An official sales receipt is a proof of transaction issued by a business either to a customer or other businesses. Every time a sale is made, a receipt should be issued as an official transaction record to verify the amount paid by the buyer for the product or service. Issuing receipts and collecting every single one from every transaction that you make ensures that your income and expenses are correct, valid, and legal.

Only BIR-accredited printers can print Official Receipts that you can use for your business.

Bookkeeping is a set of financial activities that involve managing your financial records.

This includes the following activities:

• Maintaining the journal records complete and updated with all transaction history.
• Using your journal records as the main source that support your declared income and allowed deductible expenses.

Only BIR-stamped Book of Accounts or journals are considered official book of financial records.

What will happen if I do not issue receipts and/or update my financial records?

Not issuing receipts or having an incomplete list of your sales, as well as your expenses may have the following consequences:

1. Clients may report the freelancer to authorities for non-issuance of official receipts.
2. Inaccurate declared income and deductible expenses when filing your taxes.
3. Reduced credibility in proving your financial records to BIR.

If these activities sound “business-y” for you, take note that self-employed individuals are also businesses. These activities are standard and part of a freelancer’s responsibility in managing your service business, and not just in filing your taxes.

Tax filing is the submission of tax forms to BIR in which you declare the amount of your income and the appropriate tax deduction according to your income bracket.

Tax filing is a responsibility of the Self-Employed individual.

All Filipino income earners must register with BIR and legally declare what type of taxpayer they are based on their source/s of income.

For example, Employed taxpayers are registered as Purely Compensation Income earners, in which the employer handles their registration with BIR using form 1902.

On the other hand, self-employed taxpayers, such as freelancers and business owners, file the BIR form 1901 and register themselves as any of the following, whichever applies:

• Sole Proprietor – individuals engaged in trading or selling goods (business owners and entrepreneurs)
• Professional – individuals engaged in performing their skills and services (freelancers, architects, lawyers, doctors, etc.)
• Mixed Income – individuals who have multiple sources of income, be it in trading, service, or employment.

There are different types of taxes. Yes, you read that right. Taxes paid by one taxpayer may vary from another depending on their range of income. For self-employed professionals, the following types of taxes are usually paid:

1. Income Tax
2. Percentage Tax
3. Value-Added Tax (if your annual gross income exceeds 3 million in Philippine pesos)

Graduated Income Tax table:

2 types of deductions under the Graduated Income Tax

1. Optional Standard Deduction (OSD) – This type of tax deduction automatically considers 40% of gross income as allowed deductions.

1. • • Allowed Deductions = Gross Sales * 0.4
     • Taxable Income = Gross Sales – Allowed Deductions
     • Tax Due = a + (b * [c – Taxable Income])
2. Itemized Deductions – This type of deduction subtracts your relevant business expenses such as food, and other operating expenses like electric and internet bills.

• • • Allowed deductions = Total receipts of business and operating expenses
    • Taxable income = Gross Sales – Allowed deductions
    • Tax Due = a + (b * [c – Taxable Income])