Freelancing gives you freedom, but tax mistakes can be expensive. Avoid these common pitfalls to keep your finances in check.
1. Not Registering as a Taxpayer
If you earn income, you must register with the BIR. Failing to do so can result in penalties and tax evasion charges. Registration also gives you access to official receipts and tax benefits that can help lower your liabilities.
2. Missing Tax Deadlines
Freelancers must file taxes on time to avoid late fees. Mark key dates on your calendar and set reminders. Tax deadlines include quarterly percentage tax, quarterly income tax, and the annual income tax return. Filing late can result in hefty penalties and even compromise your compliance status.
3. Underreporting Income
Failing to report all your earnings can trigger audits and penalties. Ensure that all your income sources are accurately recorded. Remember, digital payments, online gigs, and overseas clients are still taxable income.
4. Not Keeping Proper Records
Receipts, invoices, and contracts should be organized. Proper documentation makes filing easier and protects you during audits. A well-kept record also allows you to track income patterns, expenses, and potential deductions that can reduce your taxable amount.
5. Ignoring Percentage Tax
If your gross annual income is under ₱3,000,000 and you’re not VAT-registered, you must pay the 3% percentage tax. Overlooking this can lead to penalties. Ensure you file your percentage tax every quarter and keep proof of payment.
6. Failing to File an ITR
Even if you have no tax due, you must file your Income Tax Return (ITR). Not filing can result in fines and compliance issues. An ITR is also required for loans, visas, and government transactions, making it essential to stay updated.
7. Forgetting to Pay Quarterly Taxes
Freelancers must pay quarterly taxes, not just annually. Missing these payments can result in accumulated tax liabilities and penalties. Paying quarterly ensures that your year-end tax due is more manageable and prevents lump-sum financial strain.
8. Not Consulting a Tax Advisor
Tax rules change, and getting professional guidance ensures you’re compliant and maximizing tax benefits. A tax advisor can help you understand deductions, proper filing procedures, and ways to optimize your tax strategy legally.
Take Control of Your Taxes Today!
Avoiding these mistakes helps you stay compliant and financially stable. Stay informed, keep good records, and meet your tax deadlines to protect your freelancing career.
📌 Ready to Make Tax Filing Easy? Download our Ultimate DIY BIR Tax Compliance Guide, use our Freelancer Income Tax Calculator, and schedule your Free Tax Consultation Call to take the next step toward confident, stress-free tax filing!
Follow us on our socials (TikTok, YouTube, Facebook, and Instagram) and read our blogs for more freelancing tax tips!