The BIR issues a lot of forms that employers, and sometimes employees, need to submit when filing for such payments as income tax or withholding tax. One of the important forms that all employees must be aware of is the BIR Form 2316.
What is the BIR Form 2316?
Also known as the Certificate of Compensation Payment or Income Tax Withheld, this form reflects the tax withheld from an employee by his employer during a given calendar year. This form will show the total income received by the employee for a certain year, and the total amount of tax withheld from the employee.
The Form 2316 looks like this:
The Importance of the BIR Form 2316
All employees must receive from their employer the BIR Form 2316 anytime within the first month of the year. This is important so that employees are kept aware about the amount of tax that is withheld from them. The form must reflect the portion of the employee’s income that is exempt from tax, and the portion of the income that has been taxed. Additionally, the form is proof that the amount the employer withheld from the employee is really turned over to the government.
The BIR 2316 must also be issued by an employer to an employee when the latter resigns from the company.1 The form is usually issued to an employee together with his last pay/back pay, together with the Certificate of Employment. The Form 2316 will then be submitted to the new employer as part of the pre-employment requirements.
Reminders to Employers
The computation reflected in an employee’s Form 2316 will show whether the employer was able to withhold the correct amount of tax from the employee. The amount must be computed accurately as this will also reflect in BIR’s records.
It is crucial computations like this which reinforces the need for employers to automate payroll processes in order to ensure accuracy and prevent errors caused by the human component in the payroll computation. There are many payroll software which can cater to specific needs like this.
Sprout's payroll system is one of the most promising in the market. It does not only compute employee payroll but also has built-in features that compute taxes and generate the BIR Form 2316 automatically based on data already stored in the software. It’s an efficient software that will perform this process, and similar processes, in just one click!