An overview on filing ITR

By Joshua Corcuera

This 2023, the deadline for filing and payment of the annual income tax return (AITR) for 2022 is this coming Monday, April 17, according to the Bureau of Internal Revenue (BIR). The deadline for this year is not the statutory deadline of April 15 because the said date falls on a Saturday. Despite this, it is still much better to file before the deadline to avoid any issues.

Meanwhile, Revenue Memorandum Circular (RMC) No. 32-2023 prescribed guidelines in filing AITR on the said deadline. According to the digest of the said RMC, “taxpayers may file the AITR for CY [Calendar Year] 2022 and pay the taxes due to any Authorized Agent Banks (AABs) and Revenue Collection Officers (RCOs), notwithstanding the Revenue District Office (RDO) jurisdiction, without imposition of penalties for wrong venue filing.” Other details were mentioned in the digest of RMC No. 32-2023 which can be accessed online on the official website of the BIR.

Generally speaking, though, what are the consequences of not filing an annual ITR on or before the said due date?

We all know that paying taxes is an obligation arising from law. Since the power to tax is comprehensive, unlimited, plenary, and supreme, we are all mandated to pay taxes to the government without the need of any demand. Otherwise, additional liabilities, such as surcharge and interest, would arise. Though many view taxes as an additional burden, a saying goes that “taxes are what we pay for living in a civilized society.”

Moving on, in cases of late payment of taxes, the taxpayer also has to pay interest at double the legal interest rate (currently at 12% since the legal interest rate is at 6%) and a surcharge of 25% in cases of simple neglect or 50% in cases of willful neglect or bad faith.

There is simple neglect if the taxpayer filed the return after deadline voluntarily, meaning without notice from the BIR. Meanwhile, the 50% surcharge shall be collected where there is willful neglect to file on time or the taxpayer filed only after prior notice from the BIR in writing.

The base of the surcharge rate is the basic tax or tax due. The same is true for the 12% interest which must be paid in cases of deficiency tax or delinquent tax liabilities.

To give an illustration, say that person X has an ITR for calendar year 2020 with a tax due of PhP 500,000, which, therefore, must be filed on or before April 15, 2021. X failed to file on or before the deadline but voluntarily filed without notice from the BIR on July 15, 2021. The total amount due on July 15, 2021 will be PhP 640,000.

The breakdown is as follows: (1) tax due of PhP 500,000, (2) 25% surcharge based on tax due for simple neglect amounting to PhP 125,000, and (3) interest for late filing of PhP 15,000 computed as 500,000 multiplied by 12% multiplied by 3 months over 12 months.

In the example above, assume the same facts but person X filed after notice from the BIR. This is a case of willful neglect, and the applicable surcharge rate shall be 50%. Therefore, the total amount due will be PhP 765,000 (500k + 250k + 15k).

From this example given in a taxation reviewer for the board exam for certified public accountants, we can realize that not paying taxes on time will result in heavy losses and unwanted consequences. Therefore, it is still best to avoid the rush and file accurate tax returns sooner rather than later.

This article by the author, a senior accountancy student, provides general information on taxation only. The illustrative case above emanates from a hypothetical case given in an academic material. The content provided above is not intended and should not be construed as professional advice. Therefore, such article should not be relied upon as a basis for business or other related decisions. Any reliance placed upon such article is strictly at the risk of the reader. If the reader has a concern about filing his/her annual income tax return, it is best to consult with a certified public accountant.