Freelancers are required to pay taxes.
Yep! You read that right.
Freelancers are not tax-exempt, even though some have decided that paying their taxes was optional.
I know we all feel differently about “giving a portion of our hard-earned money to the government” and I totally respect that. So, I just want to say that I’m not trying to change anyone’s tax beliefs or decisions here.
This article is meant to help freelancers who would like to become taxpayers, but are confused what to do – hoping that what I share here would, at least, make their registration experience a little easier.
Personally, I have decided to register myself as a taxpayer because:
I heard many things about the tax registration process so I braced myself for the worse.
But surprisingly, it was painless and a lot easier than I thought.
I learned from some blogs that freelancers must register as Single Proprietors (self-employed business owners), so I went to BIR and inquired. They gave me this list of requirements:
I have already read that there would be another set of requirements for DTI Registration and Mayor's Permit.
“I don’t want to go through all these," I thought as I looked at each requirement.
I wasn’t willing to go to DTI, register my name as a business, and all those stuff.
So, I began to explain what I do to the BIR Representative.
I told her something like, “You see, ma’am, I’m an online writer. I am NOT anyone’s employee and I do NOT operate like a normal business."
"I don’t get paid a regular salary nor do I get regular clients. I’m a freelancer and I only get paid when somebody contacts me to get a writing job done.”
“Oh, in that case, you should register as a professional - just like actresses, authors, photographers, etc. They work freely but they only earn money when they have gigs," she replied.
“Yes, that’s right. I like the idea of being just like an actress!”
She laughed and said, “Alright! To register as a professional, these are the requirements.”
I looked at the paper and thought, “Yey! Shorter list.”
Now, at that time, I had no idea what the #1 item was.
The BIR Representative just told me to go and get one from the City Hall.
Before doing so, I googled what an OTR is and found that professionals are charged an annual tax for practicing their professions.
Professionals who require licenses to practice like doctors, nurses, lawyers, and dentists pay a professional tax to the city/province their practicing in.
For professionals who don’t require licenses to practice, like actors/actresses, authors, photographers, and yes, online freelancers, we have to pay an annual occupational tax.
I went to the City Hall to inquire about getting an Occupational Tax Receipt (OTR).
If the guards look like they’ve never heard it before, go and ask them where nurses get their Professional Tax Receipts (PTR). More nurses pay their professional taxes annually so the guards are more familiar with PTRs.
I was pointed to the same place where cedulas, mayor’s permits, and other stuff are issued. They gave me a number for “Miscellaneous.”
When it was my turn, I approached the counter. I filled out a small form with my name, occupation, and address.
I just wrote “online writer” in the occupation field.
Upon reading it, the lady said, “Wow, you’re like a blogger,is that right, ma’am? Do you work from home? You must be so smart. That’s so cool!”
It was fascinating how the idea of freelancing translates to different people. We ended up chatting about the online world and the opportunities it has opened up for everyone.
I paid a total of P175 for the OTR. This is how it looks.
I also just stopped by the Cedula counter to get one as a requirement for my Barangay Clearance.
The rest of the requirements were easy.
I got a Journal Book from the National Bookstore for P28.75.
The BIR form 0605 (the payment form) is an e-form which can be filled and downloaded online.
This is how I filled mine (with the help of a BIR Rep).
You will need to make 3 copies of the completed form and go to an accredited bank to pay the fee. The closest one to my place was Chinabank, so I went there.
The bank will keep the 1st copy, send the 2nd one to BIR, and give the 3rd one to you.
Your copy will look like this after paying.
I was also asked to fill out 2 copies of the BIR 1901 form.
This is how I filled them.
I went back to BIR and submitted my requirements as soon as I got everything ready.
To save yourself from hassle, remember to bring photocopies of all your documents. They only asked for the photocopies and gave me back the originals.
It was a Tuesday when I went. I was told to attend a basic taxpayer’s seminar the next day and to claim my Certificate of Registration (COR) on Friday.
I went back the next day for the seminar which lasted for about an hour. They entertained our questions about tax filing there.
They gave us a guide which I used to scribble some notes on.
When I came back on Friday, I got my COR, this “Ask for Receipt” placard, and my Certificate of Attendance for the seminar.
That’s it! I’m a registered taxpayer!
But it doesn’t stop there.
I now have a responsibility to file monthly, quarterly, and annual tax forms before the deadline to avoid penalties.
As a registered professional, my 1901 says that I should file 2551M forms (Monthly Percentage Taxes), 1701Q forms (Quarterly Income Tax Return) and a 1701 (Annual Income Tax Return).
The deadlines for them are:
Also, I got some official receipts printed. =)
As freelancers, most of our clients are online and wouldn’t really care getting official receipts.
But I loved having my own name printed on my own official receipts. It just looks sooo professional.
Plus, issuing receipts is a requirement to support one's declared monthly income so I’m planning on still issuing them even though my clients are online.
I went to an accredited printshop to order receipts. They needed a photocopy of my COR and my valid ID to process my order.
I got their package for 5 booklets and paid P1900.
Each book is good for 50 transactions and can be used for 5 years. (I probably bought too many but I wasn’t really thinking clearly at that time.)
The printing takes weeks and as of this writing, they’re not yet done. I’ll just post a picture when I have them. =)
Well, that’s all I have for now. UPDATE: To know how much freelancers pay monthly, quarterly, yearly in taxes, please check this post: How to Computer Your Taxes as a Freelancer
If you have any questions, feel free to type them in the comments below. I don’t have a lot of experience about filing taxes but I’ll do my best to help.