GUIDE: BIR Tax Deadlines and Tax Payment Guide For 2024

(SPOT.ph) Being self-employed has its pros and cons. Freelancers have the (quite frankly) enticing perk of being able to dictate their own schedules and places of work, but all this freedom does come with responsibility: they also have to file their own taxes. Filing your taxes when you're a self-employed individual can be a bit daunting, especially when it's your first time dealing with the Bureau of Internal Revenue (BIR) — that's why we've put together this comprehensive guide to ensure you don't miss your BIR deadlines!

Why do freelancers need to pay taxes?

Freelancers, like any other professionals, are obligated to pay taxes on their income. While navigating taxes might seem daunting for individuals running their own freelance business, there are several compelling reasons and advantages for freelancers to file taxes properly. Paying taxes is not only a legal requirement but doing so correctly and on time can have several benefits:

• Paying taxes means you're complying to the law. Filing taxes accurately and on time prevents costly penalties, fines, and interest for late submission or underpayment of taxes.
• It gives you access to loans and mortgages. Proper tax documentation serves as proof of income, which is essential when applying for personal or business loans, mortgages, or other forms of credit.
• It legitimizes your business: Keeping accurate tax records adds credibility to your freelance business. It establishes your operation as legitimate and professional in the eyes of clients, financial institutions, and government agencies.
• It allows you to have better financial planning: Regular tax filing helps you keep better track of your earnings, expenses, and potential tax deductions. This practice supports more informed financial planning and management of your freelance business.
• You can get tax deductions and credits: Freelancers often have access to various deductions and credits for business expenses, such as equipment, supplies, home office costs, and professional development fees. Proper filing allows you to leverage these deductions to reduce your overall tax liability.
• It can help facilitatae business expansion: Accurate financial records and tax compliance are crucial when seeking investment or exploring growth opportunities for your freelance business.
• It helps you build a financial history: Consistently filing taxes contributes to your financial history, which can be beneficial for future business endeavors or when requiring proof of income for personal reasons.

Table of Contents

• Who are considered freelancers?
• Key Tax Deadlines For Freelancers
• Tips On Preparing For Tax Deadlines
• Tips On Using BIR's Online Services
• Penalties For Missed Or Late Tax Filing Or Payments

Also Read: 10 Work From Home Job Sites for Filipinos

Who are considered freelancers?

Freelance work is characterized by its flexibility, independence, and the contractual nature of employment. Freelancers engage in professional relationships wherein they agree to provide specified services in exchange for an agreed-upon fee, which can be on a project, hourly, retainer, or milestone basis. 

Here are some examples of freelancers:

• Digital Marketers, such as social media managers and email marketers
• Photographers and Videographers
• Software Developers and Programmers
• Translators and Interpreters
• Web Developers and Designers
• Writers and Editors
• Virtual Assistants
• Voice-Over Artists

Freelance Categories

Freelance work in the Philippines can be broadly categorized under two main types, each with its unique characteristics and examples:

• Professional: This category encompasses individuals who offer their professional services on a contractual or project basis. They are typically self-employed and may not own a traditional business establishment.
• Sole Proprietor: This category refers to individuals who own and operate their businesses single-handedly. They might offer products or services directly to consumers and are responsible for all aspects of their business.

Also Read: Here's How You Can Officially Register As a Freelancer

Key Filing and Tax Deadlines for Freelancers

Worried that you might miss a tax deadline for your specific filing obligations? Here’s a rundown of key tax deadlines the BIR has set for the calendar and fiscal year 2024 which includes the annual and quarterly filing schedules.

Annual Filing: Income Tax Return (ITR): April 15 of following year

Prioritize filing your Income Tax Return or ITR for 2023 on or before April 15 before you go on your well-deserved summer vacation! If you are a freelancer or a self-employed individual, you will need to have paid your monthly percentage tax and your quarterly tax payments. This means that prior to April 15, you should have already registered as a self-employed individual and have been paying your monthly and quarterly taxes. 

Forms Needed: BIR Form 1701 (Annual Income Tax Return) and BIR Form 0605 (Payment Form)

How to File:

1. Download BIR Form 1701, also called "Annual Income Tax Return For Individuals (including MIXED Income Earner), Estates and Trusts" from the BIR website.
2. Fill out Form 1701, following BIR's guidelines. Be careful and avoid mistakes when filling out this form.
3. When you're done filling out your form, head to the closest Authorized Agent Bank (AAB) in your area or your Revenue District Office (RDO). Submit the form.
4. The officer-in-charge at your AAB or RDO will validate and stamp your Form 1701 as proof that you've filed your ITR.

Quarterly Percentage Tax: Every 25th of each taxable quarter

The Quarterly Percentage Tax is a levy imposed on certain transactions, businesses, and services not covered by the Value-Added Tax (VAT). Freelancers, professionals, and other non-VAT registered entities are often required to pay this tax, which is calculated as 3% of their monthly gross revenue.

Forms Needed: BIR Form 0605 (Payment Form) and BIR Form 2551Q (Monthly Percentage Tax Return)

How to File:

1. Download BIR Form 2551Q, also called "Quarterly Percentage Tax Return" from the BIR website.
2. Fill out this form, following BIR's guidelines. Be careful and avoid mistakes.
3. When you're done filling out your form, head to the closest Authorized Agent Bank (AAB) in your area or your Revenue District Office (RDO). Submit the form.
4. The officer-in-charge at your AAB or RDO will validate and stamp your Form 2551Q as proof that you've filed your monthly percentage tax return.

Quarterly Income Tax: 15th of April, August, and November

Meanwhile, quarterly tax payments and filings are relevant for those paying percentage taxes and quarterly income tax.

Form Needed: BIR Form 1701Q (Quarterly Income Tax Return) and BIR Form 0605 (Payment Form)

How to File:

1. Download BIR Form 1701Q, also called "Quarterly Income Tax Return for Individuals, Estates and Trusts" from the BIR website.
2. Fill out the form, following BIR's guidelines. Be careful and avoid mistakes when filling out this form.
3. When you're done filling out your form, head to the closest Authorized Agent Bank (AAB) in your area or your Revenue District Office (RDO). Submit the form.
4. The officer-in-charge at your AAB or RDO will validate and stamp the form as proof that you've filed your quarterly income tax return.

While these dates are often marked on the standard tax calendar issued by the BIR, they may change occasionally, especially in cases of public holidays or whenever circumstances require the BIR to give extensions (e.g. during the pandemic lockdowns of 2020).

How to Prepare for Tax Deadlines

• Maintain organized records. Keep all your financial records, receipts, invoices, and relevant documents in an organized manner. Adopt a filing system—digital, physical, or both—that allows easy access to your documents when needed.
• Use an Online Tax Filing and Payment Platform. These platforms work like an accountant; they can make filing taxes easier for their users and you can even hire their experts if you need the extra help. Check out Taxumo, Juan Tax, or Beppo.
• Regularly update financial Rrecords. This prevents the buildup of paperwork and reduces errors in your financial statements.
• Retain records for the required period. The BIR requires taxpayers to keep their books of accounts and other pertinent records for ten (10) years. This is an important yet overlooked step required for audit purposes and resolving potential disputes.

Utilizing BIR Online Services for Online Submissions and Payments

• Register for eFPS or eBIRForms. These stand for “Electronic Filing and Payment System” (eFPS) and “Electronic Bureau of Internal Revenue Forms” (eBIRForms) are platforms that allow you to file returns and make payments electronically and online. But first, determine which platform you’re eligible for and register. Your RDO officer will be happy to assist you regarding this matter.
• Familiarize yourself with the system. Explore the features of eFPS or eBIRForms. The BIR provides guides and FAQs that can help you navigate the platforms.
• Prepare returns early. This gives you ample time to review your submissions and correct any errors.
• Secure your transactions. Ensure that you receive official receipts or confirmation emails for your filings and payments as proof of compliance.
• Stay updated. Subscribe to BIR updates or follow their official communications to stay informed about any changes in tax procedures, rates, or deadlines.

Penalties for Late or Incorrect Tax Payments

Here are some of the penalties you’ll avoid if you manage to pay your dues on time:

• Surcharges. A 25% surcharge is applied for the failure to file any return and pay the amount of tax or installment due on or before the due dates. However, consistent missed filings will make the taxpayer incur a 50% surcharge.
• Interest. Aside from the surcharge, the taxpayer needs to pay an interest rate of 12% per annum, calculated from the date prescribed for its payment until you pay it in full. This applies to any unpaid amount due.
• Compromise Penalty. This may be imposed by the taxpayer's RDO instead of criminal penalties depending on the situation and at the discretion of the BIR. Compromise penalties typically vary depending on the tax type and the nature of the violation.

What to do if you miss filing a tax return:

1. Review and confirm the penalty. Ensure that the penalty is valid by reviewing your tax submissions and payments. There may be cases where penalties were erroneously imposed.
2. Pay the penalties promptly. Once a penalty has been confirmed, you should promptly settle any owed amounts to prevent further interest accrual.
3. File an amendment for incorrect returns. If the penalty is a result of an error in your tax return, file an amended return as soon as possible. Provide a detailed explanation of your mistake and any supporting documentation to correct it.
4. Request for cancellation of penalties. Taxpayers may request the cancellation of penalties if they can provide a valid reason for the oversight, such as illness, natural disasters, or other extenuating circumstances. The BIR evaluates these requests on a case-by-case basis
5. Utilize the eFPS for future payments and filings. You can use BIR’s Electronic Filing and Payment System (eFPS), which is a platform that facilitates tax filings and payments. However, your RDO will be the one to determine whether you’re qualified to file using this system or not.
6. Consult with a tax professional. They can guide you in resolving tax issues and may assist in communicating with the BIR.
7. Stay informed on tax obligations. To prevent future penalties, stay informed about your tax obligations, including filing deadlines and taxable transactions. The BIR website, seminars, and publications can be valuable resources.

Also Read: 

Filing Income Tax Returns: What You Need to Know

Filipino Taxpayers' Guide to RA 11976 (Ease of Paying Taxes Act)