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A Freelancer’s and Consultant’s Guide to Using Taxumo

Think about all the attention given to the following:

  • Decluttering your closet and keeping and displaying things that bring you joy…
  • Following the footsteps of Bill Gates, Mark Zuckerberg when they only have one style of shirt or attire…
  • The rise of planners and productivity apps that help you with time management.

All of these “hacks” introduced to us because man has finally realised that TIME is the most important asset.

And this realisation is what makes most entrepreneurs, freelancers and business owners successful. They never WASTE time. It’s more important than money. This is why service apps like GRAB, and even Upwork thrive, because successful people know that money is something that you can earn back but when you lost time, it’s lost forever.

This is the reason why Taxumo exists as well. If you value your time, and if you’d much rather spend your time earning money than computing your taxes or lining up at the RDO or the bank, this application is for you. We exist for people who see that they would much rather outsource computing, filing and paying to a system or application than spending time figuring out how to file and pay or when to file and to pay. It’s basically Taxumo giving you that gray sweater of Bill Gates and all you need to do is to wear it 🙂 haha! 

To make it even more convenient for you, freelancer or consultant, I have made this step by step guide on how to start using Taxumo and how to maximise using Taxumo.

SETTING UP A TAXUMO ACCOUNT FOR FREELANCERS OR CONSULTANTS

Sign up to Taxumo using these settings (Yup, just copy your Certificate of Registration). Here is a sample Certificate of Registration and see the parts. It contains the Tax Type that you need to file.

If you don’t have this, check out Taxumo’s Business Registration Service for Freelancers. Click here: https://www.taxumo.com/business-registration/freelancer

Have your COR by your side when you set up your Taxumo account. If you don’t have it while setting up, it’s okay. You can still change the details later on. Copy EXACTLY what is written in your COR. Example, if the Taxpayer’s Name in your COR is Arboleda, Ginger Palma, please copy it as is in Taxumo.

As you can see, you can turn the notifications (email notifications) on and off. We highly suggest that you turn these on.

For your Business Profile (see image above), just copy the line of business in your COR. For “I want to file my Taxes From”, place the date when you received your Certificate of Registration OR place the date when you want to start filing with Taxumo (if you’v been filing taxes manually before).

For Freelancers / Consultants who earn below Php 3 Million Gross Revenue or Gross Sales a year, the above settings are the suggested settings. Just copy it.

Business Type: You are providing services

Income Source: Income from Profession BUT if you are still employed AND doing consultancy / freelance work on the side, choose “Mixed from Business and Employment”.

Income Tax Rate Type: If you earn below Php 3 Million Gross Revenue or Gross Sales a year and have minimal business expenses, we suggest that you choose the 8% Flat income tax rate option.

TaxPayer’s Type: Choose Professional

Deduction Method: Just choose Optional Standard Deduction but this won’t matter when the system computes your income tax since you chose 8%.

For each year also, Taxumo allows you to save a business setting! 🙂 So cool! Since you can only change Deduction methods and income tax rate types at the beginning of the year, you can choose and save settings for each year.

And for the last part of the settings page, choose and highlight (color aqua) the taxes that you need to pay. Again, based this on your Certificate of Registration. Then upload your COR and your Digital Signature (which is both optional at this point).

VERY IMPORTANT: Please don’t forget to click on SAVE for every YEAR – Business profile that you set!

ENCODING INCOME AND EXPENSES AS A FREELANCER OR CONSULTANT

The next step is to encode your income and expenses. Click on Cashflow on the left side of the screen, and this is what you’ll see (empty cashflow tab). You can look for entries that you have encoded before by clicking on show filter. To add income, click on the “Add Button”.

This is how an empty Cashflow view looks like.

Each income entered in Taxumo should match an official receipt that you prepared for your client. The OR/SI number portion is the OR number of that transaction. For freelancers/consultants, always choose Sales – Services.

Business Name here is the name of your client. For foreign clients who don’t care about ORs, you don’t need to send them a copy of the official receipt. Just keep it in your booklet.

For expenses, those expenses that you can justify to be part of the delivery of your services is what you can encode. Please make sure that the receipts are under your Tax Payer’s Name (especially for expenses that are Php 1000 and above in amount). For transportation and foreign system invoices, please save emails as PDF and save it in your computer. You can also upload it to Taxumo as backup.

PRO TIP: Encode both income and expenses on a daily basis. This will allow you to maximize Taxumo’s Real Time Tax Calculation tool. You can see how much taxes you need to pay at any given time (para hindi kayo nabibigla when tax due dates come).

FILING TAXES

To file taxes, be sure that you are done encoding your income and expenses for the applicable period. Go to the Tax Dues tab and you’ll see all the tax cards with the Tax Dues and the deadlines.

Click on the file button and pay your taxes. Taxumo will then show you a summary of that tax.

If there are things that you need to change, you can go to your settings page. Some fields are also editable here.

For paying your taxes, you need not go to a bank within the city of your revenue district office. You can pay using any of these available channels.

  • Grabpay
  • Debit or Credit Card
  • PayPal
  • Mobile or Online Banking
  • Bank over the counter or Non-Bank over the counter like Bayad Center, SM Payment Counters, Robinsons, 7-11, etc.

PRO TIP: If you have chosen Dragonpay, please ALWAYS check your email for the completion of payment. They will send instructions for you to complete your payment.

Once you have successfully filed and paid for your taxes, you can visit the Past Filings tab on your Tax Dues tab.

If you see “Unpaid filings”, these are the tax cards that you have clicked but have not yet paid for. All you need to do is to click on CANCEL FILING so that the tax card returns to the CURRENT FILINGS TAB.

If you have successfully files and paid for a tax card, it will be marked COMPLETED (it will be marked temporarily IN PROGRESS for 2-3 days before it will say COMPLETED). Once marked completed, you can download and save the copy of the (1) form (click on view form and then click print form — print to PDF if you want to save it in your computer), (2) Download the BIR Confirmation and (3) Download and save the tax payment record.

It’s important to save backups of these in your computer. An OC person like me always want to have “back-ups” for everything. 🙂

After this, you can sit back and relax!!! Fun times!

If you want to maximize your Taxumo subscription, here are some things that you may not know about Tauxmo…

  1. If you receive 2307 forms, you can encode them directly to Taxumo’s Withheld Taxes tab (received tab) and the system will consider it when it computes your Income Tax return. Some people don’t know that these “attachments” should also be submitted and declared to BIR using another system called Alphalist Data Entry and Validation Module. Failure to submit these will also incur penalties.
  2. For your manual books of accounts, you will need to update them frequently. When a BIR examiner visits you, s/he will check if your books are updated. If you don’t know how to update your books, worry no more as Taxumo’s Books of Accounts view formats your entries in columns and all you need to do is copy these entries to your manual books.
  3. If you need to pay SSS voluntary contributions or loan payments, you can click on Pay bills. Compared to other systems, Taxumo already generates the PRN or the payment reference number for you which you can get also from the SSS site. You need not shift from one site to the other.
  4. Entries are exportable and downloadable via Taxumo’s Books of Accounts view. All income is under cash receipt and all expenses are under cash disbursements.
  5. You can give access or delegate access to two more people. Example, if you are using an accountant or bookkeeper, you can give one access to him or her.

Rest assured that Taxumo is constantly innovating and looking for ways that can help you become more productive as a freelancer or consultant.

For Taxumo’s pricing for their subscription plans, click on this link: https://www.taxumo.com/taxumo-pricing/

For those who copied the 8% option above, pricing is at Php 700 per month or at Php 10,000 for a year’s access.

For those with a lot of expenses and who would like to opt for the Graduated Income Tax Table — OSD or Itemized Deduction, pricing is at Php 1500 per month or at Php 20,000 for a year’s access.

If you have any more questions on how to use Taxumo, feel free to leave a comment or message me through https://www.facebook.com/mommyginger/.

Freelancers’ Questions About Taxation, Answered!

I have seen a shift in the mindset of a lot of freelancers (for this working online and for those rendering offline services). Back in 2013, when we at Manila Workshops started to create learning events for Freelancers and aspiring freelancers, we saw that most of them were in that realm of trying things out. Some of the freelancers that we encountered were starting a freelancing career and most of them were still thinking of starting. Four years after, we see that now, a lot of them want to make this their full time profession. They want to make this a career and their main source of income.

Since they will make this their primary source of income, a lot of questions on legitimising and registration with the government come up. As you know, as a freelancer, you need to fix and do everything (as an employee, people in HR do it for you). Registering as a freelancer in the Philippines is actually quite easy. I kid you not! You just need resources (like this article) to guide you.

Do I need to pay taxes even if I earn only a little from Freelancing?

Yes, you need to pay taxes, and it’s clearly stated in Section 74 in the Philippine Tax Code. It says that for as long as you receive income, regardless of the source (even from international entities), you are required to pay taxes. Again, we are seeing more freelancers pay taxes because of their need for a proof of their income which they will use to get VISAs, loans, health cards or HMO plans, etc.

Please do not wait for the time that you will need this for your VISA. Taxumo cannot magically create an ITR for you 🙂 Plus for Visa applications, what embassy’s want to see is your credibility and stability, meaning you frequently and REGULARLY FILE.

So, I’m now earning a small amount of money from my freelancing career, but I am also employed. How do I declare my income to the Bureau of Internal Revenue?

First, you have to register as a non-PRC Licensed professional. You may opt not to have a DTI Certificate of Registration. In DTI you reserve the name of your business, which is something that is not really that important if you’re registering as an individual. As a freelancer, you will just need to get an Occupational Tax Receipt or Occupational Permit and Barangay Clearance from your Municipal Hall. You won’t need to get a business permit that Sole Proprietorships, Partnerships and Corporations will need.

After you have these, just collate the other documents needed before going to the BIR. Check your requirements here by clicking on the button “Apply as a non-licensed professional”: https://www.taxumo.com/business-registration

What are the instances when I need to get a barangay business permit and clearance?

For example, you are a yoga teacher that is commissioned by different yoga studios, you need not get a barangay permit. Once you open your own studio though, this becomes a sole proprietor/business that you will need to register. You will need to go to DTI and the Municipal Hall, and of course, BIR. If you don’t have employees, you need not go to SSS, Philhealth and Pagibig, since you will just have to pay for your own SSS/PHIC/Pag-ibig contributions under your own identification number as a voluntary contributor.

For employees, they have to option to opt for “substituted filing”, which means they are exempted from filing an income tax returns on their own. To qualify, one should have only worked for one employer during a calendar year and has no other sources of income. This can be availed by signing off on the Form 2316 (proof of remittance of payroll tax) provided by employers after the end of the year, or after an employee has moved on. The Form 2316 will then be submitted by the employer (or ex-employer) to the BIR.

If one has worked for more than one employer during a calendar year, he or she would have to file for either of the following:

Form 1700 – use this form if one has no other sources of income other than employment income, and add all employment income and deduct all payroll taxes withheld by employer(s), and pay remaining tax due (if any). This is used if you are transferring from one employer to another.

**Please chat with with us at Taxumo.com if you want to avail of this service (Chat button is at the lower right hand side of the https://www.taxumo.com)

Form 1701* – use this form if one has other sources of income in addition to employment income, or earning purely business income; use this form to report all sources of income (employment, business, others). This is the form that will be used for people who opted for Itemized Deduction or are mixed income employees (have a day job and earning from a side business)

*Self-employed freelancers, professionals and sole-proprietors are required to also file quarterly income tax forms (Form 1701Q) in addition to the annual Form 1701. However, employment income are not required to be included in the quarterly tax returns as these are to be reported only at year-end.

Please check this out: https://www.taxumo.com/blog/how-do-i-file-an-annual-income-tax-return/

What is this new form called 1701A?

Form 1701A – Please use this form if one has no other sources of income but their business income or income from profession. This is a new form released by the BIR for those who chose the Optional Standard Deduction Method (OSD) or opted in for 8% GRT in the previous year

Please check this out: https://youtu.be/2M5XSYw-H4E

Again, you should have filed 1701Q regularly every quarter.

How do I file my Annual Income Tax?

If you are at a lost on how to file your Annual income tax, please read this article: https://www.taxumo.com/blog/how-do-i-file-an-annual-income-tax-return/

Self-employed freelancers, professionals and sole-proprietors are also required to pay quarterly taxes. Depending on their classification (see section below), they will need to file either (updated for TRAIN):

Under Professional – Graduated Income Tax Table:

  • Non Vat / Percentage taxes (Form 2551Q) – gross revenues x 3% or VAT (Forms 2550M and 2550Q) – gross revenues x 12%, less the VAT charged by VAT-registered vendors/suppliers
  • Quarterly Income taxes (Form 1701Q) – Graduated Tax Table

Under Professional – 8% GRT Income Tax Rate

  • Quarterly Income taxes (Form 1701Q) – 8% of Gross Receipts or Gross Sales

But before going to taxation, what are the requirements to register as a freelancer in BIR?

First of all, you have to decide on a business address. The city where your business address will be should match the Revenue District Office of the BIR that your TIN will be attached to. If you previously worked in Makati, and have decided to use your home address in Pasig as your business address, be sure to transfer your TIN from the Revenue District in Makati to the Revenue District in Pasig. Just fill up the form 1905 (Download Form 1905) then submit it at the current Revenue District Office. Wait for at least a week before going to the new RDO to register as a freelancer.;

The list of the BIR Revenue District Offices is here: https://www.bir.gov.ph/index.php/contact-us/directory/revenue-district-offices.html

Once I have transferred my RDO, what should I do?

You should fill out the form 1901 (download Form 1901). You can get it from the Officer of the day or from the guard from the entrance of the RDO.

For the Taxpayer Type, as a freelancer, choose professional – In General. (It’s best though to ask the Officer of the Day on how they classify Freelancers).

Be sure also that you start as a Non-Vat entity. Vat Entities are those that earn Php 3.00 Million a year. Be sure also that you say that you still don’t have employees, if you’re working alone. Check the form, and ASK QUESTIONS before signing and submitting the form.

Each form is only at Php 500 which you can pay at the Authorized Agent Banks (AABs) near the RDO using form 0605. There will also be a certification fee and you also have to pay for Documentary Stamps. These will be around Php 30 to Php 50. You will get the Certificate of Registration a week or two weeks after.

Before leaving the Revenue District Office though, you can order for you Official Receipt booklet. Some of the accredited suppliers are in the BIR premises. If you don’t see them, just ask the BIR Officer the details of the supplier that you may contact. One order is normally 10 booklets at the minimum. This may cost 1000 to 2000 pesos for 10 booklets (depends on the design and if duplicate or in triplicate).

When you go back for the Certificate of Registration, you will also receive the following: ATP or Authority to Print and your books of accounts. The BIR will stamp your books of accounts (journal/ledger/subsidiary professional income book and subsidiary purchases/expenses book) and also your official receipts.

You will know if you are registered when you have your Certificate of Registration. Once you have your COR or form 2303, you SHOULD already start filing and paying for your taxes. Be sure to file even if you haven’t earned anything for the month.

Here is the schedule for the tax deadlines for a Non-Vat Entity

Quarterly Percentage Tax (Form 2551Q) – BIR Deadline is on April, July, October and January of the next year (usually on the 25th of these months).
Quarterly Income Tax (Form 1701Q) – Q1 is on May 15 / Q2 is on August 15 / Q3 is on November 15 / Annual Income Tax Return is on April 15 of the following year.

Once you have your Certificate of Registration, this is where Taxumo, an online web application service can help you file and pay for your taxes. All you need to do is:

  • Copy the details in your Certificate of Registration to your Taxumo Profile
  • Fill in your income and expenses tabs
  • Click on the tax cost to submit your tax filing
  • Payment can be done online, too! (You can even pay via PayPal! Just go to Taxumo.com
  • Taxumo will save your BIR confirmation and the payment confirmation in your dashboard as proof of payment.
  • Their deadline is 5 days earlier than the BIR deadline

YOU’RE DONE! It’s so simple. Please view this video if you need more information.

I hope this article helps! Go to Taxumo’s YouTube Channel for newer videos! 🙂

Love lots,

Ginger

P.S.

These are other links to some other articles that can help you:
http://www.freelancing.ph/bir-requirements-every-filipino-freelancer-should-know/
https://www.rappler.com/business/53578-self-employed-how-to-register-bir

P.P.S.

If you want Taxumo to help you out with your Business Registration, you can sign up here: https://www.taxumo.com/business-registration

 

PPPS. Here is another article that you can read from my friend, Levy!

Self-employed/Freelancer: How to register with BIR