...plus unnecessary long trips to the government agency, travel expenses, and hours of waiting.
I was naive. I was not aware. You know what they say, "Ignorance of the law excuses no one", and I learned this the hard way.
Read more to learn my story.
Here is a timeline of events on how my bad yet insightful experience had been.
December 7, 2016 (Wednesday) - Once I was a newbie applicant of Bureau of Internal Revenue (BIR), along with my friend, who was a newbie as well. Days before, we planned to apply for a Tax Identification Number (TIN), so we went to Counter 17. The staff gave us copies of form 1901 along with the corresponding checklist of requirements because we said we were self-employed professionals. We then had time to prepare our requirements. When we came back, we diligently filled up the forms, gathered the necessary documents, and submitted them to the Officer of the Day to evaluate. We were then asked to get priority numbers, and then the waiting begins.
It took about 2-3 hours to wait for our numbers to be called because apparently, the staff took their lunch at 11 am without leaving anyone to take charge the counter. When we were finally called, we were then given another set of requirements to comply, which is for the Authority to Print (ATP) for the receipts and the Books of Accounts.
This is where the problem begins.
It was weird that we weren't immediately scheduled for a tax briefing at that moment. It was weird that they automatically required us to comply with receipts and books of accounts without telling us the deadline for compliance.
As citizens who were ignorant of the whole process of this government agency, we didn't know what else to ask, or what else to supposedly get from them that they may have forgotten, so we walked out the office right after we were done. I even remembered asking them upon submission if everything is already okay, and they said "yes", so I thought everything was already fine. After that, when we still had time in the afternoon, I and my friend proceeded to pay at the authorized banks for our registration fee and buy our books of accounts. Within the week, we even took our time to canvas authorized printers for our receipts.
Since I and my friend weren't aware of the deadlines, months came when we didn't go back to BIR. Both of us didn't comply with the receipts and books of accounts immediately since we didn't have enough funds for everything at the moment. The time came when my friend already got employed last February, so I got no one else to accompany me anymore on the dreaded long trip to the government agency.
April 10, 2017 (Monday) - Having an idea that April is when Income Tax Returns (ITRs) should be filed, I thought of revisiting BIR once again to check on what really my status is since after my visit last December 7, 2016, I didn't go back to comply with the remaining requirements, simply because I had an inexistent business and I didn't have any transactions in the first place.
I was then reprimanded because of the requirements I didn't comply and the returns I didn't file. A penalty of PHP 4,000 was even imposed on me because it had already been 4 months that I wasn't able to file the monthly return I didn't even have an inkling about, along with PHP 115 pesos for the dry seal of my supposed Certificate of Registration (COR). Because of all that, I was crying very hard since I was also so stressed that time thinking that I haven't even earned anything yet so it would be very hard to recover my funds, but I had no choice but to go to Divisoria to withdraw the savings that I saved hard for from my allowances when I was still in my undergrad years.
When I came back to BIR with PHP 4,200 cash on hand (I can't withdraw PHP 115 out of an ATM), I was still crying, but I have to man up and ask the staff for some help because I was already very confused. I didn't understand why the government had to be so heartless, even for someone like me who still can't even pay them anything because I literally had zero earnings in the first place.
Seeing that I was already trying to hold back my tears, the staff then referred me to their assistant head, maybe after knowing that they can't handle me anymore, so in the end, she was the one I talked to about my predicament.
Well, it was good that she was nice to talk to. She made me understand more about the process, and she even made considerations, because apparently I was supposed to pay a huge amount of PHP 11,000 since a penalty for non-compliance of receipts of PHP 7,000 was also being accounted for, but she decided to relieve me from the liability. I was then told to go to a certain staff to have me scheduled for a tax briefing (Really?! When I already needed to pay penalties which I could've avoided if I was only scheduled right after my registration last December? Oh well.). After that, I was then told to go to another staff to have my open cases computed, but such to my relief, "no open cases" was noted on the paper.
So yes, it seemed like I cried for nothing because it turned out that I didn't have to pay anything, so I deposited my money back to my account, but weeks later, it was different.
April 18, 2017 (Tuesday) - This was my schedule for the tax briefing. I was finally enlightened with the process of BIR. We were being lectured about deadlines of filing returns and whatnot, and how we actually had the power to update our registration accordingly. Right then and there, I opted to try and merge my business with my realty, but seeing that it wasn't really feasible, I've thought long and hard for some other solution to end my problems. I once again asked Counter 17 on how I could update my registration, so they gave me the form 1905, and this is where I found the light.
It turned out that, I can actually cease the business that has been linked with my TIN registration, which was the one that was giving me problems ever since when all I wanted supposedly was a TIN because I couldn't even manage my own sole proprietorship. Heck, I didn't even own one in the first place because I was joining realties all along during these past months.
April 19, 2017 (Wednesday) - This was when I finally got my Certificate of Registration (COR) and I finally saw how it looks like. Yay! I then thought that my requirements will finally be complete for the cessation of the linked business to my TIN registration, but I was also thinking about continuing with my long overdue requirements, so I thought long and hard about everything during the night, especially that the day after is another deadline in filing for a monthly percentage income tax return.
I studied everything and I even prepared two (2) sets of letters for whichever update I may pursue, whether it is to consolidate my info with the current realty I'm in or to cease my registration, so you can say that I am finally prepared, and that means it's all up to my mind to decide when I wake up the day after.
April 20, 2017 (Thursday) - This was the day that I finally decided to ...cease my registration. Yes, this is like suicide, for an inexistent sole proprietorship, that is. This was a long process, or I guess it just felt long since I took into account the hours I spent traveling back and forth BIR and Divisoria. Well, BIR doesn't have a nearby authorized bank or a reliable food chain, which meant I have to travel about two (2) hours, 1 hour going to Divisoria just so I can eat and pay at an authorized bank for my open cases and another hour or less to BIR.
So yes, in the end, I was required to pay my open cases. But what are these open cases I kept talking about?
Well, as how I understand it, open cases are penalties you get when you fail to file your income tax returns on time. As for the monthly percentage income tax returns, we get charged PHP 1,000 each month for the failure to file, so that's indeed a lot of money if you stay ignorant for how many months, or even years.
According to their computerized system, there were three (3) taxable months that I wasn't able to file, so that was a penalty of PHP 1,000 each for me, for a total of PHP 3,000, which was why I had no choice but to pay it at an authorized bank. Well, I'm just thankful that it wasn't PHP 11,000 though, or else flashbacks from the 10th will haunt me again.
Anyway, since I can't cry any longer, I remained calm and accepted my fate that I would lose thousands from my bank account once again. As a way of positive thinking, I tried to condition my mind that I will eventually recover the money soon when I can finally earn.
Going back to BIR, I had my payments verified at Counter 6 and 7, then after that, I went to the Officer of the Day to have my closure form signed, and lastly to the Revenue District Officer.
But well, the process isn't done yet since I am still required to go back one week after, so I'm hoping for the best. I am not sure if this will relieve me altogether of all the unnecessary obligations for a zero-income earner like me, but from the looks of it, it will, and I am hoping that I'm right. I also hope that I won't be required to pay any more fees because I cannot afford any heartaches of having to get money from my hard-earned savings again. Huhu.
Since I didn't want to give my parents a headache anymore, I didn't tell them straight up about this one ...yet. We've been having a lot of expenditures in this month alone, so I didn't want to bother them anymore.
To sum it up, next week, here are the things I will soon find out:
To sum it up, next week, here are the things I will soon find out:
- Will ceasing my registration mean that I will only pay for the open cases or are there any other hidden fees (i.e. penalties for not paying the Certificate of Registration on time and for not complying with the receipts and books of accounts)?
- If ever I am required to pay for other penalties, my total payment would amount to PHP 12,000 all in all (PHP 3,000 open cases + PHP 7,000 non-compliance of receipts + PHP 2,000 non-payment of COR). Lord please, I hope this will not be the case. UPDATE 04/30/17: I had just visited BIR last Thursday (April 27, 2017) and I was told that I'm only required to pay the open cases and nothing else. So I'm assuming that if I did not cease my registration, I could have been paying more, so I guess this is a good move for me to stop it. I have yet to follow up my application within 3 business days, so I'll text them this May 3.
- Will the final process be hassle-free or will the BIR employees be as confusing as ever once again?
So yes, that's how I lost PHP 3,000 from ignorance (though I hope it won't escalate into something more, God forbid). But actually, BIR does have a bit of fault on this.
I could've avoided all of the hassles if they only scheduled us for a briefing immediately upon registration, just before giving us requirements for Authority to Print and Books of Accounts, or they could've at least gave us a complete printed guide on filing deadlines along with the accomplished form 1901 that time. Also, they should've emphasized the specifications of what we were applying, because I didn't even know that I was already registered on their system despite not having completed the other requirements. It sucks how just one mistake on their part would make everyone like me suffer. They can't even give me considerations despite their lapses because apparently, no one is above the law.
Even though they did have a mistake, I also have to admit that I had my own fault, too.
My penalties would have been less or none at all if I immediately went back at most a week or a month after my supposedly incomplete registration. I should've clarified things or asked them the real status of my registration as soon as possible. Also, I should've at least did my part in researching deeper about my obligations before even starting my registration process. Lastly, I shouldn't have been too dependent on my peers in going to far away places, and I should've been more daring despite my parents telling me that I need to have someone to accompany me in going to an unchartered territory.
Here are the things you should take note of before registering with BIR:
Here are the things you should take note of before registering with BIR:
- If you are a self-employed professional but don't have sure earnings as of the moment, please re-think your plan in registering with BIR. If you tell them that you're such, they will bombard you with requirements that you won't even need until you'll actually have a transaction such as receipts and books of accounts, which will cost you some money and effort. They will think that you will be registering your own business, even though in some instances, you don't even plan to have one in the first place because you could just be an agent or you're just joining a freelance company such as a realty. They will even ask you to comply with obligations even though your business is actually inexistent. You don't want to end up like me, do you?
- If you are unemployed, there is actually a way to get a TIN, but only for E.O. 98 purposes, meaning that the purpose of the TIN should be for transacting with government offices. BIR may not let you secure a TIN if you don't have a valid purpose for it. You can read an article about it here.
- BIR will not have mercy on you if you have accumulated open cases, even though your business was inexistent or if you literally have zero earnings. They will give you penalties worth thousands without you knowing beforehand, so once again, please be sure of your decision in registering.
Oh well, so much for the lost PHP 3,000. But on the bright side, at least I didn't have it worse. At least I went back to BIR before my accumulated open cases reached more than PHP 10,000, so I'm still thankful, though once again, we'll see what happens next week.
Recently, I have read on the internet about experiences that are similar to mine, and you can read them here: click and click! At least, I can say that I'm not the only one, and there are many others who have worse cases than me as well.
This experience might be painful, but I have learned a lot. I'll be sure to keep these learnings in mind and apply them soon so that I won't suffer once again.