This year’s last day of filing tax returns is April 15 and I thought this article might help those freelancers or self-employed individuals who are too thrifty to spend on a bookkeeper or are just trying to learn how to do ITRs by themselves.

1. Income Tax Rates for Filipino Freelancers
2. Are Filipino freelancers exempt from income taxes?
3. I am a professional, am I considered a freelancer, and how am I taxed?
4. Steps in filing your ITR:
5. Where to Start with e-BIR?
6. Can I reduce the taxes that I should pay?
7. Can I skip filing ITRs and paying taxes?

Income Tax Rates for Filipino Freelancers

Under the TRAIN Law, from Jan. 1, 2018, until Dec. 31, 2022, these are the income tax rates for Filipino freelancers:

Total Amount of Annual Taxable Income	Tax Rate
Not over P250,000	0%
Over P250,000 but not over P400,000	20% of the excess of P250,000
Over P400,000 but not over P800,000	P30,000 + 25% of the excess of P400,000
Over P800,000 but not over P2,000,000	P130,000 + 30% of the excess of P800,000
Over P2,000,000 but not over P8,000,000	P490,000 + 32% of the excess of P2,000,000
Over P8,000,000	P2,140,000 + 35% of the excess of P8,000,000

Are Filipino freelancers exempt from income taxes?

No, a Filipino freelancer is not exempt from paying income taxes. Only minimum wage earners are exempt from paying income taxes. However, if you are a Filipino freelancer whose annual income was not more than P250,000, then you will be taxed 0%, which basically results to you not paying any taxes because any number multiplied by zero equals zero.

I am a professional, am I considered a freelancer, and how am I taxed?

I consider myself a professional writer. Under the TRAIN Law, purely self-employed individuals (aka freelancers and sole proprietors) and professionals whose gross sales or gross receipts and other non-operating income does not exceed the Value-Added Tax (VAT) threshold of P3,000,000, have the option to avail of the following:

1. 8% tax on gross sales or gross receipts and other non-operating income in excess of P250,000, or
2. the graduated income tax rates in the table above.

Steps in filing your ITR:

1. Know the form you will be using. I am using BIR Form No. 1701. This form is for self-employed individuals, estates, and trusts.
2. Download the Software. Go to bir.gov.ph. I downloaded the Offline eBIRForms Package v6.3. The software only works on Windows OS computers. This did not work in Macbook.
3. Input your personal details. These includes your name (complete name used when you registered for your TIN) and your TIN.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. Always save. Save the file. Always.
10. 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.
11. Wait for the emailed receipt. Print three copies of the ITR and the emailed receipt.
12. Pay taxes. I paid taxes at the RCBC branch at JCenter Mall. If you have zero tax liabilities, you pay with your RDO/BIR branch.

Where to Start with e-BIR?

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.

Can I reduce the taxes that I should pay?

[Please do not take this as an expert advise. I am not a a tax expert.]

There are so-called allowable deductions under the Tax Code, which are also found in the e-BIR form. These deductions will reduce your taxable income, thus also reducing the amount of taxes you will pay.

Here are some allowable deductions:

1. 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. 😛
2. 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).
3. 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.

Can I skip filing ITRs and paying taxes?

I don’t want to be chased by the BIR for tax evasion. Also, even though you are not earning for the year, there is no reason for you not to file your ITR because the taxes that you pay will only depend on the income you earned for the year. And it is also our duty to pay taxes, and the taxes are the lifeblood of our country.

You can also use your ITRs as proof of earnings or economic capacity, which you 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.