If taxes aren’t your favorite pastime, then the thought of filing 1701Q BIR Form has you furrowing your brow in confusion. We understand that tax season can be intimidating, but fear not—we’re here to offer a helping hand! By laying out the specific steps for filing this form correctly and confidently, we plan to take the angst and tedium out of tax time. So buckle up, fellow sole proprietors and business people—you’re about to embark on your most unintimidating tax adventure yet!
What is 1701Q BIR Form?
The BIR Form 1701Q is a Quarterly Income Tax Return for individuals, estates, and trusts, including those with mixed-income (i.e., compensation and income from business/profession). It’s used by the Bureau of Internal Revenue (BIR) in the Philippines to record the income tax liability of a taxpayer each quarter.
Who is Required to File 1701Q?
The following individuals file this return:
- Resident citizens engaged in trade/business or practice of profession within and without the Philippines.
- Resident aliens, non-resident citizens, and non-resident aliens engaged in trade/business or practice of profession within the Philippines only.
- Estates and trusts engaged in trade/business or practice of a profession.
However, if you’re an employee who is a compensation income earner, you’re not required to file every quarter. Whereas, suppose you’re an employee with other sources of income like a business, self-employment, freelancing, or professional practice (known as mixed-income earners). In that case, you must file BIR Form 1701Q for those additional incomes.
Related: Tax Codes in the Philippines- A Complete Guide
How To File 1701Q BIR Form?
Part I – Background Information
It is where you provide your basic details.
- Taxpayer’s Details: Include your Taxpayer Identification Number (TIN), RDO Code, registered name, and main line of business.
- Contact Information: Provide your telephone number, registered address, and email address.
- Filing Status: Indicate whether you’re filing for the first, second, or third quarter of the tax year.
Part II – Total Tax Payable
This section is for calculating your total tax payable for the quarter.
- Taxable Income: This is computed by subtracting allowable deductions and personal exemptions from your gross income.
- Tax Due: Apply the relevant tax rate to your taxable income to calculate your tax due. The tax rate might be the graduated income tax rate or the flat rate of 8%.
- Creditable tax Withheld: If any tax has been withheld at source, mention that amount here.
- Tax Payable (Overpayment): Subtract the creditable tax withheld and tax paid in previous quarters from the tax due to compute your tax payable. If you’ve overpaid, it will be shown here as well.
Schedules 1 to 3
These schedules require a detailed income breakdown, deductions, and exemptions.
- Schedule 1: Gross Income: Here, you need to list down all your sources of income, like sales revenue, service fees, etc. Make sure to include every single source of income.
- Schedule 2: Deductions: In this section, mention all allowable deductions, such as necessary and ordinary trade, business, or professional expenses. You can choose either the itemized deductions or standard deductions of 40% based on gross sales or receipts.
- Schedule 3: Personal Exemptions: Here, you can claim personal and additional exemptions as the law provides. For instance, individuals can claim a basic personal exemption of Php 250,000.
Related: 1906 BIR Form: Application for Authority to Print Receipts and Invoices
FAQs on BIR Form 1701Q
Q1: When is the deadline for filing the 1701Q BIR Form?
A: This form should be filed on or before the 45th day following the close of each of the first three quarters of the taxable year. The first quarter is due on or before May 15, the second quarter is on or before August 15, and lastly, on or before November 15.
Q2: What are the penalties for late filing of the 1701Q BIR Form?
A: Late filing can result in penalties, including a 25% surcharge, a 20% interest per annum, and a compromise penalty. In addition, if you neglect your tax due, there is a 50% penalty on your tax due.
Q3: How do I calculate my tax payable using the 1701Q BIR Form?
A: Your tax payable is calculated by taking your gross income, subtracting your allowable deductions and personal exemptions, and applying the appropriate tax rate. You can use offline or electronic filing, which automatically calculates your tax d
Q4: Can I file the 1701Q BIR Form online?
A: You can file it online using the BIR’s Electronic Filing and Payment System (eFPS) or Electronic Bureau of Internal Revenue Forms (eBIRForms).
Q5: What happens if I make an error in the 1701Q BIR Form?
A: If you notice an error after submission, you must file an amended return and may be subject to penalties depending on the nature of the error.
Q6: How can I lower my tax liability on the 1701Q BIR Form?
A: You can lower your tax liability by accurately reporting your income and taking advantage of all allowable deductions and exemptions. It’s recommended to seek advice from a tax professional to understand these better.
Q7: Do employees earning purely compensation income need to file BIR Form 1701Q quarterly?
A: Employees earning purely compensation income do not need to file BIR Form 1701Q quarterly. However, mixed-income earners must still file BIR Form 1701Q for additional income sources.
Related: BIR Form 2316: A Year End Statutory Obligation
Q8: What if my earnings have already been deducted with the final withholding tax?
A: If your earnings have already been deducted with the final withholding tax, it is not mandatory to file BIR Form 1701Q.
Related: 9 Facts You Should Know on Tax Mapping
Q9: Is BMBE registered required to file 1701Q?
A: If registered as a Barangay Micro Business Enterprise (BMBE) in the Philippines, you must still file the BIR Form 1701Q. This form is the Quarterly Income Tax Return for self-employed individuals, estates, and trusts. Even though BMBEs are granted income tax exemptions on income from the enterprise’s operations, they are still required to file income tax returns.
Filing these returns is not necessarily to pay taxes but to provide the Bureau of Internal Revenue (BIR) with information about the business’s income and expenses. It helps maintain transparency and ensures that all businesses comply with tax laws.
Q10: Which is better to use, Graduated Income Tax Rate or 8% in filing 1701Q?
A: Let’s look at hypothetical examples to illustrate the difference between using the graduated income tax rate and the flat rate of 8% when filing 1701Q in the Philippines:
Example 1: Using the Graduated Income Tax Rate
Maria is a self-employed professional with gross sales of PHP 800,000 for the year.
Under the TRAIN law, the tax schedule for individuals is as follows:
- Over PHP 250,000 but not over PHP 400,000 – 15% of the excess over PHP 250,000
- Over PHP 400,000 but not over PHP 800,000 – PHP 22,500 + 20% of the excess over PHP 400,000
So, applying the graduated rates, Maria’s tax due would be PHP 22,500 (fixed amount for income over PHP 400,000) plus 25% of the excess over PHP 400,000. In this case, the excess is PHP 150,000 (PHP 800,000 – PHP 250,000-PHP 400,000), so the tax on the excess is PHP 30,000 (20% of PHP 150,000). Therefore, Maria’s total tax due would be PHP 52,500 (PHP 22,500 + PHP 30,000).
Related: How to Reduce Your Philippine Tax in 2020
Example 2: Using the Flat Rate of 8%
Let’s say Maria decides to use the 8% income tax rate option instead. It means her income tax will be 8% of her gross sales or receipts above PHP 250,000.
If her gross sales are still PHP 800,000, the amount above PHP 250,000 would be PHP 550,000 (PHP 800,000 – PHP 250,000). Applying the 8% rate, her total tax due would be PHP 44,000 (8% of PHP 550,000).
As you can see, Maria would pay less tax under the 8% flat rate option in this scenario. However, whether the flat or graduated rates will result in less tax depends on various factors, including the taxpayer’s income level and allowable deductions. It’s always a good idea to consult a tax advisor to understand which option is best for your situation.
Conclusions
If you are an individual earning from self-employment activities, filing BIR Form 1701Q is mandatory. This form should be filed on or before the 45th day following the close of each of the first three quarters of the taxable year. Filing this return can help you avoid penalties and ensure your taxes are paid correctly. Moreover, consulting with a tax advisor can help you understand how to minimize your tax liability. By understanding how to file BIR Form 1701Q properly, you can make sure you pay the right amount of taxes and avoid unnecessary penalties.
Recommended: 1700 BIR Form: Definition and Step-by-Step Guide
