BIR Form 1701 vs 1701A vs 1701MS: Complete Guide for Filipino Self-Employed and Small Business Owners
Many small business owners and freelancers in the Philippines get confused when filing their BIR annual income tax return. Learn the key differences between BIR Forms 1701, 1701A, and 1701MS to avoid delays and penalties.
What you'll learn in this BIR Form 1701 vs 1701A vs 1701MS guide
This complete guide to BIR Forms 1701, 1701A, and 1701MS explains who should file each form, key differences, filing methods, and common mistakes to avoid for Filipino self-employed individuals and small business owners.
For related tax filing guides, see our BIR Form 1701Q Filing Guide, BIR Form 1702Q Filing Guide, BIR Tax Deadlines 2026 Guide, and BIR Penalties 2026 Guide.
Understanding BIR Annual Income Tax Returns
Many small business owners and freelancers in the Philippines get confused when filing their BIR annual income tax return. One common question is the difference between BIR Form 1701 vs 1701A vs 1701MS.
All three forms are used to report annual income tax for individuals, but they apply to different types of taxpayers and income situations. Using the wrong form can cause delays, incorrect tax computation, or even penalties.
In this guide, we will explain in simple terms what BIR Forms 1701, 1701A, and 1701MS are, who should file each form, the key differences between them, how and when to file, and common mistakes to avoid.
⏰ Important Deadline: For most taxpayers, the annual filing deadline is April 15 of the following year.
What is BIR Form 1701?
BIR Form 1701 is the Annual Income Tax Return for self-employed individuals, professionals, estates, and trusts who use the graduated income tax rates with itemized deductions.
This form is typically used by taxpayers with more complex financial records.
Who Should File BIR Form 1701
You should file BIR Form 1701 if you are:
-
A sole proprietor
-
A self-employed professional (lawyer, doctor, consultant, etc.)
-
A freelancer
-
A mixed income earner (employee + business income)
-
Using itemized deductions instead of OSD
-
Earning over ₱3,000,000 annually (subject to VAT)
💡 In short: 1701 is for taxpayers who want to deduct actual expenses from their income.
When to File
The deadline is April 15 of the following year.
Example:
- • Income earned in 2025
- • Filing deadline is April 15, 2026
Quarterly income taxes (1701Q) are filed earlier during the year.
Example Scenario
Maria runs a small online clothing store.
Business expenses:
- • Inventory: ₱700,000
- • Rent: ₱120,000
- • Utilities: ₱60,000
Maria files BIR Form 1701 because she wants to deduct her actual business expenses.
How to File BIR 1701
If you want to know how to file BIR 1701, the usual methods are:
-
1
eBIRForms
Download BIR eBIRForms software, fill up Form 1701, submit electronically
-
2
eFPS (for large taxpayers)
Electronic Filing and Payment System
-
3
Authorized Agent Banks (AAB)
Pay taxes after filing electronically
Required documents may include: Summary of sales, expense records, quarterly tax returns, withholding tax credits
Because of the documentation required, Form 1701 is the most detailed among the three forms.
What is BIR Form 1701A?
BIR Form 1701A is a simplified annual income tax return for self-employed individuals earning below ₱3,000,000.
It was created to make tax filing easier for small businesses and freelancers.
Who Qualifies for 1701A
You can use BIR Form 1701A if you are:
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Self-employed
-
A freelancer
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A professional
-
Running a small business
-
Earning below ₱3,000,000 annually
⚠️ Important: You must also choose one of these tax methods:
- • 8% income tax rate, OR
- • Graduated tax rate with Optional Standard Deduction (OSD)
💡 Key Difference: This is where the 1701A vs 1701 difference becomes important.
Why Many Freelancers Prefer 1701A
Freelancers often prefer 1701A because it requires less documentation.
You can choose:
Option 1: 8% Income Tax Rate
Instead of calculating expenses, you pay:
8% of gross income exceeding ₱250,000
Example
Simple and easy.
Option 2: Optional Standard Deduction (OSD)
OSD allows you to deduct 40% of gross income automatically.
Example
You then apply graduated tax rates.
This approach avoids tracking every expense.
What is BIR Form 1701MS?
BIR Form 1701MS is for mixed income earners.
"MS" stands for Mixed Income — Simplified.
These are taxpayers who earn both compensation income (salary) and income from business or profession.
Who Should File BIR 1701MS
If you are asking who should file BIR 1701MS, it applies to:
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Employees with side businesses
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Employees who also freelance
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Professionals with salary + private practice
⚠️ Important rule: The business income must qualify for 1701A rules (below ₱3M).
Example Scenario
Juan works as a software developer.
He also does freelance web development:
Because he has both employment and freelance income, he is a mixed income earner.
Juan must file BIR Form 1701MS.
⚠️ Important rule: The ₱250,000 exemption applies only to compensation income, not the business portion.
📊 Comparison Table: 1701 vs 1701A vs 1701MS
| Feature | BIR Form 1701 | BIR Form 1701A | BIR Form 1701MS |
|---|---|---|---|
| Who files it | Self-employed or mixed income | Self-employed only | Mixed income earners |
| Income type | Business or profession | Business or profession | Salary + business |
| Deduction method | Itemized deductions | 8% or OSD | 8% or OSD |
| Income limit | No limit | Up to ₱3M | Business income up to ₱3M |
| Complexity | High | Low | Medium |
| Best for | Businesses with large expenses | Freelancers, small business | Employees with side gigs |
Step-by-Step: How to Know Which Form You Should File
Choosing the correct form can be simple if you follow these steps.
Are You Purely Self-Employed?
If yes, you will likely use:
- • 1701, or
- • 1701A
If no, continue to Step 3.
Did You Choose 8% or Graduated Rates?
If you chose 8% tax rate, use:
1701A
If you use graduated tax with OSD, use:
1701A
If you want itemized deductions, use:
1701
Do You Have Compensation Income?
If you receive salary from an employer, you are a mixed income earner.
Use:
BIR Form 1701MS
Did You Choose OSD or Itemized?
⚠️ Common Filing Mistakes to Avoid
Many small businesses make avoidable tax mistakes. Here are the most common ones.
Choosing the Wrong Form
Example:
A freelancer earning ₱1M annually files 1701 instead of 1701A, making the process more complicated than necessary.
Forgetting to Elect the 8% Tax Rate
The 8% option must be selected early in the tax year.
If you forget to indicate it, the BIR may assume you are using graduated tax rates.
Mixing Up OSD and Itemized Deductions
You cannot claim both.
Choose only one:
- • OSD (40% automatic deduction)
- • Itemized deductions (actual expenses)
Missing the April 15 Deadline
Late filing can lead to:
- • 25% surcharge
- • 12% annual interest
- • compromise penalties
Always file early.
Not Reconciling Quarterly Payments
If you already paid taxes during the year using 1701Q, you must subtract those payments from your annual tax due.
Failure to do this can cause overpayment or underpayment.
Conclusion
Understanding the difference between BIR Form 1701 vs 1701A vs 1701MS helps small business owners file taxes correctly and avoid unnecessary stress.
In simple terms:
-
1701 – for self-employed using itemized deductions
-
1701A – for small businesses using 8% tax or OSD
-
1701MS – for mixed income earners with salary and business income
Choosing the correct form makes filing your BIR annual income tax return Philippines much easier. It also prevents penalties and ensures your records remain compliant with BIR regulations.
The best practice is to prepare early, track your income carefully, and keep organized records throughout the year.
Frequently Asked Questions
1. Can freelancers use BIR Form 1701A?
Yes. Most freelancers earning below ₱3,000,000 annually can use 1701A, especially if they choose the 8% tax rate.
2. Can mixed income earners use the 8% tax rate?
Yes, but only for the business portion of their income. Salary income is still taxed using graduated tax rates.
3. What happens if I file the wrong BIR form?
You may need to amend your tax return, and in some cases pay penalties or interest.
4. Do I still need to file if my employer already withheld taxes?
If you have only compensation income, your employer may qualify you for substituted filing. But if you have business or freelance income, you must still file your own return.
5. Can I switch between OSD and itemized deductions?
Yes, but the choice must be made at the start of the tax year and is generally fixed for that year.