BIG Game Changer of BIR TAX Audit
One of the heart-attack moments of each taxpayer is the day the BIR has garnished your bank accounts. It is the day when you cannot withdraw your hard-earned cash from the bank. This is possible due to collections of tax assessments due from the taxpayers subject to audit investigation through the issuance of the Letter of Authority (LOA). In this case, the tax assessments against the taxpayers have become Final, Executory, and Demandable (“FED” for the acronym).
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Under RMO 45-2019, the tax assessments can become FED due to the taxpayer’s failure to do ANY of the following:
- File valid protest within the prescribed period of thirty (30) days from its receipt. For this purpose, a valid protest is one which is filed within the time prescribed and it contains the factual and/or legal basis of the protest;
- Submit the necessary documents to support request for re-investigation within sixty (60) days from the date of filing a valid protest;
- Appeal the decision of the BIR either to the Commissioner’s Office or Court of Tax Appeals within thirty (30) days from receipt of the decision denying the protest;
- File a motion for reconsideration the decision of the Court favorable to the BIR or appeal the same to higher court within the prescribed time for its filing.
- Update the BIR on the change of address or cancellation of business registration resulting to the non-receipt of the assessment notice that was delivered or served to the address as indicated in the Registration database in the Integrated Tax System.
Based on the foregoing, RMO 35-2019 removes the issuance of a Preliminary Collection Letter (PCL) and Final Notice Before Seizure (FNBS) to delinquent taxpayers. The Warrant of Distraint and/or Levy (WDL) and Warrant of Garnishment (WG) shall be immediately issued for collections enforcement of tax assessments due from taxpayers.
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In view of the above discussions, the BIR issued RMC 43-2023 on March 2023. In the said memorandum, the BIR clarified that the taxpayers shall furnish a copy of the appeal against the Final Decision on Disputed Assessment (FDDA) to the Chief of the Assessment Division for regional cases, among others. This must be done within five (5) days from the date of filing the appeal with the office of the Commissioner of Internal Revenue (CIR) or the Court of Tax Appeals (CTA). However, the BIR miserably failed to explain or discuss the rationale of this new policy of furnishing copies of the appeal to other BIR offices.
Applying the foregoing no. 3 of RMO 45-2019, if the taxpayer failed to appeal the FDDA either with the CIR or CTA within thirty (30) days from the date of its receipt, the FDDA shall become FED. Thus, the BIR will proceed to collection remedies for tax assessments due from the taxpayers. Unfortunately, there are instances when the taxpayers filed an appeal on time either with the CIR or CTA but the BIR will still proceed to the collection remedies even if the tax assessments are NOT yet FED. Note that only Unpaid Assessments which become FED are subject to collections remedies of the BIR under RMO 35-2019 and 45-2019.
So, what happened? This is a GRAVE MALPRACTICE of other BIR offices, Assessment Division and Collection Divisions for regional cases, for example. These BIR offices are NOT informed that the taxpayers have filed on time an appeal against the FDDA either with the CIR or CTA. Accordingly, they merely PRESUMED that the taxpayers failed to file an appeal on time with the CIR or CTA, resulting in collection remedies of the tax assessments by the issuance of WDL and/or WG. This malpractice of the BIR will result in additional tax collections but violate taxpayers’ rights to due process. This is the reason why the CIR issued RMC 43-2023 to INFORM the other BIR offices that the FDDA issued to taxpayers is NOT yet FED; hence, not subject to collection remedies of the BIR.
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In practice, long before the issuance of this RMC 43-2023, we are furnishing copies of the appeal against the FDDA to the different BIR regional offices. This includes offices of the Regional Director, Legal Division, Collection Division, Assessment Division, and Department of Finance Secretary. We knew the fact of malpractice of these BIR offices by collecting tax assessments from taxpayers even if not yet FED. With the issuance of the RMC 43-2023, the BIR now clearly mandated the taxpayers to inform the other BIR offices of the timely appeal to avoid the dangerous practice of collecting tax assessments that are not yet FED.
We recommend not only furnishing copies of an appeal to the office of Chief of Assessment Divisions, in the case of regional cases, but also to other major BIR divisions as discussed earlier. Do not forget to furnish a copy to the office of the Department of Finance Secretary, a government office above the BIR to inform the CIR that the tax assessments in the FDDA are not yet FED.
Finally, there is another effective way to inform other BIR offices of the timely filing of an appeal with the CIR or CTA. That is the use of a covering letter of your copy furnish.
If you want to learn more about how to make this effective covering letter and other topics of handling your own BIR LOA, including how to make your appeal or protest against the BIR tax assessments, we would like to invite you to invest in your education through our RWB Book. Our RWB Book BIR Tax Audit for MSMEs has exclusive ATC online tutorial videos to discuss and explain its contents. And it has actual BIR assessments from LOA to FDDA and protest letters. Please click the photo below to learn more about the details of this RWB Book.
