The Need for CPA in Filing Income Tax Return

Whenever the topic of filing income tax return comes out, the question of whether the taxpayer will need the services of a Certified Public Accountant or CPA will always be asked in web forums and actual conversations. I have already replied several times to this question in the many forums I frequent and  my answer, based on Income Tax Information at http://www.bir.gov.ph/taxinfo/tax_income.htm#21937 is as follows:

A taxpayer (i-café owner included) will need the services of a Certified Public Accountant (CPA) in preparing a documentary requirement called Account Information Form (BIR Form No. 1701-AIF) and the Certificate of an independent CPA or Audited Financial Statement if the gross quarterly sales, earnings, receipts or output of his business exceed PhP 150,000. The CPA Certificate is not required if the taxpayer will opt for the Optional Standard Deduction (OSD).

It must be noted that the CPA needs to audit and certify the taxpayer’s Financial Statement, for more financial related posts, read this guide about how to prepare a checklist for a financial audit. Usual engagement between a CPA and a taxpayer does not include the actual entry of record to books of accounts  which can be done at a lesser cost by an experienced bookkeeper or unlicensed accountant.

How many among i-café owners will need the services of a CPA this coming filing of income tax returns? I cannot say, I could only guess. If an i-café has twenty (20) units or more and the owner will declare his real income, he will need the services of a CPA unless he opts to use Optional Standard Deduction on his income tax return.

What is the basic difference between OSD which will not require a CPA and Itemized Deduction which will need a CPA if sales receipts in a quarter exceeds P150k? Usually, those who will opt for Itemized Deduction will pay an income tax lesser than those who will opt for Optional Standard Deduction. This is especially true if the gross profit of the business is lesser than fifty (50%) percent of gross sales.