MANILA, Philippines – Year-end tax compliance is often seen as a routine obligation, but for businesses and individual taxpayers, it plays a crucial role in ensuring accurate reporting, avoiding penalties, and minimizing audit risks. As 2025 ends, taxpayers are encouraged to review their records early and prepare for the key requirements due in the first quarter of 2026.

Why year-end tax compliance matters?

Year-end compliance goes beyond simply filing tax returns. It involves reconciling income, expenses, payroll, and taxes withheld throughout the year to ensure that all figures are accurate and consistent. Addressing these tasks before year-end helps reduce the risk of penalties, prevents discrepancies that could trigger audits, and makes the preparation of annual income tax returns significantly smoother.

Key payroll and withholding obligations to remember

Employers and taxpayers should pay close attention to annual payroll and withholding requirements, particularly the submission of alphalists and certificates to employees and the Bureau of Internal Revenue (BIR).

Employees must receive their BIR Form 2316, or Certificate of Compensation Payment and Tax Withheld, on or before January 31, 2026. Employers, meanwhile, are required to submit copies of Form 2316 to the BIR or their respective Revenue District Office by February 28, 2026.

The BIR Form 1604-C, which summarizes taxes withheld on compensation along with the alphalist of employees, is due on January 31, 2026. For payments such as professional fees and rentals, these are generally subject to expanded withholding taxes (EWT) rather than final withholding tax (FWT), and should be reported through BIR Form 1604-F, also due January 31, 2026. Meanwhile, BIR Form 1604-E, covering creditable or expanded withholding taxes and accompanied by the alphalist of payees, is due on March 1, 2026.

It is essential that payroll records, withholding tax returns, and alphalists are fully reconciled. Any mismatch between amounts reported and taxes actually remitted during the year may result in penalties or assessments.

Books of accounts: a year-end requirement

Properly maintained books of accounts remain a cornerstone of tax compliance. Whether manual, loose-leaf, or computerized, books must be complete and updated. These records support the figures declared in tax returns and help avoid issues should the BIR review or audit a taxpayer’s filings.

Other year-end preparations taxpayers should not overlook

Aside from payroll and books, businesses should prepare an annual inventory list, particularly if they hold stocks or merchandise, and reconcile it with their accounting records. Sales, purchases, and withholding schedules should be reviewed for accuracy, while supporting documents—such as receipts, invoices, and withholding certificates—should be properly organized and readily accessible.

Payroll data, including 13th-month pay and other benefits, must also be verified against what was reported in Forms 2316 and 1604-C to ensure consistency across all filings.

Local compliance requirements

Tax compliance does not end with national taxes. Businesses are also required to renew local permits, pay local business taxes, and submit city or municipal reports, which are generally due in January 2026. Failing to meet these local requirements can result in penalties or delays in business operations.

Preparing for the annual income tax return

Completing year-end compliance tasks early lays the groundwork for accurate annual income tax returns. Calendar-year taxpayers typically file their annual returns and audited financial statements by April 15, 2026. Proper preparation minimizes last-minute stress, accounting adjustments, reduces errors, and lowers the risk of penalties or amendments.

Tips to make year-end compliance easier

Taxpayers are advised to reconcile books, payroll records, and alphalists before the year ends. Keeping all supporting documents well-organized and easy to retrieve can save time during filing season. Seeking professional guidance can also help identify gaps or discrepancies early, allowing issues to be addressed before deadlines approach.

In tax compliance, preparation is not just a best practice, it is a safeguard against unnecessary risks and costs. – Rappler.com

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