Annualization is the process of determining if employees are eligible for a tax refund or need to pay additional tax. Salarium provides automatic computation of tax Annualization and reflects it in the Payroll. Annualization commonly happens at the end of a year, at the end of a month, or when an Employee resigns or gets terminated. To find out how to compute for the annualization of a resigned or terminated Employee, click here.   

Click Company Setup > Payroll > Annualization.

To edit the Annualization Setting, click the item you want to edit. The Edit Annualization Setting box will pop up.

Select the option that is most applicable:

  • Don’t Run – no annualization for the Employee but payroll based on the monthly BIR Tax Table,
  • End of Year – computation of taxes due to the Employee in the year based on adjustment and,
  • End of Each Month – computation of taxes due to the Employee after every month based on annualized BIR Tax Table with less adjustment at the end of the year. 

Note: If you add Year To Date information and set your Annualization schedule to End of Each Month, the information will reflect on both the end of month annualization and the end of year annualization.

You are now ready to generate your payroll with the updated settings in the Annualization Tab.

Note: The system will default to End of Year annualization. The annualized tax adjustment will be credited or debited in the last pay run of the year.

Salarium computes the Tax Annualization automatically. By the end of the year, Salarium will automatically generate three documents compliant with the Bureau of Internal Revenue (BIR) related to Annualization: 

  • BIR Form No. 1604CF or the Annual Information Return of Creditable Income Taxes Withheld (Expanded)/ Income Payments Exempt from Withholding Taxes,
  • Alphalist or the Alphabetical List of Employees from whom taxes were withheld and,
  • BIR Form No. 2316 or the Certificate of Compensation Payment / Tax Withheld For Compensation Payment With or Without Tax Withheld.

To find out how to generate payroll, click here