How to File BIR Form 1701 (Individual Income Tax)

Who Must File BIR Form 1701, and Which Version You Need

BIR Form 1701, the Annual Income Tax Return for Individuals (Including Mixed Income Earners), Estates, and Trusts, is the year-end reconciliation of everything a self-employed person or professional owes the Bureau of Internal Revenue for a given taxable year. It is filed by resident citizens, resident aliens, and non-resident citizens who earn income from a trade, business, or the practice of a profession — sole proprietors, freelancers, consultants, doctors, lawyers, real estate agents, and similar taxpayers.

Not every self-employed individual uses the same annual form, however. The BIR actually has three related returns, and picking the wrong one is a common filing mistake:

• BIR Form 1700 is for individuals earning purely compensation income from one or more employers.
• BIR Form 1701A is for individuals earning income purely from business or the practice of a profession, whether they use the graduated tax table with itemized deductions or Optional Standard Deduction (OSD), or have opted into the 8% flat tax.
• BIR Form 1701 is for mixed income earners (compensation plus business or professional income), taxpayers using itemized deductions who do not qualify for 1701A, and estates and trusts.

If you hold a regular job and also run a side business or freelance practice, or if you are purely self-employed but claim itemized deductions with a mix of income sources that fall outside 1701A's coverage, Form 1701 is the return you file. It is submitted annually regardless of whether you already filed quarterly returns during the year, because the quarterly filings are only running estimates that get reconciled on the annual form.

Graduated Rates or the 8% Flat Tax: Choosing Your Regime

Self-employed individuals and professionals whose gross sales, receipts, and other non-operating income do not exceed the ₱3,000,000 VAT threshold have a choice between two tax regimes, and the decision materially affects how much tax is due.

Graduated income tax rates. Under the current table (in effect since January 1, 2023, under the TRAIN Law), annual taxable income is taxed as follows:

• Not over ₱250,000 — 0%
• Over ₱250,000 up to ₱400,000 — 15% of the excess over ₱250,000
• Over ₱400,000 up to ₱800,000 — ₱22,500 + 20% of the excess over ₱400,000
• Over ₱800,000 up to ₱2,000,000 — ₱102,500 + 25% of the excess over ₱800,000
• Over ₱2,000,000 up to ₱8,000,000 — ₱402,500 + 30% of the excess over ₱2,000,000
• Over ₱8,000,000 — ₱2,202,500 + 35% of the excess over ₱8,000,000

Taxpayers under the graduated table may deduct either itemized business expenses or a flat OSD of 40% of gross sales or receipts, and — if not VAT-registered — are also generally subject to the 3% percentage tax (BIR Form 2551Q) on gross sales or receipts, reinstated to that rate since July 1, 2023.

The 8% flat tax option. As an alternative, a qualifying taxpayer may elect to pay 8% of gross sales or receipts and other non-operating income in excess of ₱250,000, in lieu of both the graduated income tax and the 3% percentage tax. This option is not available to VAT-registered taxpayers, those subject to other percentage taxes under the Tax Code, or partners in a general professional partnership. For mixed income earners, the ₱250,000 deduction is not applied a second time against business income, since it is already accounted for through compensation; the 8% rate applies to the full gross receipts from the trade or profession.

The election is made on the first quarterly return of the taxable year (Form 1701Q) or, for new businesses, at the time of registration. Once chosen, it is irrevocable for that taxable year, though a taxpayer may switch regimes at the start of the following year.

Worked Example: Computing the Tax Due

Consider a freelance graphic designer, not VAT-registered, with gross receipts of ₱1,200,000 for the year and no other income.

Option A — 8% flat tax: (₱1,200,000 − ₱250,000) × 8% = ₱950,000 × 8% = ₱76,000 total tax due, with no separate percentage tax.

Option B — Graduated rates with 40% OSD: Taxable income = ₱1,200,000 − (40% × ₱1,200,000) = ₱1,200,000 − ₱480,000 = ₱720,000. Income tax = ₱22,500 + 20% × (₱720,000 − ₱400,000) = ₱22,500 + ₱64,000 = ₱86,500. Add 3% percentage tax on gross receipts: 3% × ₱1,200,000 = ₱36,000. Combined tax = ₱86,500 + ₱36,000 = ₱122,500.

In this scenario, the 8% option results in substantially lower tax. The comparison changes at higher income levels or when deductible expenses are large relative to gross receipts, so it is worth recomputing both ways each year before electing on the first quarter return — the choice cannot be reversed once made for that year.

Deadlines, Attachments, and How to File

BIR Form 1701 for a given taxable year is due on or before April 15 of the following year, or the next business day if that date falls on a weekend or holiday. This is separate from the quarterly income tax returns (1701Q), which are generally due on or before May 15 for the first quarter, August 15 for the second quarter, and November 15 for the third quarter; taxes paid quarterly are credited against the annual tax computed on the 1701.

Required attachments typically include the Financial Statements (audited if gross sales, receipts, or output exceed ₱3,000,000 for the year), a Statement of Management's Responsibility, and BIR Form 2307 or a Summary Alphalist of Withholding Tax (SAWT) if you are claiming creditable withholding tax against the tax due.

Under the Ease of Paying Taxes (EOPT) Act (Republic Act No. 11976), returns may be filed electronically through eBIRForms or eFPS, and payment may be made through any Authorized Agent Bank, Revenue Collection Officer, or online payment channel, regardless of which Revenue District Office the taxpayer is registered under — filing and paying "anywhere" is now the standard rather than the exception. The EOPT Act also removed the ₱500 annual registration fee (previously paid via BIR Form 0605) starting in 2024, so that cost no longer applies.

In Kontabler, every sales invoice and recorded expense throughout the year is automatically tallied into running totals for gross income and allowable deductions, so when April approaches, the figures needed for the 1701 — and the quarterly 1701Q filings that lead up to it — are already summarized instead of requiring a manual re-tally of the year's books.

Penalties for Late or Incorrect Filing

Filing or paying after the deadline exposes a taxpayer to a 25% surcharge on the basic tax due under Section 248 of the Tax Code, plus interest currently computed at 12% per annum under Section 249, and a compromise penalty that varies with the amount of tax involved. A more serious surcharge of 50% applies in cases of willful neglect to file or a fraudulent return. Because these amounts compound the longer a return remains unfiled, it is generally far cheaper to file on time even with an estimated computation and later amend the return, than to wait until the figures are perfectly final.

Rates, thresholds, and deadlines described here reflect rules in effect as of 2026; because percentage tax rates, the VAT threshold, and similar figures have changed by legislation before, always reconfirm current numbers on the official BIR website or with an accredited tax practitioner before filing.