Tax season is a time when people generally scramble to get their forms in order and pay their taxes on time. There is also a marked difference between tax returns for those who are self-employed and those who are employed by a company. One such difference is that people employed by a company usually get their taxes filed for them as per regulation. Those who are self-employed, professionals, consultants or freelancers will need to file their ITR forms on their own. Given the timesink that form filing and calculating taxes can be, here’s a few things that can help get you started.
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For individuals who have mixed income or are self-employed, the ITR Form that you will need is BIR Form 1701 which – according to the BIR – “shall be filed by individuals who are engaged in trade/business or the practice of profession including those with mixed income (i.e., those engaged in the trade/business or profession who are also earning compensation income) in accordance with Sec. 51 of the Code, as amended. The annual income tax return summarizes all the transactions covering the calendar year of the taxpayer.”
There are a number of things that you’ll need before accomplishing your BIR Form 1701, as these are required documents that will need to be attached to the actual form and your basis of your computations:
- Certificate of Income Tax Withheld on Compensation (BIR Form 2316), if applicable.
- Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304) if applicable.
- Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if applicable.
- Waiver of the Husband’s right to claim additional exemption, if applicable.
- Duly approved Tax Debit Memo, if applicable.
- Proof of Foreign Tax Credits, if applicable.
- Income Tax Return previously filed and proof of payment, if filing an amended return for the same year.
- Account Information Form (AIF) or the Certificate of the independent CPA with Audited Financial Statements if the gross quarterly sales, earnings, receipts or output exceed P 150,000.00.
- Proof of prior year’s excess tax credits, if applicable.
As you calculate your total taxes, note that certain Exemptions, defined as “ a monetary exemption which reduces taxable income. Tax exempt status can provide complete relief from taxes, reduced rates, or tax on only a portion of items”, will apply.
A PHP 50,000 Exemption is applicable to the following:
- Single individuals or individuals married but have been judicially decreed as separated with no legally qualified dependents.
- Head of a family.
- A married individual – note that this only qualifies when there is only one spouse deriving gross income.
- A PHP 25,000 exemption can be claimed for up to four qualified dependents (children and family members over the age of 65)
- Anyone deemed head of the family unless the right is explicitly waived.
- The spouse who has custody of the child or children in case of legally separated spouses. Provided, that the total amount of additional exemptions that may be claimed by both doesn’t exceed the max additional exemptions allowed by the Tax Code.
- Anyone considered head of the family supporting a fully qualified dependent.
From here on out, you’re well on your way to getting your taxes completed. Remember, the deadline for filing is on the 15th, so the sooner you finish your ITR, the faster you can get it filed. For a little more information, here’s a handy infographic to help you along:
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