How to File The BIR Form 1701 and Settle Your Income Tax Return

  • Evan Tan 

Freelancers and small business owners are not exempt from paying taxes. You also have to file and settle your tax forms, especially the BIR form 1701 (note that this is not the ONLY form that you need to file and pay for). The only difference from employees is that you need to file it on your own.

But first, what is BIR form 1701?

The BIR form 1701 or the Annual Income Tax Return for Self-employed Individuals, Estates and Trusts shows all the transactions covering the calendar year of the taxpayer.

According to BIR, this must be filed by the following individuals:

1. A resident citizen engaged in trade, business, or practice of profession within and without the Philippines.

2. A resident alien, non-resident citizen or non-resident alien individual engaged in trade, business or practice of profession within the Philippines.

3. A trustee of a trust, guardian of a minor, executor/administrator of an estate, or any person acting in any fiduciary capacity for any person, where such trust, estate, minor, or person is engaged in trade or business.

4. An individual engaged in trade or business or in the exercise of their profession and receiving compensation income as well.

Simply put, freelancers and sole proprietors are required to pay their income tax return. If your annual income is less than P250,000, you are exempt from paying percentage tax and income tax. Still, you need to file your accomplished BIR form 1701 to the RDO. For those who chose the 8% option, you will need to file the form 1701A.

I earn more than P250,000 per year. What do I need to pay?

First, let’s take a look at the new Income Tax Table under the TRAIN law. Take note that this will be implemented from 2018 to 2022 only. By the year 2023, the rates will be lower.

Now, if you’re a non-VAT taxpayer who earns less than Php 3 Million annual gross revenue, you have two options with regard to filing your taxes.

Your first option will be to follow the 3% percentage + income tax. The second option is the TRAIN‘s new 8% Gross Receipt Tax, which is simply multiplying your annual earnings by 8%.

You might be thinking that the second option is easier. However, it’s important to know that it’s not made for everyone. If your business has low profits and a high cost of sales, the easy road might hurt your business.

Wondering which option fits your business better? Check out our calculator.

How and where do I file my BIR form 1701?

As self – employed professionals and as MSMEs, we now have two forms to choose from.

You can check out this article that we have written to guide you as you file your Annual Income Tax Return:

Check out our  Taxumo subscription plans!

All plans include Annual ITR forms!

What are the required attachments?

As for the requirements, you can read and go through this article:

When and where to file and pay?

The income tax return must be filed and paid on or before April 15 of each year at any BIR-Authorized Agent Bank of the RDO where you registered. Use eBIR or eFPS to file and don’t forget to also file/submit your attachments via the Alphalist system of the BIR. If you forget to submit (assuming you have attachments to submit), this will incur penalties too.

Submit your accomplished BIR forms with the required documents and your payment. The AAB will stamp mark “Received” on the return and will machine validate it as well. The machine validation will show the date of payment, the amount paid, transaction code, the name of the bank, and other important details.

If there are no AABs in your area, you can settle your taxes with the concerned Revenue Collection Officer (RCO) under the jurisdiction of the RDO.

What will happen if I miss the filing deadline?

Well, there would be penalties. Apart from your tax due, you have to pay 25% of the amount + 20% interest per annum.

This is applicable to amended returns as well.  By failing to include some computations, thereby causing you to file an amended return, you’d have to pay for a penalty.

In addition, neglecting to file the return will likewise require you to pay for a penalty, which is 50 percent of the tax due. So you definitely have to file and pay your taxes on time.

Is there an easier way to file the BIR form 1701 and pay my income tax return?

Yes! You can rely on Taxumo when it comes to preparing and filing your tax forms. Whether that be tax computation or filing, Taxumo has products tailor-made to meet your tax filing needs as a self-employed, professional, or a small-business owner.

Just follow the steps here:

File your Annual ITR now by subscribing to a Taxumo subscription plan today:

Additional Reading:

A Beginner’s Guide to Filing Income Tax Return

How to File Quarterly Percentage Tax (BIR Form 2551Q)

A Comprehensive Guide to BIR Forms for Freelancers and Sole Proprietors

How To File Taxes Online

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