Today, I’ve been seeing a lot of news that bloggers, filmmakers, digital workers and freelancers need to pay taxes. Frankly, I’m not shocked. This has been the rule in the Philippines since years ago.
I’ve been blogging for more than a decade now and when I started earning and accepting revenue for my blog, that’s when I started paying my taxes. I started paying my taxes since 2013 (7 years ago). So this news today that bloggers need to pay taxes isn’t really shocking.
Advantages of Paying Taxes
Other bloggers wonder why I get to haggle on my rate and this is because I can issue an official receipt. The reason why bloggers who pay taxes can negotiate for a better rate is because companies can book this as an expense. Imagine paying thousands of pesos and you can’t declare the amount they pay bloggers as a deductible expense? That’s basically thousands of pesos going down the drain for the companies.
Another thing is that I loved that it was so easy for me to get a Visa going to Japan 2 years ago. I pretty much had every requirement in the check list that the agency had. No sweat applying for VISA.
There are a lot more benefits like securing loans, credit cards, HMOs, etc.
How to get started
First thing’s first… don’t panic. Collate all the requirements that you need. If you don’t know what the requirements are, feel free to email firstname.lastname@example.org and they will give you a super comprehensive list of requirements. Taxumo helps process BIR registration for Php 4999 (discounted from Php 6000) until July 31, 2020. You need not go to the RDO and register; they will process it for you.
Aside from the processing fee of Taxumo (you can also do it yourself, too, if you have the time), here is my own breakdown of the actual cost.
The Actual Cost of Registration
In this article from Manila bulletin, they indicated that the only cost are Php 500 for registration fee and Php 30 for Documentary Stamp.
From my perspective, here is an approximation for costs:
Php 530 – BIR Registration and Doc Stamp
Php 2500 – Approximation of your Official Receipt (first ten booklets … yes, they need to be 10)
Php 200 – Manual Ledgers (really depends on how many BIR would require; oftentimes only two books for Professionals and 4 books for Sole Proprietors)
Php 200 – Notary for my SPA since I had Taxumo do it for me
Php 350 – Occupational Tax Receipt and Barangay Clearance
Php 250 – Delivery back to your place of all the documents (approximation since depends on the distance from Taxumo)
Php 2000+ – Payment for DST2000 if you are renting.
Total will be approximately Php 6,030. Again, this is an approximation of the costs. So Taxumo will ask for an advance of around Php 5750.
To help educate the market on BIR registration and Taxation, Taxumo is doing an Ask – Me – Anything Community Roadshow. If you are a community admin or founder, feel free to contact Taxumo via email@example.com.
For other resources, please see these links from my other blogger friends:
It’s that time of the year again when we all have to pay our Annual Income Tax Return, popularly known as ITR. And with this, I see a lot of posts online asking how to I file an Income Tax Return or ITR and where should one start.
So, let me give you at least some information, based on what I know and how I do it. Again, I am not an accountant, but having Taxumo as a business have made me understand how taxation in the Philippines work for MSMEs, self-employed individuals and PRC licensed/non-licensed professionals.
Who needs to prepare their ITR by themselves?
Most of us are employees of a local company that are registered with the BIR. The company that we work for withholds a certain amount that they pay to the BIR (on our behalf). This is called substituted filing. And as proof of that, employees get a form 2316 around Jan to Feb (start of the year) so that you can use this when you apply for VISA, get loans, etc.
So for employees, MAKE SURE you get a 2316 form and KEEP IT! That form is very important.
Now for employees who have side businesses or freelancing / professional services that they do on the side? How do I file an Income Tax Return?
Friend, you are called a Mixed Income Individual. This means that you earn from being an employee and from your business or profession. So what you need to do is to file a Form 1701 (Annual Income Tax Return Form). Let’s talk about how to file it later on in this article. To file a 1701 for mixed income individuals though, you will have to have your 2316 by your side. And if some of your clients also gave you 2307 forms, you have to have them, too.
How about for full time freelancers, professionals and sole proprietors, what do we file?
Now listen up! You can either use 1701 or the newest form to the ITR family, which is 1701A. Now when do you know which of the two you will have to file?
Form 1701 – Please use this form if 1) you are a mixed income individual, meaning you are an employee AND also earning income from a business or side profession (ex. consultancy work, freelance writer, etc.) or 2) if you’ve chosen Graduated Tax rate with an Itemized Deduction Method
Form 1701A – Please use this form if you are earning purely business income or income from your 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
I’m ready to file my ITR. I know what form I should fill out. What do I do?
First thing that I did was I created an account in Taxumo. Just follow these screenshots:
Once you’re done setting up your user account and company information, the next step is to feed Taxumo with information. Note that the system COMPUTES for your taxes, so you don’t have to manually compute or compute using a spreadsheet.
So, there are two scenarios when we get to entering Revenue and Expenses in Taxumo. Scenario one is that you’ve never filed anything before (even manually). This is your first time. And scenario two is that you’ve actually filed manually before and you want to try using Taxumo this time around.
Perfect! I will guide you for both instances.
Scenario one’s cash flow entry is basically adding your revenue and expense entries into Taxumo. Click on your CASH FLOW tab and add entries one by one. Things to note:
For revenue that you key in, it has to pair up with an OR that you have written for a client
For expenses, enter expenses that are related to your business. It has to pair up with an official receipt (it’s usually indicated in the receipt).
Taxumo has standard and suggested categories already in the system. If you’d like to add a few categories, it’s best to consult with an accountant to know if it’s a direct or indirect expense. You can book a consultation here: https://www.taxumo.com/taxumo-consult/
Scenario two’s cash flow is basically adding your revenue and expenses for the 4th Quarter of 2019 (or applicable year for your ITR) — October, November and December. This is because we assume that you have your 1701Q-Q3 (3rd Quarter Income Tax Return) with you. Just keep it by your side when you file.
I totally forgot Scenario three. Scenario 3 is basically when you have used Taxumo and have filed at least your 3rd Quarter 1701Q with us and have consistently been logging revenue and expenses for 4th quarter. You have nothing to worry since all fields will be filled out (assuming you are not a mixed income individual where you need to have your 2316 form by your side).
So I have encoded all of my revenue and expenses in Taxumo. Do I need to encode anything else?
If you have 2307s, please take a picture of each of the 2307 form and go to the WITHHELD TAXES tab. Encode and copy each one under the RECEIVED tab.
If you are a withholding agent and need to pay withholding taxes (0619E,1601EQ and 1604E), be sure that you have done and paid all of these already.
Hmmm, that’s about it.
I have done all that. Am I ready to file my Annual Income Tax Return now?
Yes, you are! You have done all the prep work. All you need to do is to watch these videos and follow it. If this is the first time you are using Taxumo, be sure that you have your past filings of 1701Q beside you. If you are a mixed income individual, have your 2316 with you while filing your ITR in Taxumo.
Oh, this sounds easy! Aside from the actual tax dues that I will need to pay, how much is processing in Taxumo?
Taxumo has 3 subscription plans to choose from and the plans are based on the tax forms that you need to file. To know the forms that you need to file, check your Certificate of Registration and look at Tax Types. You’ll normally see the following for a self-employed individual:
Percentage (Non-VAT taxpayers) / Value Added Tax (VAT taxpayers)
Registration fee (this is the yearly BIR fee that you need to pay every January)
Income Tax (this is paid by everyone)
Withholding Taxes – EXP/OTH (This means you are a Withholding Tax Agent and you need to withhold taxes for each payment that you make)
The cheapest is Php 700 per month (if you get the annual fee). It’s Php 888 if you get the monthly fee. This is for those who opted to pay the 8% flat income tax rate (so they need to file forms 1701Q, 1701A and usually the registration fee or 0605). Taxumo’s pricing already includes filing form 1701A and all of these mentioned forms. You SAWT or 1701Q/1701A attachments are also submitted to the BIR! No need to be penalized for missed submissions of attachments.
The next plan is at Php 1500 per month (if you get the annual fee). It’s Php 1888 if you get the monthly fee. In this plan, the forms Percentage tax (2551Q), Income Tax Forms (1701Q, 1701, 1701A), Withholding Tax (0619E, 1601E, 1604E), Registration Fee (0605) and submission of attachments QAP and SAWT are also included.
The last plan is at Php 2300 per month(if you get the annual fee). It’s Php 2888 if you get the monthly fee. This is what VAT taxpayers usually need since in this plan, the forms Percentage tax (2551Q), VAT forms (2550M and 2550Q), Income Tax Forms (1701Q, 1701, 1701A), Withholding Tax (0619E, 1601E, 1604E), Registration Fee (0605) and submission of attachments QAP, SAWT and SLSP are also included.
*Note that for all plans, Taxumo gives you additional 2 delegate access and access to your Books of Accounts view.
A lot of people are asking if they can just avail of Annual ITR (1701 and 1701A). Yes, you can!
Here are the rates:
1701A 8% at ₱ 888.00
1701A Graduated (Optional Standard Deduction) at ₱ 1,888.00
1701 at ₱ 1,888.00
Usually, the deadline is on April 15, but it was extended for this year due to COVID 19. BIR deadline is May 15,2020. Taxumo’s deadline is May 10, 2020.
Always file early, peeps, and #TaxItEasy!
If I missed anything that you’d like to ask, please feel free to comment on the comment section below. Also, check out the videos of Taxumo in their YouTube channel: https://www.youtube.com/c/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.
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”.
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).
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.
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.
Debit or Credit Card
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…
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.
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.
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.
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.
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.
Mid March 2019, my team (Taxumo) was introduced to the GrabPay team of Grab. We were introduced by Ms. Diane Eustaquio, the Executive Director of Ideaspace. As some of you may know, we were part of Batch 4 of this incubator/accelerator program, and it has helped us a lot in our start-up journey.
I remember the first time we met with the GrabPay (Grab Philippines) team. They really and sincerely wanted to help with the mission of making it easier for every one to pay taxes. After the first meeting, everyone in each of the teams were committed to make this happen.
Since April was a busy season for us, we agreed to start integrations by May 2019. Integrations only took us a month and for marketing, our go-to-market strategies were laid out after.
We’ve actively started promoting our partnership this month (July 2019).
How will this partnership benefit me?
You can get huge savings when it comes to paying your taxes, particularly on the Taxumo processing fees.
For one, when you pay your taxes using GrabPay Credits for the months of July and August 2019, you get Php 100 OFF on Taxumo Processing Fees.
All you need to do are the following:
Step 1: Key in your income and expense receipts in Taxumo then view your Tax Dues Cards to check on the amount of taxes that you need to pay
Step 2: Choose GrabPay as the payment option and click on payment. It will immediately confirm if you have enough balance in your Grab App (GrabPay Credits) so be sure that you have enough GrabPay credits.
Notice that you will automatically have Php 100 OFF.
The second benefit is that you can get more Taxumo Xennies (usually 1 Xenny is equivalent to 1 Peso). Taxumo Xennies can be used to pay Taxumo Processing fees and to upgrade your Taxumo Plans.
You can now purchase Taxumo Xennies using GrabPay Credits. The best deal that you can get is paying Php 250 for 550 Xennies!
So if you really want to upgrade your Taxumo account and have access to our books of accounts view (if you don’t know how to fill out those manual ledgers) or if you want to get around 50%+ off on Taxumo Processing fees, now it the time to STOCK UP ON XENNIES!
Personally, my dream really for these kinds of integrations with partners, is to have a country where you can pay taxes anytime, anywhere. A country where tax payers pay their duties while commuting, while waiting for the next episode on Netflix, while standing in line in the recently opened ShakeShack… basically, anywhere!
We also welcome new ideas that you may have. If you have an idea that you think will work well for Taxumo, message us at firstname.lastname@example.org!
A lot of people have been asking me how to file 1701Q. Personally, I use Taxumo for filing my 1701Q, because it’s the easiest way to compute, file and pay taxes. Full disclosure, I am one of the founders of Taxumo. The reason why we created Taxumo is to help people pay their taxes online.
Business owners, licensed professionals (i.e. doctors, interior designers, etc.) and non-licensed professionals (i.e. consultants, freelancers, etc.) can pay their taxes while focusing more on running their businesses and careers. Accountants can service clients who are far from them and will have no limitations as to how many clients they will service. They can scale their businesses, too!
Our dream really for Taxumo is to help everyone become more productive by giving them back more time to do the things that they love, the things that they are good at and the things that they can earn from.
Okay… the frequently asked questions recently are how to file 1701Q for the first quarter? How do I opt in to the new 8% GRT option for those earning gross revenue of Php 3 Million pesos and below for the entire year?
For the sole purpose of this article, we will only tackle the 1701Q forms for Sole Proprietors, Licensed and Non-Licensed Professionals. I won’t be able to tackle 1702 since this form is used by Corporations and Partnerships.
What is 1701Q and 1701?
These are BIR forms for you to pay your Income Tax. The way income tax is computed is to get the taxable income which is Gross Sales minus Gross Purchases. Then the taxes are based on a tax table if you chose the Graduated IT Rate (and chose Itemized or Optional Standard Deduction).
With TRAIN or the new tax law, there is a new option for this who are earning Php 3 Million Gross Receipts / Revenue per year or less. This is the 8% Flat Income Tax Rate. The computation is based on your gross sales less exemptions.
How do I file my 1701Q for the First Quarter using Taxumo?
First of all, create an account in https://www.taxumo.com. The details that you need to place when you create an account should be based on your Certificate of Registration (COR) so keep a copy beside you and also have a soft copy (picture or scanned copy) available in your computer.
You will then be directed to a blank DASHBOARD.
Click on the Company Profile tab on the left side of the screen. Please make sure that all details are correct (ex. Taxpayer’s name is how it is written in your COR — an individual’s name is written as LAST NAME, FIRST NAME MIDDLE NAME). Just copy how it is written on your COR.
For filing your 1701Q, make sure that you have chosen the correct ATC or Alphanumeric Tax Code. First, you determine whether you’re Business Income, Income from Profession, or Mixed Income: to do so remember how you registered in the BIR.
If you are earning compensation income (from an employer who withholds compensation taxes and gives you a Form 2316) AND earning income from either business or profession, then you fall under “Mixed Income”
If you presented DTI and a Business Permit when you registered and you registered as a Sole pProp in the BIR, then you fall under “Business Income”
If you got an Occupational Tax Receipt or Professional Tax Receipt as part of registration or you did not submit any Business Permit to the BIR when you registered, then you under “Income from Profession”
Then now comes the choice if you want to avail or “opt-in” to the 8% Income Tax Flat Rate. If you want to avail of it, then choose the appropriate ATC with the 8% indicated. We will take care of helping you opt-in with the BIR.
*Some users, aside from opting-in to 8% via the first 1701, ask their BIR RDO to have it indicated in their COR or Certificate of Registration. If you want this, you can go to your RDO and ask the officer of the day if this is possible.
Also, don’t forget to set the Deduction Method.
The rule to follow: If your Expenses > 40% of your income, Itemized is the more tax efficient choice. If your Expenses <= 40% of your income, OSD is the more tax efficient choice.
The income source for people who have no day jobs is “solely from business”. Those with day jobs or local employers issuing 2316 forms and with employee contracts are “mixed from business & employment”.
Then choose if you are a Single Proprietor or Professional.
A lot of people ask about “DISPLAY FORMS FROM” also. Indicate here the date when you got your Certificate of Registration from the BIR. Then for uploading of a copy of the Certificate or Registration and Digital Signature, you can go back to this on a later date. This is not required by TAXUMO.
Now, you can start encoding your income and expenses. To file 1701Q- Quarter 1, make sure that you encode January to March income and expenses.
Don’t forget to add and encode the 2307 forms that you have at hand. Click on Withheld Tax then click on Received.
Click on Add Record. BTW, please have a picture or scanned copy of your 2307s in your computer / device before adding them here.
Just copy the details then click SUBMIT.
Once you are done encoding Income, Expenses and your Withheld tax forms, you can go back to your Cashflow Dashboard. On the right side of the screen, you will see your TAX CARDS. These are the taxes that you need to pay from the date when you received your Certificate of Registration. If you have filed some of these taxes offline or not via TAXUMO, just click on “Mark as Paid / not applicable”,
Do note that you can pay your Tax Dues with already computed BIR compromise, surcharges and penalties for tax dues a year prior to today.
One of the boxes that you will see is labeled Quarterly Income (Q1 Jan – Mar). This is the TAX CARD for 1701Q – First Quarter. To file it, click on “File now”. This screen will show.
Once you have filled that screen out, TAXUMO will show your tax dues. Most of us Sole Proprietors and Professionals will probably have Zero or Negative Filing for this quarter. This is because the Php 250,000 exemption is taken into account in the computation of your income taxes. So don’t panic! haha! 🙂
To pay your 1701Q, you can choose any of the available options. For each option (except PayPal/Credit Card), an email instruction will be sent by DRAGONPAY. Please be sure that you key in your correct email address when it is asked. The instructions will be sent there. Read carefully and just follow the steps indicated.
Once you’ve paid and followed the instructions via email, you’re done! You have just filed your 1701Q – Q1. Hope this article helps you out and answers our most pressing question this month on how to file 1701Q. 🙂
BTW, you will see the form, BIR confirmation and Payment confirmation in the “Past Filings” tab. If the status is still in processing, this means that you’re all done. Next steps are with us. Taxumo will be processing the forms in batches to make sure that we don’t “clog the pipes” of BIR, so to speak. Rest assured that your filing will be completed on or (more likely) before the tax deadline.
That’s it and I hope this article helped you out! 🙂