#AskTheTaxWhiz: Have you received your ITR?

I am currently employed full-time as a supervisor in a fast-food chain. It’s my only source of income. Do I need to file an annual income tax return (ITR)? If not, what will be my proof of income and tax payment since an ITR is required when applying for a visa and bank loans?

No. Generally, employees are exempt from filing an ITR under the substituted filing tax system. This is explicitly stated under Section 14 of the Tax Reform for Acceleration and Inclusion (TRAIN) law or Republic Act (RA) No. 10963.

Under the TRAIN law, employees are qualified for the substituted filing tax system if:

1. There is an employer-employee relationship.
2. The employee is receiving purely compensation income only.
3. The employee is receiving income from one employer.
4. Tax was withheld correctly.
5. There is a Certificate of Compensation Payment/Tax Withheld (BIR Form 2316) that is duly stamped “Received.”

As mandated by the Tax Code, employers are required to issue BIR Form 2316 as proof that your taxes were withheld. This shall serve as your ITR.

In fact, Wednesday, January 31, is the deadline of the release of BIR Form 2316 to all compensation income earners or employees. For employees qualified under the substituted filing tax system, employers are also required to submit the form to the BIR on or before February 28.

Are there any penalties if my employer refused to issue our BIR Form 2316?

Yes. There is a compromise penalty amounting to P1,000 for each failure to file or submit, but it must not exceed the aggregate amount of P25,000 per calendar year. Note, however, that BIR Form 2316 shall be signed by both the employee and employer agreeing to the amount of income payment and taxes withheld including other documentary requirements for those who will claim personal and additional exemptions.

In addition, failure to comply for two consecutive years may result in criminal liability with a fine of not less than P10,000 and imprisonment of not less than one year. The employer is also required to settle the compromise penalty of P1,000 for each failure without any maximum threshold. (Sources: RR No. 11-2013 and RR No. 2-2015)

I work in the Accounting Department. Despite our efforts to comply with all the BIR requirements, we always end up being penalized especially during January since it’s also the renewal of registration and business permits. I know it’s already late and I may have to pay penalties again, but can you please provide a summary of all important deadlines for January with regard to the renewal of registration and business permits as well as compliance with the BIR?

I understand. Everyone gets overwhelmed by all the documentary requirements especially at the start of the year when all businesses are also required to renew their registration and permits.

Here’s a summary of important deadlines in January which you need to remember:

• January 10 – Distribution of BIR Form 2307/2306
• January 15 – Filing of BIR Form 1601C and 1601E
• January 20 – Renewal and payment of business permits c/o local government units (LGUs)
• January 25 – Submission of the Quarterly Summary List of Sales/Purchases by VAT taxpayer (non-eFPS); and Release of Tax Refund of Excess Taxes Withheld on Compensation by Employers
• January 30 – Submission of Annual Inventory List and Quarterly Summary List of Sales/Purchases by VAT taxpayer (eFPS)
• January 31 – Submission of Annual Registration Form (BIR Form 0605) and Annual Information of Income Tax Withheld (1604CF); and Release of BIR Form 2316 to all compensation income earners or employees

Is there an easy way to understand the TRAIN law? How can we comply with all the new and seemingly complicated requirements especially for us, the self-employed and professionals, who may not afford to hire an accountant or consultant? Please help.

Yes. The Tax Whiz Academy of the Asian Consulting Group (ACG), a social enterprise committed to helping taxpayers pay the right taxes, already launched the first-ever TRAIN Handbook featuring 100 questions about the new tax reform law.

To help you with your tax compliance and to ensure you can avoid unnecessary penalties and compromises, sign up now on the Tax Whiz App and get a chance to grab a copy of the TRAIN Handbook plus mentoring with the Philippine Tax Whiz for free.

For bulk orders, email us at consult@acg.ph or call (02) 3725727.

You may also follow us on Facebook for the schedule of TRAIN seminars and to join our Nationwide Tax Roadshow. – Rappler.com

Mon Abrea, popularly known as the Philippine Tax Whiz, is one of the 2016 Outstanding Persons of the World, a Move Awards 2016 Digital Mover, one of the 2015 The Outstanding Young Men of the Philippines (TOYM), an Asia CEO Young Leader of the Year, and founder of the Abrea Consulting Group and Center for Strategic Reforms of the Philippines (CSR Philippines). He currently serves as Adviser to the Commissioner of Internal Revenue of the Philippine government on tax administration reform in promoting inclusive growth. Follow Mon on Twitter (@askthetaxwhiz) or visit his Facebook page. You may also email him at consult@acg.ph.