One of your major responsibilities as a freelancer or sole proprietor is filing your BIR Form 1701Q. This form is also known as the Quarterly Income Tax Return For Individuals, Estates and Trusts. This is submitted quarterly for the first, second, and third quarters.
Who are required to file BIR Form 1701Q
According to BIR’s guidelines, this must be accomplished and filed in triplicate by the following individuals:
- A resident citizen engaged in trade, business, or practice of profession within and without the Philippines.
- A resident alien, non-resident citizen, or non-resident alien individual engaged in trade, business, or practice of profession within the Philippines.
- 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.
In summary, you will need to file Form 1701Q if you’re a professional (e.g. freelancer, doctor), a self-employed individual in a sole proprietorship, or a trustee.
I’m earning less than ₱250,000 annually
Under the new TRAIN law, those who earn less than ₱250,000 annually are exempt from paying income tax returns. So if you fall under this bracket, you don’t have to pay your quarterly ITR — BUT you still have to file.
Having said that, we do recommend that you still file your Quarterly ITRs and consistently comply. As we said previously in an earlier article, imagine needing to have an ITR and then having to explain how tax exemptions work to whoever you’re talking to. Yeah, good luck.
Check out the new Income Tax Table under TRAIN. Take note that the rates will go lower in 2023.
My annual income is more than ₱250,000
The TRAIN law gives you two options for filing and computing your taxes. You can either follow the 3% percentage + income tax (use the graduated income tax table) or use the new 8% Gross Receipt Tax.
Now, the 8% Gross Receipt Tax might sound easier for you, but keep in mind that it’s not for everyone. To know if you’re making the right choice, check out this tax calculator that we made for you.
How to compute your Quarterly Income Tax dues
Before you begin, you’ll need to check whether you’re on the 8% Income Tax Rate or the Graduated Income Tax Rate. The easiest way to do this is to check your Certificate of Registration from the BIR. This will indicate which tax schedule you’re on.
I’m on the 8% Income Tax Rate
The first thing you’ll need to know is whether your earnings come solely from your business or profession, or if your earnings come from both compensation (basically, if you have an employer) and business/profession. After which, you can apply the formula below applicable to you:
Income Solely from Business / Profession
Total Income Tax Due = 0.08 * (Gross Sales - ₱250,000)
Mixed Income Earner
Total Income Tax Due = (0.08 * Gross Sales) + Tax Due on Compensation
As you can see, the ₱250,000 deduction is NOT applied for Mixed Income Earners. The reason for this is because the ₱250,000 has already been deducted from the tax due based on compensation so it no longer applies to the tax from your business.
I’m on the Graduated Income Tax Rate
If you’re on the Graduated Income Tax Rate, you’ll need to check first whether you’re on Itemized Deduction or Optional Standard Deduction (OSD).
Here’s the difference between the two if you’re confused:
- OSD – This allows you to claim a deduction of 40% from your gross sales or receipts for the quarter.
- Itemized Deduction – You have to identify and deduct all the ordinary and necessary expenses from your gross income. These expenses must attribute to the development, management, and operation of your business like travel and salaries.
Take note that neither of these options is available for you if you opt for the 8% IT rate
Now, both of the deductions have different formulas for computing your taxable income so check your Certificate of Registration to confirm which one applies to you.
With that being said, calculating your tax payable for Graduated Income Tax Rate takes two steps:
- Compute your taxable income
- And, based on the taxable income, refer to the tax table for how much tax you’ll need to pay
Formulas for Taxable Income
Taxable Income = Gross Sales - Gross Purchases
Optional Standard Deduction
Taxable Income = Gross Sales * 60%
Computing for Tax Payable
After calculating your taxable income, you will need to refer to the tax table below for your tax dues.
Deadlines for filing BIR Form 1701Q
|Quarter 1: January to March||On or before May 15|
|Quarter 2: April to June||On or before August 15|
|Quarter 3: July to September||On or before November 15|
Your Annual Income Tax Return will include your 4th quarterly ITR filing. That’s why there’s no Quarter 4 deadline.
Remember, the BIR doesn’t give extensions to these deadlines. Therefore, taxpayers are encouraged and expected to file as early as they can to avoid the usual inconveniences during the last day of filing.
How to fill up BIR Form 1701Q
Fill out Part I of BIR Form 1701Q. This includes your basic information such as your TIN, registered name, registered address, the line of business or occupation, and other applicable information.
Before filling out Part III, you will need to accomplish Part V of the form first. You will find this on page 2.
Fill in Schedule I if you’re on the Graduated IT rate
Fill in Schedule II if you’re on the 8% Flat IT rate.
Fill out Schedule III if you have any tax credits or payments
Add in your Tax Payable on Line 63. Deduct your Tax Due from Schedule I or II with the Total Tax Credits/Payments from Schedule III to compute this.
Go back to Page 1 of the form and fill out Part III (Total Tax Payable). Refer to your inputs in Part V to know what to write down in this section.
Save the form, submit, and pay if you have any tax dues.
And that’s how you fill out your quarterly income tax return!
What are the attachments required for filing
Here are the documents you’ll need to prepare:
- Certificate of Income Tax Withheld at Source (BIR Form 2307), if applicable.
- Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304) if applicable.
- Duly approved Tax Debit Memo, if applicable.
- Previously filed return, if an amended return is filed for the same quarter.
Where do I file my BIR Form 1701Q
First, you must file your income tax return first using eBIR Forms and print out copies of the form (with the attachments). After that, submit the forms to any Authorized Agent Bank (AAB) located within the territorial jurisdiction of your Revenue District Office. Present your accomplished BIR form 1701Q with the requirements and your payment. The teller of the AAB or the RDO officer will give you a copy of your stamped and validated form.
For “No Payment” returns, you only have to attach the required documents to your BIR form 1701Q. You will also receive a copy of your stamped and validated form.
If your place doesn’t have any AABs, you can file this directly with the Revenue Collection Officer or duly Authorized City or Municipal Treasurer of the RDO.
The easier way to file and pay your Quarterly ITR
Let’s admit it. The computations and filling up of forms can be quite tedious. The submission of attachments are a nightmare, too (since we need to input it one by one)!
Fortunately, there is Taxumo, a web-based tax filing app that lets you skip the manual computing of tax dues and accomplishing of BIR form 1701Q. Instead, you would only need to enter your income and expenses, and you get your tax dues auto-calculated in real-time.
The BIR form 1701Q is also auto-generated so there’s no need to manually fill out and print forms. The best part is that with a click of a button, you could submit your taxes online through the app. Taxumo also submits the attachments (2307s) for you!
You can watch our webinar on how you can file Form 1701Q online through Taxumo below:
Are there penalties for late filing
Absolutely. Apart from your tax due, you have to pay a 25% surcharge, a 20% interest per annum, and a compromise penalty. If you choose to neglect to file the return, there is a penalty of 50% of the tax due.
Refusal to pay penalties will be referred to the appropriate office for criminal action, so make sure that you pay your taxes on time.