Calculate tax (PPh21) no more and no less

Payroll outsourcing is a unique profession. If I met with a person and I explained that I am helping clients to process the salary, in general, the person would be smiling to me, because he/she felt the uniqueness of that job why clients should outsource payroll. At the same time, many companies treat it as a routine job that HR functions can handle easily internally.

However, after involving more than 15 years, the biggest challenge is in PPh21 calculation. If there is a mistake or late payment, the tax office can fine 2% from less calculation or late payment, including fewer PPh21 paid during the year comparing PPh21 paid in December. While if the company pays more PPh21, the management feels loss because there is no compensation to pay more tax. Even more, now the Tax Office has a burden to achieve the high target to collect the tax. So the Tax Office can issue a Tax Collection Letter or at least a letter for questioning any suspicious such as why the company paid less monthly tax payment at the beginning of the year comparing at subsequent months.

So, in the end, calculating tax (PPh21) accurately, no more, and no less is the most important thing.

Two aspects that I can share to calculate tax accurately, no more and no less:

- I evaluate the Forecast tax calculation method is better than the moving average tax calculation method. We can see when there is an increased salary in the middle of the year. Forecast tax calculation calculates tax based on current income up to the end of the year plus previous income during the year, the result the tax will be the same up to the end of the year. While moving average tax calculation calculates tax based on annualized average salary up to a current month, so that the tax will gradually increase up to the end of the year. We create Myquantumhr with the Forecast method, which avoids complain from the employees and tax office.

- Another thing is to differentiate between regular income and nonregular income. The simplest example is overtime allowance, which seems a routine; however, the amount can fluctuate so that we prefer to treat overtime as nonregular income to make tax calculation more precise.

Two examples are case how we can implement PPh 21 calculation no more no less. The conclusion: it seems that the payroll process is simple. But PPh 21 regulation in Indonesia is more complicated than the tax regulation in other countries and high tax targets for developing Republic Indonesia, the payroll process is not as simple as people imagine.