A guide for first-time filers

Two things decide almost everything: whether you earn compensation income — you are on a payroll and get a BIR 2316 — or business or professional income, where you invoice clients and are nobody’s employee.

The words people use blur this. A “part-time job” can be either. If they put you on payroll and hand you a 2316, that is employment. If you send them an invoice and they hand you a 2307, that is professional income — and you are supposed to be registered with BIR for it.

Getting this wrong does not produce an error message. It produces a return you did not owe, and a missing one you did. The four questions sort it out.

If you are on a payroll, you are already paying income tax. Your employer works it out from a table BIR publishes for each payroll period — monthly, semi-monthly, weekly or daily — remits it, and hands you a 2316 in January showing the year’s total. That is withholding tax, and it is an instalment rather than the final bill.

The table is not applied to your gross pay. It is applied to your taxable compensation — gross less your share of SSS, PhilHealth and Pag-IBIG. On a ₱50,000 salary those come to about ₱3,200 a month, so the tax is charged on roughly ₱46,800. Calculators that skip this step overstate the tax by several hundred pesos a month.

Three details catch people out:

• SSS is charged on a salary credit, not on your pay. The credit moves in ₱500 steps between ₱5,000 and ₱35,000, so two people ₱200 apart in salary usually contribute exactly the same, and nobody contributes on more than ₱35,000 however much they earn.
• The first ₱20,833 a month is exempt. That is the ₱250,000 annual exemption divided by twelve. Below it, nothing is withheld at all.
• 13th-month pay is tax-free only up to ₱90,000 a year, counting other benefits. The month your bonus lands, more tax comes off than usual.

Because BIR derived the payroll table from the annual one, an unchanging salary withholds within a peso or so of what the annual return computes — which is exactly why most employees never have to file. The gap opens when something changes mid-year: a raise, a second employer, or a bonus. Two employers is the case that reliably leaves you owing money, and it has its own section below.

If you had exactly one employer for the whole year, no business income, and your employer withheld and annualised your tax correctly, substituted filing applies. Your 2316 is treated as your return, and there is nothing to lodge in April.

This is the normal situation for most employees, and it is why most Filipinos never file anything. It stops applying the moment any of those three conditions breaks.

Two or more employers in the same calendar year — whether at the same time or one after the other — disqualifies you from substituted filing. You file BIR 1700 yourself by 15 April, attaching a 2316 from every employer.

Almost everyone in this position owes money, and the reason is arithmetic rather than anything anyone did wrong. Each employer withheld as though it were your only job, so each one gave you the first ₱250,000 tax-free and applied the lowest brackets. Added together your income sits higher up the table than either employer assumed, and the difference falls due when you file.

No quarterly returns come with this. Those belong to business income.

Worth knowing before you take a second job: the tax is not extra, it was always owed. It just arrives in one lump in April instead of being spread across your payslips.

Registered self-employed, with no employer, you file quarterly and annually:

• 1701Q for the first three quarters — 15 May, 15 August, 15 November. There is no fourth quarter; the annual return covers it.
• 1701A annually if you are on 8% or the 40% OSD, or 1701 if you itemise deductions. Both due 15 April.
• 2551Q percentage tax each quarter — unless you elected 8%, which replaces it — or 2550Q for VAT if you are VAT-registered. Never both.

1701Q is cumulative. Each quarter reports everything since 1 January and subtracts the tax earlier quarters already paid — it is not a return for the quarter on its own. Filling it in per quarter is the single most common mistake, and the answer looks entirely plausible either way.

Employment plus business or professional income makes you a mixed-income earner. You file 1701 annually, with your employer’s 2316 attached, plus the quarterly returns for the business side.

The trap: the ₱250,000 is not available against your business income. Your compensation has already used it through the withholding table. Claiming it again on the business side understates your tax, and nothing in eBIRForms stops you.

If your gross stays at or under ₱3,000,000 and you are not VAT-registered, you may elect a flat 8% on gross — in place of both the graduated income tax and the percentage tax. If you are purely self-employed the first ₱250,000 comes off before the 8% applies.

It is elected one year at a time and does not roll over. Miss the election in your first quarterly return and you are on graduated rates for that whole year, owing percentage tax you may not have been setting aside.

Cross ₱3,000,000 and the election is void for the entire year, not from the month you crossed. The graduated tax and the percentage tax both become payable from the first quarter, with surcharge and interest on top.

BIR 2307 is what a client gives you when they withheld tax before paying your invoice. It is not a receipt — it is proof you have already paid part of your tax, and it is credited against what you owe. Without the certificate on file the credit is not allowable, so a missing 2307 is money.

BIR 2316 is the same idea from an employer, issued once a year. Under substituted filing it doubles as your return. When you have two employers, both 2316s attach to your 1700.

A deadline landing on a weekend or a holiday moves to the next working day — including the special non-working days proclaimed each year, which is why the date sometimes shifts at short notice.

Filing or paying late attracts three separate charges:

• 25% surcharge on the amount due — 50% instead if the failure was wilful or the return was false.
• 12% interest a year on the unpaid tax, running from the due date until you pay.
• A compromise penalty, set from a BIR schedule that varies with the amount involved.

This app will not compute what you owe in penalties. The compromise penalty comes from a schedule applied with BIR discretion, and the interest depends on the exact date you settle. A confident wrong number about what you owe BIR is worse than no number at all — so you get the rules, and the arithmetic stays with the people who can be held to it.

Filing a return you cannot yet pay is still better than not filing. The surcharge attaches to late filing as well as late payment, so lodging on time removes one of the three charges.

Every figure below is pinned by the test suite, so these cannot drift away from what the app actually computes.