How to Handle BIR Tax Assessments

While it is indisputable that taxes are vital to our country’s growth, one of the most unpleasant experiences is to receive a large BIR tax assessment. Those experiencing it for the first time may be filled with fear and panic. Indeed, a BIR tax assessment is a serious matter that cannot be ignored and one you must know more of.

The key to effective handling of tax assessments is knowledge of the process and the various legal ways you can cope. Although it is recommended that you obtain the services of a tax professional, it would be helpful if you already have a basic idea of the BIR’s procedures. Below are some of the basic terms you should be knowledgeable about.

Types Of Audit Notices

• Letter of Authority (LA). This is the usual letter given to start BIR audit. The Letter of Authority is an official document that authorizes BIR personnel to examine a Taxpayer’s book of accounts and other records in order to know the Taxpayer’s correct tax liabilities.

• Memorandum of Assignment. It is either the assignment of your case to another revenue officer or the reversion of the case to your original revenue officer.

• Letter Notice. This is issued if there is a suspected under-declaration of sales and/or over-declaration of purchases.

• Mission Order (e.g. Tax Mapping, Tax Surveillance and Operation Kandado). This is issued for surveillance or inventory-taking activities.

Assessment Process

• Subpoena Duces Tecum. This is a Latin phrase which means “to bring with you under penalty of punishment.” In this case, you are mandated to present the documents cited in the order.

• Informal Conference Stage. A written notice informing the taxpayer that an audit of his books of account and accounting records indicates that additional taxes or deficiency assessments have to be paid. The taxpayer is given an opportunity to present his defense in a meeting or he may agree to the finding and pay the required amounts and penalties.

• Jeopardy Assessment. An assessment made by an authorized Revenue Officer without a complete or partial audit.

• Pre-Assessment Notice (PAN). A letter issued to indicate the findings and assessment after review has been made.

• Final Assessment Notice (FAN). The final assessment of the BIR. A failure to file a valid protest against a FAN shall render it final.

Other Terms

• Court of Tax Appeals. A special court that deals exclusively with tax cases. If you do not agree with the assessment or ruling of the BIR, you can then take your case to this court.

• Prescription period. This is the legal deadline for an action to be taken; otherwise it is no longer valid.

• Waiver of the Statute of Limitations. When the taxpayer or his/her authorized representative agrees to extend the prescription period.

Handling BIR audits and assessments requires professional expertise if you are to maximize your legal rights. Still, it would be to your advantage if you have a basic knowledge of the process.

To know more about this topic, BusinessCoach, Inc., a leading business seminar provider, conducts a seminar entitled, “Managing BIR Tax Assessments.” Contact (02) 727-5628, (02) 727-8860, (0915) 205-0133 or visit www.businesscoachphil.com for details.

Click here to view details of the seminar: Managing BIR Tax Assessments »

*Originally published by the Manila Bulletin. C-4, Sunday, March 10, 2013. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.