Self- employed are those individual working for oneself as a freelancer or the owner of a business rather than for an employer. A home-based business is a type of business where the primary office address is located in the owner’s home.
A self-employed/Home-based business need to comply with the requirements of the following government agencies:
- For trade name or business name, go to Department of Trade Industry (DTI)
- For permits and licenses, go to Local Government Units (LGUs) such as Barangay and Mayor’s Office
- For the new Tax Identification Number (TIN) or updating registration, go to Bureau of Internal Revenue (BIR)
The following are the different Accounting books that needs to be maintained by a self-employed/ home based-business. All accounting books must be registered as well with the BIR.:
- General Journal
- General Ledger
- Cash Receipt Journal
- Cash Disbursement Journal
A Self-employed/ home based-business needs to issue Invoices and/ or receipts to their customers. Invoices and/ or receipts needs to be registered to BIR before the business starts to operate.
- For manual invoices and/or receipts – Look for an accredited printer who will do the printing of invoices and/or receipts
- For computerized invoices and/or receipts like Point-of-Sales, Cash Register Machine (CRM), etc. – Register the computerized system with the BIR
The following are the Tax Returns needed to be filed and paid by the Self-employed/Home-based businesses
Monthly
- BIR Form 1601E – if you are renting, paying professionals or commissions. Deadline of payment or filing is on or before 10th of the preceding month.
- BIR Form 2551M – For Non-VAT individual. It is the computed sales tax equivalent to 3% of monthly gross sales. Deadline of payment or filing is on or before 20th of the preceding month.
- BIR Form 2550M – For VAT individual. It is computed sales tax equivalent to 12% of monthly vatable sales less 12% of vatable purchases/expenses. Deadline of payment or filing is on or before 20th of the preceding month.
Quarterly
- BIR Form 2550Q – For VAT individual. It is similar to BIR Form 2550M, but instead of one month, it reports the three months in a particular quarter. Deadline of payment or filing is on or before 25th of the preceding month after the close of the quarter.
- BIR Form 1701Q – This is the income tax for the quarter. Deadline of payment or filing is on or before the 60th day after the close of the quarter.
Annual compliance for Self-employed/Home-Based Business
- Renew licenses annually such as licenses and permits in LGUs
- File and/or pay annual reports such as Annual Income Tax Return (BIR Form 1701) in BIR.
DISCLAIMER
This article is intended to equip the taxpayers or their bookkeepers in complying with the Bureau of Internal Revenue’s (BIR) and other Government rules and regulations. It is not intended to teach the taxpayers the details of tax planning and avoidance or to commit tax evasion or any fraudulent tax activities. Certain advice, comments and opinions expressed in this article are based on specific situations, limited available definitive tax and other government rulings and the actual experience of the authors, and may not apply to the reader’s specific tax or business concern and should not be used to avoid tax under the National Internal Revenue Code (NIRC) or applicable tax laws and other government regulations without consulting an accountant or lawyer or secure a BIR ruling before using any suggested advice or strategy.
