The Income Tax Of An I-Café Owner
Now is the season of computing, filing and paying the annual income tax derived from compensation and/or business of every citizen including an i-café owner. Many questions are being asked in various forums regarding the subject. In this blog article, we will try to answer some of them.
The discussion we have here are for the i-café owners who singly owned the registered business. The document used for the purpose isBIR Form 1701 – Annual Income Tax Return for Self-Employed, Professionals, Estates and Trusts. It is presumed that those who will use this form had dutifully filed their quarterly income tax returns using BIR Form 1701Q.
The first question that I often see in forums is whether a Certified Public Accountant’s signature is needed in filing BIR Form 1701. I say, only those whose gross annual income exceeds P600,000 are required to avail of the services of a CPA in preparing their Financial Statement which is part of the BIR Form 1701.
The next question is usually how much to they have to pay as income tax. The simple answer is that the income tax of a self-employed i-café owner will range from five to thirty-two (5 – 32%) percent of his net income, a figure which will be arrived at after deducting the allowable personal exemptions and additional deductions allowed by law.
One very important decision that an individual self-employed taxpayer has to make in filing his annual income tax returm is the method of deduction he will use. He can opt for Optional Standard Deduction (OSD) of 40% of his gross income which is very simple and everybody must find no difficulty in using. Or he can go for “itemized deductions” which is a bit complex and may require a competent bookkeeper if not an accountant to accomplish his tax return.
The two (2) methods of deducting the expenses incurred by a café owner in the conduct of his business is amply covered by Revenue Regulations 16-2008. This and the discussions at Newly Registered sa BIR at ULOP should get you clarified on which to use when computing you income tax.