Whenever my content creator friends and social media influencers would ask me when is it the best time to pay taxes, I would always tell them that once you are earning, you have to pay. And this is not because I want to be some goody two shoes in this industry, but personally, what I value most is peace of mind. So today, let’s go through this RMC about Taxation for Social Media Influencers.
Believe me! I had my fair share of missed tax filings and books that were not updated years ago, and it was not a fun thing to go through. I had to pay exorbitant fees, but I couldn’t blame anybody else. Paying taxes is the responsibility of the tax payer, so I couldn’t blame my accountant or blame the BIR for charging me. Having no knowledge of the law is not an excuse, so we all better brush up on learning about taxes.
Why are we discussing this? Yesterday, our tax ministry, the BIR, released a Revenue Memorandum Circular (RMC) or a memo reminding everyone that all Social Media Influencers to file and pay their taxes. This is RMC97-2021. Some of you would ask “who are Social Media Influencers”? So the BIR actually gave a run down of who these people are and they specifically mentioned those who are under the YouTube Partner Program or basically people who are earning from Youtube.
But, if you earn via direct advertising, meaning you get paid by brands, or you earn via other platforms like Facebook (via support badges, stars, etc.), Twitch (via bits and subs), Kumu (via in app gifts, etc.), Instagram, even Affiliate commissions, please please please do pay taxes for these things, well. The law states that if you earn any income on Philippine soil, you will have to declare taxes for these earnings.
In the RMC, BIR also goes through the allowable deductions or basically, what are the expenses that you can declare. It also goes through compliance from registration, to updating your books and filing and paying taxes (which I discussed in the shared linked above for Freelancers).
The BIR goes on to remind the penalties for tax evasion and failure to file a return.
Penalties for Online and Social Media Influencers who evade taxes and who fail to file their taxes
After that, the BIR discusses double taxation. Double taxation is basically being taxed by the platforms that you use and being taxed as a professional. An example for this is that Google LLC withholds 24% of your earnings. Then when you declared in the Philippines as a tax payer, you will have to pay VAT/Percentage, Income tax and (if applicable) withheld taxes.
To avoid double taxation, one must secure a tax residency certificate (TRC) from the BIR and then this is submitted to the foreign platform who is applying taxes in their own countries. Note that this is only applicable to platforms and entities in countries that the Philippines has a tax treaty with.
What happens to your taxes in that foreign country? In the case of Google LLC, the previously withheld 24% will now become 15% and then you still have to pay taxes in the Philippines. Of course, for other platforms, they will have yet to share what their own taxes are.
So with the reminder yesterday, the last section of the RMC states this…
So there you have it. If you have questions or you need assistance, feel free to chat with Taxumo via the chat button on their site: https://www.taxumo.com or email them your inquiries customercare@taxumo.com.
All about tracking, tax planning, effort and perseverance!
I am so motivated to fix my finances this 2021. I’ve learned so much from diligently tracking both my personal and business income and expenses. So for today, I’d love to share with you what I have learned and hopefully, these learnings can help you, too.
You can’t do away with LEARNING Finance Topics if you want to be Financially Independent
I have friends who turn a blind eye and a deaf ear when you start talking about finances, investment, taxes, accounting, etc. To be honest with you, years ago, I was like that, too. And when I was young, I abhorred Math. I never really understood why we were studying it.
I started enjoying finances when I worked for a bank, and I love it even more now that I’m running a startup. I started seeing why we need to learn how to compute (even just for the basic stuff) and why we need to “read and understand” numbers. The thing about these topics is that you can’t really do away with these if you plan to be financially independent later on.
Last 2020, I tried to learn as much as I can about all of these, and I got to learn more on how “money” can work for you. One of the things that I learned is that you need to look at each Peso or Dollar as something or someone who works for you. Is their task to pay a bill or pay for a particular expense, or is their task to grow themselves?
For most of us, it may take a while before you can send some of your funds to grow themselves. Most of your money will really be spent on paying bills, etc. but take your time and enjoy the process. That’s another thing that I learned.
Know what your Constraints are
I learned to make more informed decisions last year, and this stemmed from the fact that I learned to know and realize what my constraints are. I know myself really well and one of my personal challenges is saying NO to things that don’t really matter. The PROs of this weakness is that there are a lot of opportunities that come to me and I get to widen my circle, but the CONs are I have less time for myself and less time for the things that really should matter.
So last year, I made a conscious decision to prioritize. The pandemic really slowed down Manila Workshops’ business, but what I realized is that handling Manila Workshops, Taxumo and Blogging / Vlogging really is a lot to handle. Although the purpose of Manila Workshops is great, I realized that I can also fulfill that purpose when I do the other things on my plate (like grow our startup and enjoy vlogging and blogging).
As for blogging, vlogging and streaming, I plan to work on understanding and learning more this year. People also think that Blogging and Vlogging is easy. You just create content and people will come. Well, that’s not the case really. You need to treat it like a business, so you will need a little bit of capital and lots of effort and learning. Nowadays, the learning curve for being a content creator is steep IF you really want to earn from it. It’s easy to learn tools that simplify content creation, but there are a lot of things to learn if you plan to earn from it.
This year, I am also officially announcing that I will keep the Manila Workshops brand, but we will be keeping it as a community instead. I won’t be monetizing it again yet. I’ll still look at a more scalable business model. Oh, that’s another thing, too. Growing Taxumo has made me realize a lot of things about how I handled Manila Workshops, which was actually pretty cool. I think I have grown more when it came to handling a business.
Learn how to Track literally EVERYTHING and do Tax Planning
People, I have realized that the first step to financial success is really knowing where you stand. You need to know your numbers — your personal income and expenses, your household income and expenses and your business revenue and expenses. Making decisions base on gut feeling (at least for me) isn’t the way to go.
Hard decisions are “hard” to make (like getting married, shifting careers, starting a business, etc.) because you obviously haven’t been to the FUTURE. Any path you take will be hard, unless you intentionally decide to take a one year break from making any life decisions, and just “Eat. Pray. Love.” your way through life that one year. In any case, you need money to sustain you that whole year.
So if you want to get on track to fixing your finances, start the habit of tracking it. You will realize that this simple habit will help you discover things that you haven’t discovered before about yourself, your spending, your behaviours, etc.
This is how I track my personal finances
For business, it’s really the same thing. I remember having this conversation with Nicole Alba, a young finance vlogger, and I mentioned that in order for people to run sustainable businesses and freelancing careers, they also need to know how to handle their personal finances.
For my business, I use Taxumo to track both my revenue and expenses.
It super easy and not at all complicated to learn how to use the system. Taxumo has FREE onboarding sessions here just in case you want to learn how to use it: http://txmo.co/onboarding.
What I have learned also by consistently tracking my business revenue and expenses, I can do tax planning. I can easily identify how much I should set aside for taxes early on. I have all of my information in Taxumo, so it makes it easier for me to know the amount of taxes that I need to pay. I also get a feel of what I have spent on significantly on the previous month.
As a self-employed individual, tax planning for me begins with just tracking really. How can you plan if you have no idea on where your funds are going or how much are you earning.
As for the tax rate that you can choose at the start of every year, before your first filing for the year, Taxumo has this notification bell that recommends what tax rate is best for you based on your cashflow entries.
Tax planning recommendation tool in Taxumo!Sample of what is seen in the recommendations tab
You can check this out after inputting cash flow entries.
I have so many things going on in my life right now, but what I can say really is that I know where I am heading this 2021. It’s clear to me where I want to go and I am happy with the things that are happening to me and my loved ones.
I wish you all the same feeling. I wish that you find enough motivation and will power. I wish you find clarity. I hope that the path to being financially free will be clearer and I hope that you find your life’s purpose.
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”.
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…
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.
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.
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 customercare@taxumo.com!
