As business owners, we all have our dues to pay at the end of the day. Here are some of the things you need to know about your annual income tax as a business owner.
Income Tax and Why I Should Pay Them
Under the Tax Code of 1997, Income Tax is defined as a tax on a person’s income, emoluments, profits arising from property, practice of profession, conduct of trade or business or on the pertinent items of gross income specified in the Tax Code, as amended, or other special laws. All businesses are required to pay an annual income tax to the government. The annual income tax you pay is based on the net income of your MSME for the previous fiscal year.
Requirements When Filing Your Income Tax
- Make sure to have these documents ready when tax season rolls around:
- Certificate of Income Payments Not Subjected to Withholding Tax (BIR Form 2304), if applicable
- Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if applicable
- Duly approved Tax Debit Memo, if applicable
- Proof of Foreign Tax Credits, if applicable
- Income tax return previously filed and proof of payment, if the amended return is filed for the same taxable year
- Account Information Form (AIF) or the Certificate of the independent CPA with Audited Financial Statements, if the gross annual sales, earnings, receipts, or output exceed P3,000,000
- Proof of prior year’s excess tax credits, if applicable
Smart Tips for Easy Managing and Filing
If you are a new entrepreneur, you may not immediately have the ability to have an accounting department for your business. Here are some tips to keep you on top of your tax game:
- Register your business with the requisite government agencies, ideally three months before operation
- Register your book of accounts, as well as your official receipts and invoices
- Compute your taxes at every quarter to prepare for tax filing season on April
- Separate your personal and professional expenses for easier processing
- File BIR returns and pay taxes before due dates
- Always double check the documents you submit to BIR
- Always issue official receipts (ORs) or invoices
- Update your tax information regularly
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