How to File an Income Tax Return in the Philippines: Guide for Freelancers and Entrepreneurs

Published: March 25, 2021 | Updated: August 19, 2021 | Posted by: Moneymax | Personal Finance


income tax return

It’s the tax season once again. For freelancers and entrepreneurs, this means getting yourself busy because you’re filing an income tax return (BIR Form 1701) and paying taxes all by yourself. The work would be easier if you can afford to hire an accountant or tax agent. But what if you can’t?

Tax preparation and filing in the Philippines can be very confusing for beginners and even for those who have been doing it for years. If it’s any consolation, filing ITRs nowadays is a lot easier than it was before. The forms have been reduced from 12 to four pages. Also, the Bureau of Internal Revenue (BIR) has introduced online methods for preparing and filing ITRs. Lastly, tax payments can be conveniently made through ATMs and online banking channels.

No experience yet in filing an income tax return as a self-employed individual? This comprehensive guide should give you a head start.

Who is Tax Exempt?

Not everyone is required by law to pay taxes. Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, Filipinos earning less than PHP 250,000 per year (or roughly less than PHP 21,000 per month) are exempted from paying income tax.

However, tax-exempt Filipinos still need to file an income tax return.

If your annual income is over PHP 250,000, your earnings as a self-employed individual will be taxed under the new tax rate[1] that corresponds to your annual income bracket.

Why Do Freelancers and Online Sellers Have to Pay Taxes?

You may be wondering why freelance workers and entrepreneurs are being taxed. After all, you might have already worked as a freelancer or sold items online in the past without having to deal with this. So, before we proceed to the next topic, let’s clear this confusion first.

While the words “freelancer” or “entrepreneurs” are not exactly found in the BIR’s lexicon, the bureau has a category called “self-employed individuals.” People under this category receive income from the conduct of trade, business, practice, or profession.

So whether you’re doing independent work as a writer, web designer, computer programmer, photographer, doctor, dentist, lawyer, actor, athlete, or online seller, you’re mandated by the law to pay taxes.

Read also: Know Your Taxes: Basics of Tax in the Philippines

How to Register as a Freelancer or Self-Employed Individual with the BIR

Income Tax Return Philippines

Are you already registered by the BIR as a self-employed individual? You won’t be able to pay taxes and file an income tax return without your Certificate of Registration (CoR), which you’ll get once you complete the BIR registration process.

Here’s what you need to accomplish, so you’ll be able to file an income tax return:

BIR Registration Requirements

  • Accomplished BIR Form No. 1901[2] (Application for Registration)
  • PSA-issued birth certificate, community tax certificate/cedula, passport, driver’s license, or any government-issued ID with your name, address, and birthdate
  • Photocopy of Mayor’s Business Permit (or duly received application for Mayor’s Business Permit, if it’s still in process with the city hall or municipal hall) and/or Professional Tax
  • Receipt/Occupational Tax Receipt, or DTI Certificate
  • Accomplished BIR Form No. 0605[3] (Payment Form)
  • Tax Identification Number (TIN)
  • Accomplished BIR Form No. 1906[4] (Application for Authority to Print Receipts and Invoices)
  • Final and clear sample of principal receipts or invoices

Here’s what you need to accomplish, so you’ll be able to file an income tax return:

BIR Registration Steps

  1. Go to the BIR Revenue District Office (RDO) that holds jurisdiction over the place of your business.
  2. Submit the requirements to the New Business Registrant Counter.
  3. Pay the annual registration fee of PHP 500, BIR-printed receipt/invoice, PHP 15 certification fee, and PHP 15 documentary tax to any authorized bank. Submit the BIR Form No. 0605 when making your payment.
  4. Submit the BIR Form 1906 to apply for Invoices/Receipts.
  5. Attend a seminar for new business registrants conducted by the RDO.
  6. Claim your BIR registration certificate (Form 2303), “Ask for Receipt” notice, Authority to Print, BIR-printed receipt/invoice, and eReceipt.
  7. Once registered with the BIR, you can start filing your ITR and paying your taxes.

Related article: How to Get a TIN ID in the Philippines: A Complete Guide

What is Income Tax Return?

An income tax return (ITR) is a form that taxpayers file with the BIR to report their income, expenses, and other important information such as tax liability and any refund for excess payment of taxes. For individuals who have mixed-income or are self-employed, the ITR Form that you will need to accomplish is BIR Form 1701.

When to File Income Tax Return

The deadline for filing income tax returns in the Philippines for freelancers and self-employed individuals is April 15 every year. Failure to meet the deadline will result in penalties such as a 25% surcharge of the tax due and a 20% interest per year from the deadline of payment until full payment of the amount.

It’s much better if you file yours earlier to avoid missing the deadline and to have time to correct any tax miscalculation.

How to File an Income Tax Return in the Philippines

There are three methods to file an income tax return in the Philippines: through the Electronic Filing and Payment System (eFPS), Electronic BIR Forms (eBIRForms), and manual filing.

What is the Electronic Filing and Payment System?

Electronic Filing and Payment System eFPS

Developed by the BIR, the eFPS is a paperless system for paperless filing of ITRs and paying taxes through the internet. It’s a quick, convenient, and secure way to file and pay your taxes.

Who Can Use the eFPS?

The BIR built this electronic tax filing and payment system mainly for the largest taxpayers in the Philippines. But presently, all taxpayers in the country who need to file and pay their taxes are allowed to use the eFPS.

How to Use the eFPS

  1. Register for an account. Visit the eFPS site and click the “Enroll to eFPS” link. Once done, fill out the enrollment form and click the Submit button. Wait for an email message from the BIR after three to 10 days regarding the approval or rejection of your enrollment.
  2. Upon activation of your account, you can start filing and paying your taxes electronically through the eFPS. Log in to your account, fill out the required fields, and submit your info.
  3. Once the information has been received, you’ll receive a filing reference number (FRN). The FRN, which can be found on the top right corner of your ITR, will be issued for every successful filing transaction.
  4. To pay your tax, click the Proceed to Payment button under the FRN. Enter the required details and payment mode. Then click “Submit.” You’ll see a confirmation notice on the screen when the payment has been successfully completed.
  5. Print your ITR through the Tax Return Inquiry facility. You may get your e-filed ITR certified in your RDO.

What is Electronic BIR Forms?

Electronic BIR Forms eBIRForms

The eBIRForms is an alternative method that makes ITR preparation and filing easier, more convenient, and more accurate. It consists of two packages that enable taxpayers to fill out their ITRs offline and submit it to the BIR online:

  • Offline package – This downloadable tax preparation software allows taxpayers to directly encode data offline and validate, edit, save, print, and submit ITRs to the online eBIRForms system.
  • Online package – This system accepts ITRs submitted online and automatically computes penalties for late filing of ITR.

Who Can Use the eBIRForms?

Non-eFPS filers may use this method. The government mandates certain taxpayers such as accredited tax agents and their clients to use the eBIRForms.

How to File BIR Form 1701 Online Using the eBIRForms

  1. Visit the eBIRForms page[5].
  2. Download the latest version of the eBIRForm Offline package on the page.
  3. Install the package and open it.
  4. Choose the appropriate form (Form 1701A for self-employed individuals). Enter the required information in the ITR and validate it.
  5. Click the “Final Copy” button to save a copy of the final ITR.
  6. Go online and submit your ITR using the Online eBIRForm system. Enter your username and password.
  7. On your screen, the FRN will appear confirming receipt of the ITR.
  8. If the submission failed, click the “Final Copy” button to access the alternative mode for the ITR submission.
  9. Check your email for a confirmation message of successful tax return submission.

What is Manual Filing of ITR?

Income Tax Return Philippines

Unlike the two other methods of preparing and filing an income tax return in the Philippines, manual filing involves filing your ITR personally in the RDO where you’re currently registered.

Who Can File an ITR Manually?

Taxpayers who are exempted from electronic filing of tax returns such as senior citizens and persons with disabilities (PWDs), as well as those who can’t use the eFPS and eBIRForms due to technical error or system maintenance, can file and pay their taxes manually.

How to File an ITR Personally

  1. Download, fill out, and print three copies of the accomplished BIR Form No. 1701A[6] (Annual Income Tax Return for individuals earning income purely from business/profession).
  2. If you’re required to pay taxes, go to the accredited bank of the RDO where you’re registered.
    Present the accomplished BIR form and the required documents (Check the requirements on the BIR website[7]).
  3. Get your copy of the duly stamped and validated BIR form. This will be your proof that you’ve filed your ITR.

How to Get a Copy of My ITR in the Philippines Online?

Lost or forgot to keep a copy of your income tax return? Here are the different ways you can try to retrieve your ITR.

Send an Email Request to the BIR

To keep track of your finances as a freelancer or an entrepreneur, you need to compile all the important documents, especially those that concern taxation. If you’re looking to get a copy of your ITR and other BIR-related documents, you may try sending a request to the Bureau via contact_us@bir.gov.ph.

Call the BIR Hotline

You may also get in touch with the agency’s Customer Assistance Division via the following numbers:

  • 8981-7030
  • 8981-7003
  • 8981-7040
  • 8981-7020
  • 8981-7046
  • 8981-7419
  • 8981-7452
  • 8981-7478
  • 8981-7479

Check Your ITR Through eFPS

Alternatively, you can use your eFPS account to see the tax returns you filed in the past. Just log into your account, go to the eFPS User Menu, and click the Tax Return Inquiry button.

Request Your ITR Through the FOI Website

You may also get a copy of your ITR in the Philippines through the Freedom of Information website. The Freedom of Information or FOI Program is the government’s response to the citizens’ call for transparency. Through this program, you can request any information about government transactions and operations as long as the information will not endanger national security.

Here’s how you can make a request for your income tax return:

  1. Go to www.foi.gov.ph.
  2. Create an account if you don’t have one yet. Otherwise, just log in.
  3. Once logged in, you’ll be directed to the dashboard, which contains all the requests of the account owner.
  4. Click the Make a Request button. You’ll then be asked to select the agency.
  5. After selecting the Bureau of Internal Revenue, click Write My Request.
  6. You’ll then be directed to a page where you’ll need to fill out the form. Supply the details for the following fields:
    • Tile of the Document (in this case it’s your income tax return)
    • Coverage or Time Period
    • Intended Purpose of Use
    • Your Message
  1. The request that you’ve just sent will be forwarded to the Receiving Officer of the concerned agency.
  2. If your request is approved, you’ll find a response on your dashboard.

Pointers to Remember When Using the FOI Website

The FOI program informs users that everything you input into its platform—which includes your name and message—will be publicly displayed on the website.

The agency also asks requesters to make sure that the information being asked for is not already publicly available. It also asks users to be very concise on their requests, so the release of information will be much quicker.

Here are two useful tips from the agency:

  1. Write the request in simple and precise language.
  2. The website is not made for general inquiries, so you must be very specific when naming the documents you want to retrieve. In your case, just state that you need your ITR.

Tips for Organizing Your Taxes as a Self-Employed Taxpayer

If you’re freelancing for an employer that takes care of your taxes and deductions, then there’s nothing to worry about. However, not all freelancers enjoy the same convenience, and they need to do everything themselves.

Avoid missed deadlines and penalties. Here are some of the things you may need to keep in mind:

1. Create a Separate Bank Account for Your Business

Efficient financial organization starts with the creation of a separate account for your freelance work or business. That way, it’ll be much easier for you to track your operation-related spending and tax-related deductions.

2. Start Setting Money Aside for Your Taxes

Better yet, create a specific bank account that’s dedicated to your taxes. While your overall tax largely depends on how much you’re making, it wouldn’t hurt to start saving as early as now. That way, you won’t be shocked by how much you’ll need to pay eventually.

3. Be Keen on Recording

To keep tabs on your taxes and payments, we recommend that you have a record-keeping system. It can be as simple as an Excel file or a columnar book. Using tech platforms, such as Taxumo and Tax Whiz PH will surely make this work much more efficient.

Related article: BIR Online Payment Guide: Easy Ways to Pay Taxes in the Philippines

4. Seek the Services of a Professional

If you’re a super freelancer who’s handling multiple projects and earning a sizeable income, managing your taxes can be a headache. But that won’t be the case when you work with an accountant. Not only will they help you keep track of your finances, but they’ll also explain to you the confusing parts of taxation.

5. Keep Your Invoices and Receipts

To better calculate your taxes, you’ll have to refer to your invoices and receipts. As such, you need to keep copies of them.

6. File Ahead of Time

Don’t wait for the BIR’s deadline before you actually file your ITR. The last days of the filing season can be hectic and stressful, and you may even find yourself wasting some time as you wait in line. Prepare all the pertinent documents ahead of time, so you’ll have a chance to correct the details and make sure that everything is updated.

Final Thoughts

Does the thought of filing your ITR and paying your taxes seem daunting? It really is, so you need all the help to get it done and have more time to attend to your business or freelance gig. You may try using apps that can automate some of the tasks involved in tax preparation and filing, like calculating taxes and filling out forms.

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