As a freelancer, managing your taxes can be a bit overwhelming. You may have multiple clients, varied income sources, and fluctuating expenses. With so much to manage, it’s easy to overlook the importance of saving a copy of your Income Tax Return (ITR). However, always saving a copy of your ITR is essential for both legal and practical reasons. In this blog, we’ll explore why freelancers should always save a copy of their ITRs and how it benefits them in the long run.
What is an Income Tax Return (ITR)?
An Income Tax Return (ITR) is a form you file with the Bureau of Internal Revenue (BIR). It reports your income, expenses, deductions, and tax payments. This legal document proves you’ve paid your taxes. Freelancers in the Philippines must submit it annually.
Even if you don’t owe taxes or are entitled to a refund, you are still required to file your ITR as part of your annual tax obligations.
Why Always Save a Copy of Your ITR: Benefits
- Proof of Tax Compliance
Always saving a copy of your ITR serves as proof that you have complied with tax laws. The BIR may ask for this when you apply for a business license, a loan, or even when you need to show your financial standing. This ensures you have documented evidence of your tax filings. - Important for Audits
The BIR may conduct an audit of your tax returns for up to three years. If you’re ever audited, you’ll need to provide copies of your filed ITRs to prove your income and deductions. Always having a copy of your ITR ensures you’re prepared for audits and can back up your claims with valid documents. - Building Financial Credibility
When applying for business loans, personal loans, or a credit line, financial institutions often require proof of tax filings. Always saving a copy of your ITR shows responsible financial management. This helps build your credibility with lenders and other financial institutions. - Eligibility for Tax Credits and Deductions
If you qualify for certain tax credits or deductions in the future, you will need to refer to your previous ITRs to claim them. Keeping your ITR ensures that you won’t miss out on possible tax benefits you may be eligible for later. - Tax Filing for Future Years
Always saving a copy of your ITR helps you track your financial progress year after year. It serves as a reference for calculating your taxes for the next filing period. You’ll have a clear picture of how your income and tax obligations have evolved, making it easier to manage your finances in the long run. - For Recordkeeping and Tax Planning
Your ITR is an essential part of your business records. Proper recordkeeping is crucial not only for tax purposes but for overall financial planning. Always having access to your ITRs will help you plan for future taxes, set financial goals, and improve your overall tax strategy.
How to Always Save Your ITR Effectively
- Save Digital Copies
After filing your ITR, download the form and save it to your computer or cloud storage. Make sure to label the files clearly with the corresponding year. - Keep Physical Copies
If you prefer physical copies, print out your ITR and store them in an organized filing system. Ensure they’re easy to locate when needed. - Organize Supporting Documents
Along with your ITR, keep any receipts, invoices, or supporting documents related to deductions and expenses. These will be useful in case of audits. - Back Up Your Files Regularly
To avoid losing your ITR copies, back them up regularly. Store them in multiple locations, such as external drives or cloud services.
Protect Your Business with Proper Recordkeeping
Always saving a copy of your ITR is more than just an administrative task; it’s a necessary step to protect your business and personal finances. It ensures you’re prepared for audits, can access tax credits, and helps you manage your financial future.
Stay Ahead of Your Freelance Tax Responsibilities
For more tips on freelancing taxes and proper recordkeeping, follow us on our socials (TikTok, YouTube, Facebook, and Instagram) and read our blogs. Make sure you’re always ready with the right tools and knowledge to manage your freelancing business with confidence.