How to File BIR Form 1701Q

bir-form-1701Q

One of your major responsibilities as a freelancer or sole proprietor is filing your BIR form 1701Q. This is submitted quarterly for the first quarter, second quarter and third quarter.

Who are required to use the BIR form 1701Q?

This must be accomplished and filed in triplicate by the following individuals:

1. A resident citizen engaged in trade, business, or practice of profession within and without the Philippines.

2. A resident alien, non-resident citizen or non-resident alien individual engaged in trade, business or practice of profession within the Philippines.

3. A trustee of a trust, guardian of a minor, executor/administrator of an estate, or any person acting in any fiduciary capacity for any person, where such trust, estate, minor, or person is engaged in trade or business.

Do I have to file Quarterly Income Tax?

Under the new TRAIN law, those who earn less than P250,000 annually are exempt from paying income tax return.  So if you fall under this bracket, you don’t have to pay your quarterly ITR. Having said that, we do recommend that you still file your Quarterly ITR’s. As we said previously in an earlier article, imagine needing to have an ITR and then having to explain how tax exemptions work to whoever you’re talking to. Yeah, good luck.

Check out the new Income Tax Table under TRAIN. Take note that the rates will go lower in 2023.

bir form 1701Q

My annual income is more than P250,000. How do I compute my dues?

The TRAIN law gives you two options for filing and computing your taxes. You can either follow the 3% percentage + income tax or use the new 8% Gross Receipt Tax.

Now, the 8% Gross receipt Tax might sound easier for you, but keep in mind that it’s not for everyone. To know if you’re making the right choice, check out this tax calculator that we made for you.

How do I compute my income tax dues if I opt for the 8% Income Tax Rate?

The first thing you need to know is whether your earnings come solely from your business or profession, or if your earnings come from both compensation and business/profession.  After which, you can apply the formula below applicable to you:

 Income Solely from Business / Profession:

Total Income Tax Due = 0.08 * (Gross Sales – 250,000)

Mixed Income Earner:

Total Income Tax Due = (0.08 * Gross Sales) + Tax Due on Compensation

As you can see, the Php 250,000 deduction is NOT applied for Mixed Income Earners. Reason for this is because the Php 250,000 has already been deducted from the tax due based on compensation so it no longer applies to the tax from your business.

What are the attachments required for filing my quarterly return?

Here are the documents you need to prepare:

1. Certificate of Income Tax Withheld at Source (BIR Form 2307), if applicable.

2. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304) if applicable.

3. Duly approved Tax Debit Memo, if applicable.

4. Previously filed return, if an amended return is filed for the same quarter.

When and where do I file my BIR Form 1701Q?

You must file your income tax return with any Authorized Agent Bank (AAB) located within the territorial jurisdiction of your Revenue District Office. Present your accomplished BIR form 1701Q with the requirements and your payment. The teller of the AAB or the RDO officer will give you a copy of your stamped and validated form.

For “No Payment” returns, you only have to attach the required documents to your BIR form 1701Q. You will also receive a copy of your stamped and validated form.

In case your place doesn’t have any AABs, you can file this directly with the Revenue Collection Officer or duly Authorized City or Municipal Treasurer of the RDO.

The deadlines for filing of BIR form 1701Q are:

1st quarter: On or before May 15
2nd quarter: On or before August 15
3rd quarter: On or before November 15

Remember, the BIR doesn’t give extensions to these deadlines. Taxpayers are encouraged and expected to file as early as they can to avoid the usual inconveniences during the last day of filing.

How do I accomplish and compute my quarterly income tax returns?

1. Fill out the Part 1 of BIR form 1701Q. This includes your TIN, registered name, registered address, the line of business or occupation, and other applicable information.

2. The Part 2 of the form states the computation of your quarterly income tax. Put your Sales/Revenues/Receipts/Fees. Add the Amount You Received as a Partner from General Professional Partnership, if there’s any.

3. Determine your Gross Income by subtracting your Cost of Sales/Services to your total sales or revenue. If you’re a freelancer, your cost of services will include internet fees, freelance platform fees, etc. For sole proprietors, you can put your building rental, internet cost, salaries of your employees, and other relevant expenses.

4. After getting your Total Gross Income, determine and compute your Total Allowable Deductions. You can choose between Itemized Deduction and Optional Standard Deduction. Take note that neither of these options is available for you if you pick the 8% Gross Receipt Tax.

  • OSD- This allows you claim a deduction of 40% from your gross sales or receipts for the quarter.
  • Itemized Deduction- You have to identify and deduct all the ordinary and necessary expenses from your gross income. These expenses must attribute to the development, management, and operation of your business, like travel and salaries.

5. Subtract your Allowable Deduction from your Total Gross Income to get your Taxable Income.

6. Compute your Tax Due by using the tax table under the TRAIN Law.

7. Determine your Tax Payable by deducting the Total Tax Credits/Payments for the Quarter from your Tax Due. This includes Credible Tax Withheld from the previous Quarters, Credible Tax Withheld per BIR Form 2307, and Prior Year’s Excess Credits.

Is there any easier way to prepare, file and pay my income tax return?

Let’s admit. The computations and filling up of forms can be quite tedious. Fortunately, there is Taxumo, a web-based tax filing app that lets you skip the manual computing of tax dues and accomplishing of BIR form 1701Q.  Instead, you would only need to enter your income and expenses, and you get your tax dues auto-calculated real time.  The BIR form 1701Q is also auto-generated so no need for filling up and printing of forms. Best part is that with a click of a button, you could submit your taxes online. You can check it out here.

Are there any penalties if I missed the deadline for filing?

Absolutely. Apart from your tax due, you have to pay a 25% surcharge, a 20% interest per annum, and a compromise penalty. If you choose to neglect to file the return, there is a penalty of 50% of the tax due.

Refusal to pay penalties will be referred to the appropriate office for criminal action, so make sure that you pay your taxes on time

Ready to file and pay your taxes online with Taxumo?

A Comprehensive Guide to BIR Forms for Freelancers and Sole Proprietors

As a freelancer or a sole proprietor, filing BIR forms and settling your taxes is your responsibility.

Knowing the right forms to secure and when they should be filed will save you from a lot of stress and penalties. So for today’s post, we’re giving you the ultimate list of BIR forms that every taxpayer should know.

Here we go.

Continue reading “A Comprehensive Guide to BIR Forms for Freelancers and Sole Proprietors”

Brand New 2551Q Form (Quarterly Percentage Tax) with 8% Opt In

On April 25, on the deadline of filing the Quarterly Percentage Tax Form, the BIR released RMC 26-2018 which has the new 2551Q form and the submission procedures for manual, eBIRForms, and eFPS.

The new 2551Q Form now has a field where you can indicate whether you’re opting in to the 8% Flat Income Tax Rate. Also, SPOILER ALERT: 2551Q is not yet updated on eBIRForms and eFPS.

Related downloads:

So for the procrastinators who put off their tax filing until the very last day of the deadline, congratulations!  😉

For the rest of us, it’s unlikely that the BIR will penalize us for not using the new 2551Q form when we submitted given the timing when they released this RMC. Moving forward, though, we have to make sure we’re filing this new one. The next deadline is on July 2018.

While we’re on the topic, if you missed filing your 2551Q, then you may no longer be eligible for the 8% Flat Income Tax Rate anymore. Basing on RR 08-2018, you had to make sure you filed your 2551Q on time. You can read more about our breakdown of that RR and how to opt in to 8% by visiting this article:

How to Avail of the 8% Income Tax Rate on Gross Sales/Receipts

Having said that, there is a glimmer of hope. We noticed that the RDO’s are implementing things differently. If so, perhaps your RDO doesn’t see missing your 2551Q filing as a reason for ineligibility. To be sure, it would be best to call your RDO.

We here at Taxumo are constantly updating ourselves with the latest forms and procedures so you don’t have to! Sign up to Taxumo now to start focusing on your passion instead of worrying about your taxes!

 

Withholding Tax Table 2018 for Freelancers / Professionals OR How much should my client withhold?

What is this “withheld” amount? Why did my client not pay the full amount? What is this 2307? Is this the “ITR”? When you get your check from your client and, specially, if this is the first you’re getting paid, you probably have these questions in mind. So let us help you understand how withheld taxes work in the PH context. In this article, we’ll share the updated withholding tax table 2018 specifically for Freelancers and Professionals (not employees).

Read on to find out more about withheld taxes…

What Are The Different Payroll Tax Rates to be Aware of This 2018

 

 

Whether you’re a freelancer or a new entrepreneur flying solo, sooner or later as your business grows, you may want to consider hiring employees. And when you do hire your first employee, you would have to start thinking about payroll, and payroll tax rates.

For both aspiring and existing business owners, 2018 comes with big changes specifically with implementation for payroll taxes. When it comes to handling payroll, it’s important to understand the current payroll tax rates. Not all employees under an organization have the same salaries and there are those who have different tax brackets as well. Meaning, each individual can have varying tax rates depending on their job position and company.

Continue reading “What Are The Different Payroll Tax Rates to be Aware of This 2018”

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Whether you are a business owner, freelancer or a  professional, we all spend a significant amount of time at work and sometimes even more than we spend at home.

With all the stress and challenges that comes with our work life, wouldn’t you want a work space where you can be comfortable and feel emotionally and mentally healthy? A space that boosts clarity, creativity, and productivity? A place that encourages collaboration and trusting relationship with your colleagues and clients?

Learn how to de-clutter your workspace here…

Small Business Tips: Using SEO To Spark Your Business in 2018

I’m going to discuss one of the small business tips some entrepreneurs are not taking advantage of nowadays.

Over 3.5 billion searches happen per day, according to InternetLiveStats.com.  Is your website near the top of the search results when someone searches for the services or products you offer?  According to BigCommerce.com, in 2017, 51% of Americans (and that’s just Americans) prefer to shop online and that rate grows every year.

Find out more about SEOs here…

Tax Reform: How to Change from VAT to Non-VAT

Tax Reform TRAIN Changing from VAT to Non-VAT

The Tax Reform for Acceleration and Inclusion, more popularly known as TRAIN, has amended the tax code to increase the VAT Threshold from P1.919 Million to P3.0 Million. If you are a registered VAT taxpayer earning less than P3.0 Million, you may now opt to be non-vat instead. This is great for services and high margin businesses as this will most likely result in tax savings.

Find out how to change your tax type to Non-VAT here…

TRAIN Law Primer or So what do I file now?

A Primer on the TRAIN Tax Reform Law

The Income Tax Reform Law (Tax Reform for Acceleration and Inclusion of TRAIN) (RA No. 10963 + veto message) changes a lot of things for the DIY taxpayer. Aside from the forms themselves, the tax reform law also changes the frequency, the processes, and the formula & tax tables that we’ve all gotten used to. As a freelancer, professional, or self-employed individual, this can be a confusing change. This article aims to make the tax TRAIN easier to understand.

Read more about the biggest changes from TRAIN…