Understanding BIR Audit
Event: Understanding BIR Audit, August 18, 2018
A day of learning, discovery and hope.
As a hard-working contributor to our society, the last thing you want to happen to you and your business is the deprival of your basic right – to due process.
Worry not! Divine Grace Fresco – President, ETM Tax Agent Office Inc. shares what it means to be under the seemingly complex and unnavigable straits of BIR’s audit proceedings.
Taxpayers receiving Letter of Authority (LoA or eLA) from the BIR may hold the impression of already losing the battle when it comes to paying the true and correct amount of taxes. Little did they know that it was nothing but a mere starting point for the planned audit of their books and related accounting records.
It is important to understand that any act committed against the constitution and law is void from the beginning. This means that any act performed by government workers, even in-line with their duty would be void and unenforceable when it violates the law of the land. This applies to all government workers. Thus, acts by any BIR personnel which is contrary to the Tax Code (or National Internal Revenue Code) is also void. Only a handful of taxpayers know their right and even a smaller percentage exercise and assert what is right.
Divine Grace Fresco shares her knowledge and expertise in the field of taxation
Ways to cancel a Letter of Authority
There are many ways to contest an audit even before it begins! Being able to discern the validity of the eLA served to the taxpayer/s is a must for those who will be deemed authorized by corporations or individuals to receive such decree. One way to check as mentioned by the speaker is to examine the names of the Revenue Officers (RO) given authorization by the eLA, and matching it with the servers of the eLA. An eLA served by an RO whose name is not authorized to conduct audit cannot enforce the eLA and the taxpayer has the right to either confiscate and file a complaint against the abusive RO or outright rejection of the said letter. Checking the date of the issued eLA may also yield a prescribed and unenforceable piece of paper. Unsigned eLA is not a valid eLa. These are some of the ways to really scrutinize and dissect whether an abuse of power is in play or if the taxpayer’s rights are observed by the government workers.
Tax Code (National Internal Revenue Code)
Let’s talk about the Tax Code. The church acknowledges the Bible when it comes to man’s source of truth and morality in accordance to God’s will and command. People following these teachings found in the Bible are known to be very close to the Creator and is seen to be on the right track.
The same is true for the Tax Code.
The state refers to the Tax Code when it comes to proper extinguishment of obligations by the taxpayer. The Tax Code prescribes the framework which grants the BIR and its personnel authority to collect the true and correct taxes from taxpayers. Taxpayers likewise are instructed to classify themselves accordingly to produce the best description befitting their operations to arrive at the tax scheme appropriate to the business entity. Rules and regulations released by BIR should always be based on the Tax Code, it is otherwise questionable in nature and invalid from the beginning if found in violation of the law.
Stages of BIR Audit
The BIR audit stages can be summarized into three: request for records, assessment and collection. The BIR audit starts upon the issuance of the eLA along with the checklist of requirements, instructing the taxpayer to submit a sizeable amount of documentation (both material and immaterial in audit) and related accounting records. A final report of investigation is then prepared after engaging the taxpayer in a conference to discuss the tax liability findings of the RO. A Preliminary Assessment Notice (PAN) is issued once it is determined that there is sufficient basis to assess the taxpayer for any deficiency, then after fifteen (15) days of silence from the part of the taxpayer, a Formal Letter of Demand and Final Assessment Notice (FLD/FAN) shall be issued which commands the taxpayer to make the necessary payments of the tax liabilities and applicable penalties. Collection involves the receipt of Preliminary Collection Letter (PCL), Warrant of Distraint and/or Levy and Warrant of Garnishment – this stage is the most painful one.
Stages of BIR Audit: Driving a point home
A true story: Rekindled Hope
Mr. Raymond Hernandez shared his story of despair transforming into hope. Once bullied by ROs, he revealed how learning taxation and following the Tax Code empowered him as a taxpayer and further ‘improved’ his relations with these humble government workers. This experience then gave him another purpose in life to pursue: the advocacy to help and guide other entrepreneurs in rectifying their way of contributing to society – paying the true and correct taxes.
The Understanding BIR Audit Cycle seminar was conducted last August 18, 2018 at the University Hotel , UP Diliman Campus Quezon City. For information on upcoming tax seminars, please visit ETM Tax Agent Office Events. ETM Tax Agent Office is always here to help you find the right and legal solutions to your tax problems.
Come and join us! Be more than aware – be prepared!
Come and join us! Be more than aware – be prepared!