According to Benjamin Franklin, there are only two things that are certain in life: Death and Taxes.
Are you making PHP60,000.00 and over in a year’s time? If your answer is a resounding “Yes”, then that means you are required to file an ITR (Income Tax Return)
What you need to do:
For Personal/ Individual Income Tax
Freelance: Taxing as it may sound ( No pun intended, lol), you have to ask for a Form 2307 from every company that has withheld tax on their payments to you. Using the data, you have to fill out BIR Form 1701.
Business Owner: Are you making money from a business venture with another person? Are you an employee of your own company? Or are you receiving dividends or share on the total profit of a business? Please make sure to include the income you received from your different sources of income. BIR Form 1701 provides you with the specifics. With the BIR, be as specific as you can be!
For Mixed Income
If you have a day job, but also do freelance work or own a small business be it online or physical store, you will need to file an ITR declaring mixed income. That means you are telling the BIR that you have several income sources. Similarly, if you run several businesses, you need to itemize them all.
Freelancing on the side: You have to ask for a Form 2307 from every company that has withheld tax on their payments to you, including one from your day job.
Business Owner: You have to ask your day job for a Form 2307, and then consolidate the income you made from your business/es into one form 1701.
Filling out the form
Filling out the Form 1701 can be a little tricky. You may need to consult with an accountant the first few times you do it or every time you find that you have a new source of income.
The 1st section of Form 1701 only requires personal data. That means, it is very simple. But that is not the case with the other sections, such as your tax code and the computations, which can get confusing. So it is best to consult your friendly accountant to help you with this.
The BIR provides a lot of information on their website. You can access the information on filing income tax returns online. Please use the BIR’s Electronic Filing and Payment System (eFPS).
Things to keep in mind
You must understand the changes that the BIR made year after year, as well as the requirements you need to remember.
1. The BIR will now pre-audit Tax Returns filed. This means that BIR agents and officials will pre-audit or check the forms and their attachments prior to the acceptance of the forms. expect long lines.
2. There are new Income Tax Forms. Minor changes were made to the ITR forms. You can download the latest versions on this official BIR page. The proper form will depend on how you are registered as a taxpayer.
3. There are new limitations and/or allowable expenses. There are limitations on entertainment and representation expenses, donations to charitable contributions, on interest expenses, and on depreciation expenses for transportation and maintenance expenses.
4. Make sure you attach all requirements to your ITR. Attachments such as a summary of taxes, duties and licenses need to be included. Make attachments using Form 1702. (Download both page 1 and page 2.)
5. Be aware of penalties. Surcharges ranges from 25% to 50% for failure to file returns, late payments, and problems with attachments, etc. Avoid the extra charges by fixing your papers early and filing on time.
For your reference, you can refer to these documents that were recently released to Certified Public Accountants (CPAs).
If you happen to know a CPA, it is best to consult these professionals so you’ll get the specifics clear according to your own unique situation.
Once again, let’s review who are required to file an ITR. Game? Okay, here it goes.
You are required to file an ITR if:
- You are a minimum wage earner.
- Your gross income (total earned for the past year) does not exceed your total personal and additional exemptions.
- Your income derived from a single employer does not exceed Php60,000 and the income tax on which has been correctly withheld.
- Your income has been subjected to final withholding tax.
- You are qualified for substituted filing.