Now that you’re on the other side as a business owner, you will be dealing with withholding taxes again. This time around though, you cannot afford to just shrug your shoulders and ignore it.
Filing withholding taxes properly and on time is a must for business owners new and old. In this article, you’ll find out how to file withholding taxes correctly so please read on to make sure your future dealings with the Bureau of Internal Revenue (BIR) go off without a hitch.
What Is Withholding Tax on Compensation?
The Withholding Tax on Compensation is the tax deducted by an employer from an employee’s income. The amount deducted from the employee’s income is not fixed. Instead, it is based on the amount that an employee earns over a certain period.
You can check out the different tax rates as provided by the BIR in their Revised Withholding Tax Table here.
Another important thing to note about withholding taxes is that they don’t go into the pockets of the employers. In this scenario, the employers are merely acting as withholding agents on behalf of the government.
Business owners are tasked with collecting the appropriate amount of taxes from their employees and they are then obligated to remit those payments to the BIR. By enlisting the help of employers in collecting taxes, the government hopes to cut down spending on collection efforts while also reducing the amount of delinquencies.
How to File the Withholding Tax on Compensation Monthly ?
It’s important to always be aware of tax payment deadlines if you’re a business owner. Remember that ignorance of the law won’t absolve you from the penalties.
When it comes to taxes, the penalties on late payments can be onerous. Late payments can result in a 25% surcharge, 6% annual interest and a compromise penalty imposed by the BIR. You want to avoid those costly penalties as much as possible.
To avoid those penalties, make sure to remember the following:
Additional Forms to File
While BIR Form 1601-C is due monthly, there are additional forms you have download, and fill out at the end of the year. These include the following:
Form 1604-C must be submitted to the BIR only but Form 2316 must be given to both the BIR and to your employees.
Filing your own taxes can be troublesome if you’re still getting used to life as a business owner. Allow us at ACCOUNTAHOLICSPH to offer our expertise. Contact us today to learn about the different ways in which we can help!