BIR Form 1701Q


Mon, Aug 1, 2011 at 8:34 AM

Questions


Hi Al,

August na! Let's look forward to more of God's abundant grace for us!

I'd like to ask some questions regarding 1701Q. Here goes . . .

1. In #20, I should tick "Business," tama ba?
2. In #23, 'di ba ang current optional standard deduction ay 40% na at hindi ang lumang 10% na nasa 1701Q form?
3. Still in #23, which is wiser to choose, itemized deduction or optional standard deduction? For the past two months, maliit lang naman ang expenses ko. 
4. In #29, does cost of sales/service refer to expenses?
5. In #31, what could be included as "other income" other than professional fees? Or is this space reserved for those with mixed income?
6. In #33, what could be included as "deductions"? Does this include personal deduction as a married person and with dependents?

Haha . . . as I read my questions, naisip ko para ka na palang accountant na kinukunsulta ko. Magkano retainer's fee mo?  Thanks for helping me ha. Mentor kita pagdating dito. Oh, by the way, another question for 2551M naman. I had a transaction for July but the payment is still due this Wednesday, Aug. 3. So practically, I had no income for July. For my July 2551M, tama ba na ang ilagay ko sa #14A and #24A ay "No income"?


Answers


1. In #20, I should tick "Business," tama ba?

Yes, that's correct. We mark the "Business" box with an "x."

2. In #23, 'di ba ang current optional standard deduction ay 40% na at hindi ang lumang 10% na nasa 1701Q form?

Yes, the optional standard deduction is currently 40%.

3. Still in #23, which is wiser to choose, itemized deduction or optional standard deduction? For the past two months, maliit lang naman ang expenses ko. 

The optional standard deduction seems to be the easier choice. But I don't find it wiser because I don't have basis for it. With the itemized deduction, I understand what I deduct from my taxes and I can show proof of that through my completed accounting books. ;-) 

You'll be surprised to find at certain times that your deductions can and may exceed your total gross income. 

4. In #29, does cost of sales/service refer to expenses?

They are expenses, yes. But these expenses particularly refer to the upkeep of your business; they're what we consider "constants" in our monthly bills (e.g., electricity, water, Internet connection, telephone, gas, courier, and others). The list may vary depending on your business needs.

5. In #31, what could be included as "other income" other than professional fees? Or is this space reserved for those with mixed income?

My understanding of your question is this: "Other income" refers to one's source of income that may not be in line with his (registered) business. For example, habang nag-e-encode ng audio ang isang freelance transcriptionist, puwedeng nakakabenta din pala siya ng ice candy, cold cuts, insurance, o real estate . . . parang ganun. Or one may be teaching in a nearby college while freelancing as a fashion designer. If one is a registered freelance designer, for instance, then the "other income" comes from his teaching profession.           

I'm uncertain about "mixed income" which seems to refer to a number of things already. :)

6. In #33, what could be included as "deductions"? Does this include personal deduction as a married person and with dependents?

Yes, that includes your expenses for yourself, other than your family. OK, because we generally follow the itemized deduction, I'll be quoting from the back page of Form 1701Q: 

There shall be allowed as deduction from gross income all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on or which are directly attributable to the development, management, operation and/or conduct of the trade, business or exercise of a profession including a reasonable allowance for salaries, travel, rental and entertainment expenses.

I like the last one--entertainment expenses--madalas-dalasan nga ang entertainment . . . hehe. 

My personal list has five main categories (or five main headings in my 'cash disbursement' book):

1) Transportation and Travel (e.g., fare money for bus, jeepney, and tricycle, as well as expenses for vehicular needs like car registration renewal, maintenance, and the like)
2) Office Supplies and Other Needs (e.g., pen, paper, ink, computer, PC table, PC chair, software, hardware, and other equipment)
3) Utility/Light/Water (e.g., Manila Water, Meralco,  bottled water, housekeeping, laundry)
4) Communications (e.g., mail, courier, photocopy, Internet connection, cable TV, phone subscription, and mobile prepaid)
5) Social Benefits and Taxes (e.g., SSS, PhilHealth, Pag-IBIG, community tax, percentage tax, etc.)
6) Miscellaneous (e.g., books, references, memberships in associations, home office rent, meals, entertainment, and health/beauty care)

Haha . . . as I read my questions, naisip ko para ka na palang accountant na kinukunsulta ko. Magkano retainer's fee mo?  Thanks for helping me ha. Mentor kita pagdating dito. 

Haha . . . wala `yun. I'm still learning about these things as well, and I'm glad to share with others what I learn along the way. Ngayon nga lang din ako gumawa ng sarili kong report ng quarterly income tax return. Kaya paki-check mo din kung tama ba ang mga sinasabi ko. The important thing is that we're transparent about these things, especially because these are money matters. You're welcome, feel free to share these things with others too. 

Oh, by the way, another question for 2551M naman. I had a transaction for July but the payment is still due this Wednesday, Aug. 3. So practically, I had no income for July. For my July 2551M, tama ba na ang ilagay ko sa #14A and #24A ay "No income"?

OK din naman na "No income" ang ilagay mo. Ako ang inilalagay ko 'pag ganyan "0" lang, as in zero talaga . . . haha. 

Thanks again, and hope to hear from you soon. Sana hindi na kayo binabaha diyan . . . Stay dry during this rainy season. God bless!

Walang anuman . . . Nawa'y nakatulong. Ipapaskil ko din ito anonymously sa FAQ page ko para may reference din ang ibang freelancers.

Ingat din kayo diyan . . . Praises be to God for His blessings upon us!


Sincerely,
Al