#AskTheTaxWhiz: Why is income tax return filing so burdensome?

Mon Abrea
#AskTheTaxWhiz: Why is income tax return filing so burdensome?
Part 2: Complying with the BIR is becoming more and more difficult and costly. Do they not consider the time spent and costs incurred by taxpayers just to comply with tons of regulations they issue almost every month?

Part 1
of #AskTheTaxWhiz on Income Tax Return (ITR) answered a furious grandma’s inquiries on why ITR filing is so burdensome and provided her with guide on who are required, not required, and exempted from filing ITR.

Know more about ITR filing in this edition.

Dear Mr Tax Whiz,

I have been doing business in our province, but every year complying with the Bureau of Internal Revenue (BIR) is becoming more and more difficult and costly.  Do they not consider the time spent and costs incurred by taxpayers just to comply with the tons of regulations they issue almost every month?

After struggling for another year, here we are still cramming to meet the April 15 deadline.  I have learned my lesson in hiring a fixer when we were starting so this time I got a full time bookkeeper. But with the new and overly burdensome, not to mention complicated and confusing electronic BIR (eBIR) requirements, I need to outsource an accountant to do the preparation and filing of my income tax return (ITR).

Few days before the deadline, I am still at a loss. Every time I call BIR offices, it is either they would not pick up the phone or they do not answer my questions. How do I compute my income tax payable? How do I file my income tax return?  What if I do not have enough cash, can I pay in installment? Do I need audited financial statements even if I incurred a net operating loss for taxable year 2014?

A number of revenue memorandum circulars have been issued this week. I want to file and to pay my taxes but I honestly do not know how. Can you give a step-by-step guide on filing our income return to avoid unnecessary penalties and compromises?

Cashless (Named withheld)


Dear Cashless,

We have received similar complaints from our followers and readers. I personally share the same sentiment as I just filed my annual ITR this week, and it took me a while before I understood all the eBIR requirements and its implications to avoid unnecessary penalties and compromises.

I perfectly understand your situation, as not all bookkeepers are familiar with the tax regulations.  However, you have to consider hiring a good accountant as an investment than a mere business cost to secure your company from having any problems with the BIR.

It is important that you are working with a trustworthy accountant to make sure you do not commit mistakes in computing your income tax payable.  Remember, failure to pay right taxes is subject to 25% surcharge, 20% interest, and up to P50,000 ($1,124.26) compromise penalty. You may follow this basic formula:

Gross income: P___
Less: Allowable deductions (Itemized or optional): P___
Net income: P___
Less: Personal and additional exemptions: P___
Net taxable income: P___
Multiply by tax pate (5% to 32%): P___
Income tax due: Tax withheld (per BIR From 2316/2307): P___
Income tax payable: P___

Here’s a summary of what BIR form to file, documents needed and how to file your eBIR form manually (for those not covered by mandatory eSubmission):

If you do not have enough cash to pay your income tax payable upon filing, you may opt to pay in installment up to 50% of the amount due.  The second installment is due on or before July 15 of the same year. If you are self-employed using eBIR Form 1701, go to page 3, line 79 for the portion of tax payable allowed for second installment.

Regarding audited financial statements, it is only required for taxpayers who claimed itemized deductions with gross quarterly sales, earnings, receipts, or output exceeding P150,000 ($3,373.12).

But for those who opt to use Optional Standard Deductions (OSD), audited financial statements are not needed.

If there is one good thing that came out from all the mess created by recent regulations on electronic filing, taxpayers have become more vigilant and involved. 

Even the office of Senator Bam Aquino received a lot of complaints and the BIR did not ignore it as they issued Revenue Memorandum Circular 14-2015 providing guidelines in the filing, receiving, and processing using the electronic platform of the BIR for taxable year 2014 ITRs.

BIR provided a process flow:

For those encountering system error or downtime, the BIR also provided alternative modes of obtaining offline eBIRForms package.  Taxpayers may download from any of the following:

We all need to be reminded that paying our taxes is our civic duty, and collecting taxes is a public service of the BIR. They need to make it simple, easy, and convenient for everyone to comply.

Let us all work together to make sure all taxpayers get to file and to pay their taxes on time.

I urge everyone to take time in understanding the guidelines provided by the BIR and send any feedback and suggestions to BIR through efiling@bir.gov.ph.

Got a question about taxes? #AskTheTaxWhiz! Tweet @rapplerdotcom or email us at business@rappler.com. Rappler.com

Mon Abrea is a former BIR examiner and an advocate of genuine tax reform. He serves as chief strategy officer of the country’s first social consulting enterprise, the Abrea Consulting Group, which offers strategic finance and tax advisory services to businesses and professionals. Mon’s tax handbook, Got a Question About Taxes? Ask the Tax Whiz! is now available in bookstores nationwide. Follow Mon on Twitter: @askthetaxwhiz or visit his group’s Facebook page. You may also email him at consult@acg.ph.


$1 = P44.51

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