Paying Taxes: Do Freelancers Need To Do This, Too?

First of all, thank you to the ladies who submitted their questions yesterday!  Wow!  Really appreciate your participation!

So here’s the first of the questions I received.  She asked to be kept anonymous, and I respect that.

I need help in paying taxes. How do you do it? Do I need to do it? I do freelance work, too, and I also have a small online store. I just don’t know how to go about it.

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Okay.  I’m not sure if I can really be of help, because I’m far from being a voice of authority in this field, but I will share with you what I have done for my own business.

I started my virtual assistance service back in 2006.  But it was only in 2009 that I registered as a business.  Reason?  I sought the advice of a lawyer who told me to wait until I’m very stable before I register as a business.  Meaning, I had to wait until my income was steady at a certain amount.

When in 2009, I felt that I was ready, I registered as a sole proprietor, under “services” as the industry category.  My first stop:  DTI.  I registered VASupportPro Services.  VASupportPro stands for Virtual Administrative Support Professional.  It’s the result of a month-long study on how I would rank on searches.  I added “services” to make it flexible in terms of service offering.  I wanted to have that elbow room to grow the business, offering services other than virtual assistance.

Then I secured a business permit, registered with BIR and had my official receipts printed.

I won’t go deep into the process that I went through, because I don’t want to turn this post into a rant.  Having to transact with (some) government offices in this country can really discourage you to be a responsible citizen.  Suffice it to say that I’m holding on to the belief that the change is in me, in all of us, and it is up to me, to us, to do our share and contribute to the change, for the better.  So however hard it is to be good, let’s still be good.  🙂

To help you out with the process, I’m sharing here an article which lists down the types of taxes for self-employed people like us:  What Taxes Should I Pay in the Philippines (Self-Employed)

I’m paying the 3% percentage tax, based on gross earnings.  To help me stay organized in monitoring my earnings, I use this free invoicing platform, so that at the end of each month, I just copy everything to the eBIRform.  I always make it a point that I file my monthly return on the first week to avoid the rush, but due date is always on or before the 20th of the month following the taxable month.  I use the 2551M form.

For my quarterly filing, I opted for the 40% optional standard deduction, instead of the itemized deduction, so it’s less hassle for me.  After all, my operating expense is pretty much the same month after month, so going for the straight deduction makes sense for me.  But if your operation incurs lots of representation expenses, the itemized deduction may be a better option.  I use the 1701Q form.

Putting the horrors of registration aside, paying your taxes is pretty much routine and really easy.  It’s even made easier by the electronic filing that we have now.  Just download the eBIRform package, set it up with your valid email address, and each month, you only need to input your gross earnings and it will automatically compute the tax payable for you.  After filling in the necessary form, you will need to save it, then click on submit.  That form will then travel through cyber going to the central BIR database, or whatever they call it.  Wait a few minutes, and watch out for an acknowledgement of your submission from BIR via your email.  While waiting for the BIR confirmation to reach your inbox, go ahead and print three copies of the form you submitted.   Then, when that confirmation finally reaches your inbox, print it also at the back of the form that you already printed.  After that, go your merry way to the nearest BIR office and make the payment.  I opt to pay at our local BIR office.  Transactions are faster.  But you can also opt to pay at accredited banks.  I may be doing that soon. 🙂

There may be certain months that you have no transaction to declare, like if your family went for a vacation and you opted not to work.  You are still required to file.  Just submit your form electronically, print the form, and print the confirmation email at the back of the form.

To wrap up, do you need to do it?  I would say, yes, you do.  That is, if you already have a steady flow of income, please go ahead and do it.  Being able to issue an official receipt has advantages for the business.  Some clients actually ask for a receipt, so being able to say, yes, you can provide it, already puts you a step ahead of competition.  Being able to show an Income Tax Return also has advantages.  Visa applications require that you have one.  🙂

And best of all, you sleep better at night knowing that you are part of what’s good in this country.  🙂

Do you have questions, comments or feedback about this post?
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