Avoid BIR Penalties – Hiring an Accounting Firm for Comprehensive Tax Services
In line with the season for filing income tax returns (ITR) for most businesses, it is important to be reminded of your tax responsibilities. It also counts to be aware of those common, unnoticeable mistakes that often lead to unwanted penalties.
The Philippine’s Bureau of Internal Revenue (BIR) plays a significant role in successfully running your business in Davao. In fact, the BIR plays a major, superlative role. Abiding by its rules and regulations will not only save your business from its imposed penalties, it will also spare you from possible criminal charges that are a major hindrance to a good night’s sleep. This is basically the reason why businesses or any other legal taxpayer (group or individual) should consider hiring a reputable accounting firm in Davao which offers tax services, and more.
Here is a list of the things to look forward to in this article:
- Functions of the BIR
- Common Mistakes to Observe when Filing Tax Returns
- 10 Tips to Avoid BIR Tax Penalties
Understanding the BIR
BIR is an attached agency of the Department of Finance. It collects more than half of the total revenue of the Philippines and it is the primary entity that controls the Philippine taxation.
Among its powers and duties are:
- Assessment and collection of all internal revenue taxes, fees and charges; and
- Enforcement of all forfeitures, penalties, and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts; and
- Administers supervisory and police powers conferred to it by the National Internal Revenue Code and special laws.
So why do we really need to pay taxes? The answer is a no-brainer: Taxes are the soul of our government, without which, it cannot possibly subsist.
Common Mistakes to Observe
Instead of wasting your profits on some ridiculous penalties, many promising undertakings could have been made. In few cases, it may take them a whole night to scrutinize those bills and taxes, but still, something just seems to really go out of the right track.
Tax penalties could be imposed to entities who either failed to file their ITR on the scheduled date or they may have committed errors even during or before the preparation and filing of these tax returns.
How do you avoid these unfortunate circumstances? As mentioned, it always counts to be aware of these common, yet often unnoticeable mistakes:
1. Filing the wrong BIR form with incorrect or incomplete information
Especially for first-time taxpayers, all those BIR forms might seem too confusing. Keep in mind that tax return forms for self-employed individuals, corporation, sole-proprietorship, partnership, or professionals vary. Filling up each form with the wrong information (e.g. writing the incorrect date) may also get you into trouble so be sure to consult with a tax or accounting expert.
2. Numerical and declaration errors
This is one of the most common mistakes committed when filing tax returns. It could be caused by a simple mathematical operations error or apparent inconsistencies of the amounts declared. In few cases, people miswrite the correct number of zeros of the declared amount. These simple mistakes may lead to a totally different amount of income tax liabilities that can be easily spotted by a BIR examinee.
3. Discrepancies in the reported information and
A. Prior year’s return
Some information needed for the current year must coincide with the previous years. This is a fact that taxpayers must be always reminded of. As an example, the beginning balance of a business for the current year must be the same amount with the ending inventory reported for its previous year’s operation.
B. Taxpayer’s books of accounts (BOA)
Books of accounts record every sales, balance and other financial invoices issued to a taxpayer. Information listed down on a taxpayer’s BOA should also coincide with those listed in the tax return forms.
4. Filing the tax return or paying the tax in the wrong BIR office
This may sound absurd, but yes, this actually happens. While the BIR is the only legal tax agency, you as the taxpayer should only pay at the specific BIR office where you registered. Otherwise, it will automatically result to a surcharge equivalent to 25% of the tax payment due.
5. Filing after the deadline
For every taxpayer, besides his birthday and other significant dates, April 15 is a date to remember. It is after all the tax deadline, and yet, many still miss it. Failing to file the income tax return within the prescribed period automatically draws a 25% surcharge. The taxpayer will also be imposed with an interest on the unpaid amount.
Missing the deadline is probably the most common mistake. What’s the simplest solution? Don’t wait for the deadline and file earlier than April 15th!
Such above-mentioned list of common tax-payment mistakes does not actually need the complex science of accounting and taxes in order to be made right. In fact, it only takes a THOROUGH REVIEW PROCESS. When understanding these matters gets too complicated, however, perhaps it’s time to hire a reputable firm in Davao City that offers tax services and other necessary advices.
To put you further away from any possible charges, you should abide by the following 10 COMMANDMENTS TO AVOID BIR TAX PENALTIES:
1. Before starting actual operation, finish your business’ registration process.
2. Display everything that are necessary to be displayed (COR, Ask for Receipt poster, Annual Registration Form).
3. Pay and file your ITR on time.
4. Avoid tax evasion.
5. Keep, preserve, and make authenticated copies of important records and forms.
6. Be truthful with any information you write in your BOA.
7. Do not keep two or more sets of records of BOA.
8. Do not use fake or falsified Revenue Official Receipts, Letters of Authority, and other forms.
9. Do not fail to issue receipts to your customers or clients.
10. Try to avoid the 5 common mistakes listed above.
Accounting firms which offer tax services in Davao are always there to assist if any of the above mentioned information you still find vaguely defined. Just remember: abiding by the regulations set by the BIR is still the first and the most certain way in order to operate a smooth-running business.