** This is updated as of April 7, 2017.
I am now in the process of filling up my Income Tax Return. I know, kinda last minute, especially that April 15 (the day for filing tax returns) falls on a Holy Week. I am home-based (work-at-home, freelance) writer and researcher, and I wanted to share some things I learned while doing my tax returns.
- Know the form you will be using. I am using BIR Form No. 1701. This form is for self-employed individuals, estates, and trusts.
- Download the Software. Go to bir.gov.ph. I downloaded the Offline eBIRForms Package v6.3. This did not work in our Macbook Airs, so we downloaded again in my Acer laptop running on Windows 7.
- Input your personal details. These includes your name (complete name used when you registered for your TIN) and your TIN.
- Know your tax district’s RDO Code HERE. This is needed for Item No. 6 in Page 1 of the ITR. Your RDO or Revenue District Office is where you are registered as a tax payer. In my case, I live in Cebu City but I was registered as a taxpayer of Mandaue City because my former employer registered me there. I still have to transfer my district (and when I do that I’ll also share how in this blog). Mandaue City’s RDO Code is 080. Cebu City North is 081, and Cebu City South is 082.
- Know your PSIC. I used this file to look for my PSIC or Philippine Standard Industrial Classification. This is pertaining to Item No. 18 in Page 1. My book keeper previously used PSIC 7499 which is “Other business activities,” including bill collecting, and business brokerage activities. I don’t do any of those. I write and do research work and I thought the most appropriate PSIC for me is 7240, which is “Database activities and on-line distribution of electronic content.” Please, if there are any home-based and freelance writers reading this, please enlighten me.
- Get a cedula. Before filling up the tax returns, you must get a cedula or have a government-issued ID. We used our SSS ID.
- Calculate income, salary, deductions, etc., in a separate piece of paper. I prepared this ahead (all throughout the year) and just pulled the details out once I started preparing the tax returns.
- Validate your details. Click on the “validate” button after you have inputted all the necessary data. Rectify the details required in the pop-up button.
- Always save. Save the file. Always.
- Send a copy to the BIR. There is a button at the bottom of the form that you need to click in order to send a copy of the ITR to the BIR. Make sure you have a valid email address because the BIR will send you back a receipt message that you need to print and attach to the ITR.
- Wait for the emailed receipt. Print three copies of the ITR and the emailed receipt.
- Pay taxes. I paid taxes at the RCBC branch at JCenter Mall.
Where to Start?
Page 1 — I started by filling in the important personal information in Page 1. It was good to learn though that most of the information I inputted last year were saved by the BIR form. I used the same computer I used last year where I installed the e-BIR package.
Page 9 — I then went to Page 9 and filled in the balance sheet.
Page 5 — I next went to Page 5 to input my sales and revenues.
Page 7 — I inputted my deductibles at Page 7. I noted all year my expenses so that I won’t have to scramble looking for them come ITR filing time.
Page 2 — I noted the amounts in Page 2, specifically Net Taxable Income (Item 64).
Page 10 — I went to Page 10, Schedule 11, and inputted my Net Taxable Income there. It should match with Item 64 on Page 2. Do not worry because the e-BIR form will help you when you click the Validate button.
What are some deductibles?
Caveat: I am not an expert. And this is my first time to prepare my ITR on my own. The following are things I learned while preparing the ITR. I think I may have spoken too soon. I have a feeling I am doing the correct thing to do. 😦
Bad Debts – These are debts that have become totally worthless, meaning you can no longer recover this. I did not realize that if I loan money to family and friends, I can deduct them in my ITR. There is good diay in loaning money. 😛
Office Supplies – I know many of you would raise your eye brows if you know I do spend some amount of money in office supplies even though I am working from home. Here, I include the money I spent to buy the usual office supply suspects (bond papers, staple wires, paper clips, ballpens, pencils). I also include here printer inks, mouse, mouse pad, calculators. I also include here software I use for my work (anti-plagiarism software, word processing software, subscriptions to journals that I use for references, e-books, books).
Repairs and Maintenance – Materials and Supplies – I include here my annual computer maintenance and/or the unexpected maintenance expenses. I also include here my expenses for buying new work-related gadgets, such as printers, laptops, tablets.
Why is it important to file ITRs and pay taxes?
Why do I file income tax returns and pay taxes when I can tax evade and say I am not earning at all. It is because, aside from it is my duty, and the taxes are the lifeblood of our country, I also need to file my ITRs and pay taxes because, being a home-based service provider, it is very difficult to procure proof of my earnings, which I can use for (1) bank loan applications, (2) Pag-Ibig loan applications, and/or (3) visa applications for travel to other countries.
I would have to say that the offline eBIR form was user-friendly because I did not have to calculate my taxes manually. I am poor in math and I am sure I would have errors. I like that there is a “validate” button in the form, which allowed me to correct any errors I did. The saving and printing process slowed me down though. I was not sure if it was because my OS is old, or because I had poor Internet connection. Nevertheless, I was glad I was able to prepare the tax returns at home without hiring the services of a book keeper. (By the way, I hired a book keeper last year and she was the one who encouraged me to prepare my taxes personally so I would know. Thanks, Ma’am Bamba!). I also found Mummy Unwired’s detailed post on how to prepare the ITR. The comments are insightful too.