5 Lessons in Filing and Paying BIR Penalties

We always get clients who ask us to file their tax returns past the due date, especially the Annual Income Tax Return since this is one of the documents required in showing how much you’ve earned for a certain year. Mostly, we wince at the thought of penalty, interest, and surcharge (all separate amounts and categories by the way) even when it will not come from our own pockets but from the clients’ hard-earned money. That all too familiar feeling of “wala na ngang kinita, magkaka-penalty pa” – been there done that. That is where our empathy and support for our fellow business owners come from, a long time ago we were walking in their shoes.

“Wala na ngang kinita, magkaka-penalty pa.”

Two of our staff went to a nearby province for some client related tasks. One went to the local government office and the other – the relatively inexperienced between the two when it comes to dealing with government institutions, went to a BIR Revenue District Office (RDO) to supposedly save time since it was a long way going back and forth to that location. It was just a 2019 Income Tax Return (ITR) with no income tax due, and two delayed Audited Financial Statements, for the year of 2019 and 2020, which should just amount to Php 3,000 in total (Php 1,000 for each delayed filing). Lo and behold, the BIR have assessed and stamped the BIR forms with a whopping total of Php 35,000!

They couldn’t come back anymore to the BIR office since it’s almost 5pm and the team decided to do better by the next day. With a setback of more than 30 grand, the two returned to the same BIR office determined to appeal and have the penalties reassessed with a copy of the provision of memorandum from the BIR website on how much the actual penalty should be for the specific tax returns and attachments we were filing. Without any surprise, but not after asking for additional requirements from our team which they gladly complied just to get it over with, the Php 35,000 penalty was reduced to a reasonable Php 3,000. It was a long and panic-inducing 24 hours for the two and the whole team who were waiting for every update they could send back. Crisis averted.

Lessons learned:

  1. Make sure to file and pay taxes on or before the deadline!
  2. If you weren’t able to do number 1, then know your tax returns and corresponding penalties when trying to settle open cases (unfiled/unpaid tax returns) with the BIR.
  3. If you can’t do 1 and 2, make sure to prepare heaps of money for penalty, interest, and surcharge.
  4. Now this is the best one, if you can’t do 1, 2, 3, then just outsource these kinds of work to make your problems go away 😀 subtle plug ehem ehem
  5. Kidding aside, the last and most important lesson here is – there will be a better time for business owners and operators here in the Philippines. But now is not that time yet so the best  we could do is to look out for each other and extend a helping hand wherever and whenever you can. If we can’t be the solution, then let’s not be the problem. This is not to generalize and by no means an attack to anyone or any institution. We can only hope for a better system, the one we need but don’t have. The one we deserve. I thank you, bow.

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