. As an example, "A" earned a total salary of P6,000 in 1958, but his retirement deductions totalled (6% of P6,000) P390.00. Therefore, "A" actually received in his hands only a total of P5,610. "Now, our question is should the amount of P6,000 be reported for 1958 income tax returns or P5,610 which was actually received?" In reply thereto, I have the honor to inform you as follows: Anent query No. 1, the taxpayer being a salaried employee should report all his income in the year earned regardless of the fact that a portion of his income is received only the following year, pursuant to section 38 of the National Internal Revenue Code. Accordingly, part of the income earned in 1957 and received only in January, 1958 is taxable for the year 1957. As regards query No. 2, the 6% deduction from an employee's salary as contribution to the Retirement Fund is part of his income. This contribution is not an allowable deduction. Accordingly, the same should be reported as income in his income tax return. Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue