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Sun, Sep 11, 2011 at 6:33 AM
Hi Al,
I'm so happy I came across your site in my search of knowing how to pay my tax
as a freelancer. I have further questions though.
1. On 2551M, 1701Q. Hindi ko maintindihan 'yung attachements required at the back
of the form and whether it is applicable for me.
2. Ano ba 'yung ATC? Am I exempted from VAT? Napansin ko kasi doon sa article mo
na wala sa list mo among tax type 'yung VAT for freelancers.
3. On 1701Q, kung 'yung kinikita ko ay mula sa isang company lang. (I do drafting
works kasi online. I am in the Philippines and the company where I send work is
in Hawaii.) I received payment once a month lang for the work I sent for the past
month. Sa #26 ko ba ilalagay 'yung kinita ko for the whole quarter? how about
'yung 40% OSD, doon ba sa #33 then sa #36 'yung difference? Walang work ang
spouse ko, so I am not to fill out any for her.
4. I read this on NIRC "That those whose quarterly sales, earnings, receipts, or
output do not exceed Fifty thousand pesos (P50,000) shall keep and use
simplified set of bookkeeping records duly authorized by the Secretary of
Finance" Di ko masyadong maintindihan ito. What if I am earning more than
50,000, how should I prepare my bookkeeping records? Minention 'yung
simplified bookkeeping records for those earning less than 50,000. Meron ba
nu'ng NOT simplified or COMPLEX bookeepping records for those earning more than
that? What does it really mean? Am I required to have an accountant? And how
would I know if I'll earn more or less than 50,000
in a quarter receipts? eh iba iba naman kada months sometimes nga zero diba?
5. From NIRC pa rin ... "... persons whose gross quarterly sales, earnings,
receipts or output exceed One hundred fifty thousand pesos (P150,000) shall
have their books of accounts audited and examined yearly by independent
Certified Public Accountants and their income tax returns accompanied with a
duly accomplished Account Information Form (AIF) which shall contain, among
others, information lifted from certified balance sheets, profit and loss
statements, schedules listing income-producing properties and the corresponding
income there from and other relevant statements." Ganito ba 'yon ... If I earned
more than that, am I required by law to find an accountant to make my
tax computations? And what is AIF?
6. Am I required to attach actual/photocopied invoices when submitting my
monthly, quarterly, and annual returns? Meron akong mga nabasang attachements at
the back of the forms and I really have no idea what they are and whether I
need them.
I really appreciate your site, not just on tax issues you wrote there, but also
on faith-related issues, especially tithings. I tithe and feel guilty when I do not
but I been reading a lot about these and also can't really weigh things whether
to tithe or not to tithe. Both sides present strong points, and I really don't
know. Maybe I'll make a separate letter for this. Anyway, thanks a lot Al. I
really appreciate you.
God bless.
Mel
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Tue, Sep 13, 2011 at 6:12 PM
Hi Mel,
I'm glad to hear from you. Thank you for writing. Now, let's go over your questions one at a time.
On 2551M, 1701Q. Hindi ko maintindihan 'yung attachements required at the back of the form and whether it is applicable for me.
The "Attachments Required" section for Form 2551M are as follows:
1. Certificate of creditable tax withheld at source, if applicable. >>>>>>> As I understand it, this refers to a form (Form 2307) issued to you by a private/local company that hired your services and deducted withholding tax from your professional fee. Because you are paying your own taxes as a freelancer, you will then deduct from your percentage tax due the amount of tax withheld from your professional fee.
2. Duly approved tax debit memo, if applicable. >>>>>>> Unfortunately, I do not understand this either. :) Please ask the BIR officer of the day in your BIR district office about this matter.
3. For amended return, proof of the payment, and the return previously filed. >>>>>>> Ditto. :)
4. All returns filed by an authorized representative must attach authorization letter. >>>>>>> OK, in the case when there is someone else (e.g., an accountant) preparing your filing of returns, an authorization letter should be attached to your forms for percentage, quarterly, and annual tax.
Ano ba 'yung ATC? Am I exempted from VAT? Napansin ko kasi doon sa article mo na wala sa list mo among tax type 'yung VAT for freelancers.
Ay, sorry po, Sir. :-D Ang listahan pong ito ay ating matutunghayan sa likod na pahina po ng Form 2551M. :) At the back page of Form 2551M, you will find the alphanumeric tax code (ATC) which refers to the type of percentage taxes that categorize taxpayers. Magkakaiba sila. Usually, freelancers fall under the percentage tax (PT) 010 which refers to "persons exempt from VAT under Sec. 109v (Sec. 116)." And so non-VAT taxpayers use BIR Form 2551M. So why is a freelancer categorized under PT 010? Let's read again from the back page of Form 2551M's "Who Shall File" section, number 1:
Persons whose gross annual sales and/or gross receipt do not exceed P1,500,000 and who are not VAT registered.
Please note that you, as a freelancer, have the option to register under the VAT category if you exceed the P1.5-million income bracket. Mabuhay ka kapatid! Kailangan ka ng bansang Pilipinas! :-D
In that case, you're still the best person who can determine whether you are exempt from VAT. ;)
3. On 1701Q, kung 'yung kinikita ko ay mula sa isang company lang. (I do drafting works kasi online. I am in the Philippines and the company where I send work is
in Hawaii.) I received payment once a month lang for the work I sent for the past month. Sa #26 ko ba ilalagay 'yung kinita ko for the whole quarter . . .
The answer to that question is "Yes."
How about 'yung 40% OSD? Doon ba sa #33 then sa #36 'yung difference? Walang work ang spouse ko, so I am not to fill out any for her.
Opo, 'dun nga po. Pinagpala ang iyong maybahay, Mel. Dumami nawa ang katulad mong ama ng tahanan. :-) Affix instead n/a on the blank boxes (like the "Spouse" column) of the form.
I read this on NIRC: "That those whose quarterly sales, earnings, receipts, or output do not exceed fifty thousand pesos (P50,000) shall keep and use simplified set of bookkeeping records duly authorized by the Secretary of Finance." 'Di ko masyadong maintindihan ito.
Haha . . . ako din. OK, if you ask me, I can only say that we may keep records in the way we know. This is also what the BIR personnel advised me with regard to my bookkeeping, that is, without an accountant to do it for me. Sa pagkakaunawa ko sa "bookkeeping records duly authorized by the Secretary of Finance," ito `yung accounting books na dala natin upon BIR registration at tinatakan ng BIR personnel. These books may be new or simply renewed. Again, for more clarity, feel free to ask the officer of the day at your BIR regional district office (RDO).
What if I am earning more than P50,000, how should I prepare my bookkeeping records? Minention 'yung simplified bookkeeping records for those earning less than P50,000. Meron ba'ng NOT simplified or COMPLEX bookkeeping records for those earning more than that? What does it really mean?
You may do your own bookkeeping regardless how much you earn as a freelancer, and I encourage you to do so. And because it's your money, you know best where you spend or save every cent of your income. 'Yan sana ang dapat na nangyayari sa bawat income earner. There is no such thing as a complex bookkeeping. Bookkeeping becomes complex because of one's neglect to fill them out in a timely manner. Totoo. But note that if you fill out your books on a daily basis, your bookkeeping is simplified because you remember well your transactions on a daily basis.
OK, sabihin nating sa isang buwan, kumita ka mula sa isang client ng P80,000. Siyempre, bibigyan mo siya ng official receipt na may halagang P80,000. Ito ngayon ang halaga na ipapasok mong entry sa iyong cash receipt book, under both credit and debit columns. Now the three other books (ledger, journal, and cash disbursement) will generally contain your records on expenditures. You may consult the BIR officer of the day for details.
Am I required to have an accountant? And how would I know if I'll earn more or less than P50,000 in quarter receipts? Eh, iba-iba naman kada month, sometimes nga zero, 'di ba?
No, you're not required to have an accountant. Do take time to understand how to use the books--apat lang naman `yun. :) If you keep your records diligently--from the official receipts that you issue your clients to the ORs issued to you by other service providers--then you won't get lost. From your records, you can easily determine the total amount of money you receive every three months. I'm sure hindi ka mawawala, lalo pa ngayon na sabi mo isa pa lang ang client mo. Kahit dumami pa `yan, at sa tulong ng calculator (salamat sa inventor nito!), madali mong malalaman ang kabuuan ng kinita mo sa isang buwan, quarter, o taon.
2. From NIRC pa rin, ". . . persons whose gross quarterly sales, earnings, receipts or output exceed One hundred fifty thousand pesos (P150,000) shall have their books of accounts audited and examined yearly by independent certified public accountants and their income tax returns accompanied with a duly accomplished account information form (AIF) which shall contain, among others, information lifted from certified balance sheets, profit and loss statements, schedules listing income-producing properties and the corresponding income there from and other relevant statements." Ganito ba 'yon . . . if I earn more than that, am I required by law to find an accountant to make my tax computations? And what is AIF?
OK, this is a condition requiring a CPA. But note that the CPA will audit and examine your books of accounts on a yearly basis only. Kung `yan ang sinabi ng NIRC, then yes, that's the law. As also noted in what you quoted from the NIRC, AIF stands for the "account information form" that will contain the detailed information recorded in your accounting books.
3. Am I required to attach actual/photocopied invoices when submitting my monthly, quarterly, and annual returns? Meron akong mga nabasang attachements at
the back of the forms and I really have no idea what are those and whether I needed those.
No, you're not required to do that, unless you are individually instructed to do so for some reasons. I can see that the attachments required generally refer to withholding taxes and/or authorization you provide someone to represent you in filing your taxes (e.g., a CPA). May CPA ka ba? May pinapasuweldo ka ba o binabayaran sa iyong freelancing business? O ikaw ba ay kinakaltasan ng withholding tax ng isang kumpanya para sa serbisyong ibinibigay mo sa kanila? If your answers to these questions are "yes," then you may consult the BIR personnel officer to explain the details for you.
I'm including here your additional question from your other email dated, Sunday, September 11, 2011 10:37 AM:
Regarding 1701. Sa schedule no. 2 (being a freelancer) under name of payor saka TIN. 'Yun ba yung name at TIN ng clients ko? Paano kung ayaw ibigay ng clients ko 'yung mga info na ganon. OK lang ba na blank 'yun?
Are you referring to BIR Form 1701Q? Because there are other 1701 forms. But if this is BIR Form 1701Q's Part I on Background Information, then I will have to say, no, that's not your payor's TIN. It's your TIN. Now, in cases when the client's info details are needed, you will have to ask the client's permission for any disclosure of such. Some clients abroad may offer you a copy of documents which they file concerning your services with them. Client's are usually willing to help if you ask them about matters that relate to your taxation.
I really appreciate your site not just on tax issues you wrote there but also on faith-related issues, especially tithings. I tithe and feel guilty when I do not, but I've been reading a lot about these, but I cannot really weigh things on whether to tithe or not to tithe. Both sides present strong points and I really don't know. Maybe I'll make a separate letter for this. Anyway, thanks a lot, Al. I really appreciate you. God bless. Mel
Thank you Mel for visiting the site and for taking the time to write. I am glad to know that you find the website helpful. Please don't feel guilty for not tithing. It's sad that some churches use tithing as the reason behind a Christian's success, or the failure to tithe as the reason why some Christians fail particularly in their financial affairs. Tithing was prescribed by God to the Levites under the law, the Old Covenant. But note that there are no more Levites living today and we no longer live under the Old Covenant. We now live under God's grace, the New Covenant when the atoning sacrifice of Jesus Christ finished the work on the Cross. Nothing in what we do (or don't do) can change what Jesus already did.
I stopped tithing in 2009, but God did not stop providing for me and my family. I stopped tithing upon realizing that I am a child of God and therefore I am free, just as Jesus explained in Matthew 17:24-27, "Then are the children free." But definitely, we can always give in love. ;-)
The book I find helpful in discussing in-depth the issues on tithing is "Tithing: Low-Realm, Obsolete & Defunct" by Matthew E. Narramore. It is also available online. Do read it and recommend it to others as well. You may also visit my library for other helpful resources in the faith.
Thank you again, Mel. If you have other questions, feel free to write back.
Sincerely,
Al
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