Self-employed: What to consider in filing your tax return

Did you just resign from your job to start your own business or do freelance work? Here are things you need when filing and paying your own taxes

MANILA, Philippines – Did you just resign from your job to start your own business or do freelance work?

Filing and paying your own taxes may be daunting especially if it’s your first time. (READ: Self-employed: How to register with BIR)

As you crunch the numbers ahead of the annual April 15 deadline for filing tax returns, here are things you need to consider.

Book of accounts

Self-employed taxpayers are required to maintain books of accounts using any acceptable method of accounting (accrual or cash basis) in a consistent manner. The books shall be preserved for up to 3 years from the closing of the taxable year for post-audit examination.

For those whose quarterly revenues exceed P150,000, books of accounts shall be audited and examined by an independent certified public accountant. Annual returns shall be accompanied by relevant documents like certified balance sheets, profit and loss statements, and others.

Receipts/invoices

They should also issue receipts or invoices for every payment received.

The receipts or invoices shall be serially numbered, and must show the business owner’s/taxpayer’s name, type of business, tax information number or TIN, and business address.

The original copy of each receipt or invoice shall be issued to the customer at the time the transaction is effected, while the duplicate copy shall be preserved for up to 3 years from the closing of the taxable year.

Tax deductions

All expenses paid or incurred by a self-employed taxpayer can be deducted from his tax payment.

The taxpayer though should prove that these expenses are necessary “in carrying on or which are attributable to the development, management, operation and/or conduct of the trade, business or exercise of profession including a reasonable allowance for salaries, travel, rental and entertainment expense.”

To prove this, the taxpayer is allowed to present the following as supporting documents:

  • Official Receipts
  • Cash/Sales Invoice
  • Payroll
  • Vouchers
  • Bank Statements
  • Debit/Credit Memo

Pro-bono services

The Bureau of Internal Revenue mandated via Revenue Regulation 4-2014 that in cases when the self-employed taxpayer does not charge a professional fee, he must issue a BIR-registered receipt “to show a discount of 100% as substantiation of the ‘pro-bono’ service.”

Registration fee

Self-employed taxpayers must pay a registration fee of P500 on or before the last day of January of every year after the initial BIR registration. – Rappler.com

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