Penalty for Paying the BIR Form 1701A Second Installment Late via BIR Form 0605: A Worked Example

Electing to pay your annual income tax in two installments under NIRC Section 56(A)(2) only defers half the bill — it doesn’t make that second half optional. A second installment paid after October 15 is treated as a deficiency on the unpaid half, carrying the same Section 248 surcharge and Section 249 interest that apply to any other late BIR payment, settled through BIR Form 0605. This post works through one concrete scenario to a peso-exact total.

Why does only half the tax carry late-payment exposure? #

Because the two-installment election under NIRC Section 56(A)(2) splits a single annual income tax liability into two legally distinct payment dates, a late second installment is a deficiency only on the portion still unpaid at that second deadline — the first installment, paid on time when the return was filed, is already a closed, valid payment. This site’s guide to the installment option itself — Can You Pay Your BIR Income Tax Due in Two Installments? NIRC Section 56(A)(2) Explained — covers who qualifies and the two fixed dates; this post picks up specifically at what happens in pesos when the second one is missed. A concise restatement of the underlying rule, drawn from tax-practice summaries of NIRC Section 56(A)(2) (this site could not reach a primary BIR or Official Gazette copy to re-verify the exact statutory phrasing), puts it this way:

“When a tax due is in excess of Two thousand pesos (P2,000), the tax [may be paid] in two (2) equal installments, in which case, the first installment shall be paid at the time the return is filed and the second installment on or before October 15 following the close of the calendar year.”

The scenario: ₱90,000 split, second half paid 40 days late #

A self-employed professional filing BIR Form 1701A for calendar year 2026 has ₱90,000 in annual income tax due, elects the two-installment option, and pays the first ₱45,000 on time at filing in April 2027. The second ₱45,000 installment, due October 15, 2027, isn’t actually paid until November 24, 2027 — 40 days late — via BIR Form 0605.

Step 1: the Section 248 surcharge on the unpaid installment #

NIRC Section 248 adds a 25% civil surcharge for ordinary late payment without fraud or willful neglect, computed here on the ₱45,000 still unpaid at the October 15 deadline — not on the full ₱90,000 original liability, since the first half was already settled on time.

₱45,000 × 25% = ₱11,250

Step 2: the Section 249 interest on the unpaid installment #

Section 249 interest runs at 12% per annum (double the BSP legal rate, under Revenue Regulations No. 21-2018) on the unpaid ₱45,000, prorated for the 40 days between October 15 and the actual November 24 payment date.

₱45,000 × 12% × (40 ÷ 365) = ≈ ₱592

Step 3: the RMO No. 7-2015 compromise penalty #

Separate from the surcharge and interest, RMO No. 7-2015’s Annex A schedule suggests a compromise penalty keyed to the amount of unpaid tax, offered in lieu of pursuing a Section 255 criminal referral for the late payment. With ₱45,000 unpaid, this scenario falls in the schedule’s ₱20,001–₱50,000 bracket:

This is billed and paid on a separate BIR Form 0605 from the surcharge-and-interest payment, the same two-track civil/compromise structure covered generally in BIR Late Filing Penalties: Section 248 Surcharge, Section 249 Interest, and RMO No. 7-2015 Compromise.

The full worked total #

Paying the second installment 40 days late turned a ₱45,000 obligation into roughly ₱66,842 — nearly 49% more — while the first ₱45,000 installment, paid on time, required nothing extra at all. Splitting the payment didn’t cost anything by itself; missing the second date is what did.

How to avoid this #

1. Calendar October 15 the moment the installment election is made — not as a vague “later this year” reminder, but as a specific date with the ₱45,000 (or whatever the actual second-installment amount is) already set aside.
2. Treat the second installment like any other BIR deadline, since the civil penalty structure is identical to a late return — there’s no special leniency for having already paid half on time.
3. If cash flow for October is uncertain, consider paying the full amount at filing instead. The installment option is a convenience, not an obligation — skipping it avoids the second-deadline risk entirely.
4. Pay via BIR Form 0605 referencing the original return and period as soon as the missed deadline is discovered, rather than waiting for a BIR notice, since interest keeps accruing daily until actually paid.

Frequently asked questions #

Does the late-payment penalty apply to the whole annual tax or just the unpaid installment? #

Just the unpaid installment. If the first installment was paid on time when the annual return was filed, the Section 248 surcharge and Section 249 interest on a late second installment are computed only on the remaining half still due — not on the full original tax liability.

What form do I use to pay a late second installment? #

BIR Form 0605, the BIR’s general payment form for amounts that don’t have their own dedicated return, is used to pay the second installment — referencing the original annual income tax return and period — whether paid on time by October 15 or late with surcharge and interest added.

Is there a compromise penalty on top of the surcharge and interest for a late second installment? #

Generally yes. A late second installment is still a late tax payment, so RMO No. 7-2015’s Annex A compromise-penalty schedule, keyed to the amount of tax unpaid, applies on top of the Section 248 surcharge and Section 249 interest, the same three-layer structure that applies to any other late BIR payment.

Can I still use the installment option if I expect to pay the second installment late? #

The option itself doesn’t require certainty that the second installment will be paid on time — but electing to split the payment and then paying the second half late produces the same surcharge and interest exposure as any other late payment. If cash flow for October is genuinely uncertain, paying the full amount at filing avoids this risk entirely rather than betting on being able to pay by October 15.

Does missing the second installment affect the first installment I already paid on time? #

No. The first installment, paid on time when the annual return was filed, is a completed, valid payment. Only the unpaid second installment is in deficiency, and only that portion carries surcharge, interest, and compromise penalty exposure.

Summary #

Missing the October 15 second-installment deadline under NIRC Section 56(A)(2) turns only the unpaid half of an annual income tax bill into a deficiency — in this ₱90,000 example, a ₱45,000 second installment paid 40 days late grows to roughly ₱66,842 once the 25% Section 248 surcharge, 12% Section 249 interest, and RMO No. 7-2015 compromise penalty are added, all paid via BIR Form 0605. The first installment, paid on time, is unaffected. For the installment election itself, see Can You Pay Your BIR Income Tax Due in Two Installments? NIRC Section 56(A)(2) Explained; for the general penalty framework, see BIR Late Filing Penalties: Section 248 Surcharge, Section 249 Interest, and RMO No. 7-2015 Compromise.