Office Audit Procedure in Revenue Regional Offices

April 25, 1977 REVENUE ADMINISTRATIVE ORDER NO. 04-77 SUBJECT : Office Audit Procedure in Revenue Regional Offices TO : All Internal Revenue Officers, Employees and Others Concerned In order to insure uniformity of action in the investigation and reporting of small tax cases in the Revenue Regional Offices and to tap the maximum potential from these cases, there is hereby promulgated an Office Audit Procedure for the guidance and compliance of all those concerned. This procedure shall be followed in the investigation and reporting of income and business tax returns which are subject to office audit. I. Purpose The purpose of the creation of an Office Audit Section in the Assessment Branch of every Revenue Regional Office is to have a unit that would assist in the processing of tax returns and take charge of the investigation of small cases whose tax potential is not commensurate with the time and efforts exerted and costs incurred in a field investigation. Such cases may very well be settled by correspondence or office interview and at the same time can become an effective vehicle for the Bureau's tax information and education program. II. Organizational Set-Up The Office Audit Section shall be under the direct supervision and control of the Chief, Assessment Branch of the Regional Office. It shall be headed by a Chief of Section, to be assisted by an Assistant Chief of Section and such other officials that would be needed to effectively run the Section. It shall be composed of examiners divided into groups of at least eight but not more than ten examiners, with group supervisor in-charge of each group. Whenever possible, the necessary clerical support shall be given each group. The group supervisor shall be selected from among the most ranking examiners in the Section, taking into consideration their educational qualification, experience, technical knowledge and training. III. Territorial Limits In order not to cause inconvenience and unnecessary expense for transportation on the part of taxpayers, office audit investigation shall be limited only to the towns and cities indicated opposite each Revenue Regional Office as follows: Revenue Region No. Town and/or Cities 1 Baguio City 2 Tuguegarao 3A San Fernando, Sto. Tomas 3B Valenzuela 4A Manila 4B Quezon City and the cities and municipalities comprising Metro Manila area except Manila and Valenzuela 4C San Pablo City 5 Legaspi and Daraga 6A Iloilo City 6B Bacolod City, Talisay and Murcia 7 Cebu City, Talisay and Mandawe 8 Tacloban City 9 Zamboanga City 10A Cagayan de Oro City 10B Butuan City 11A Cotabato City 11B Davao City However, when circumstances so warrant, the Regional Director may recommend to the Commissioner the extension of the territorial limits of office audit investigation in his Revenue Region. IV. Scope of Work The Section shall examine individual income and business tax returns which have been classified for office audit in accordance with the following: Individual Income Tax Returns In Revenue Regions In All Other Showing 3A, 4A, 4B, 6A Revenue Regions 6B, 7 and 11B 1. Salary income with or without W-2, and commission income, claiming travelling, representation All All and entertainment expenses which appear to be excessive or the total of which, amounts to more than 30% of gross income. 2. Business and professional with gross receipts with gross receipts income of not more than of not more than P100,000 P50,000 3. Farming Income with gross receipts with gross receipts of not more than of not more than P50,000 P20,000 4. Gains & Losses from sales with an aggregate with an aggregate or exchange of capital and gross sales of not gross sales of not non-capital assets more than P50,000 more than P20,000 (for each schedule) (for each schedule) 5. Rental Income with gross receipts with gross receipts of not more than of not more than P50,000 P20,000 V. Reclassification of Returns If the classification of returns as presented in Paragraph IV would result in too many returns for office audit and disproportionately less number of returns for field audit, depending on the number of examiners to perform each function, the Regional Director is given the discretion to readjust the classification of returns to equitably apportion the returns between the field and office audit examiners. Such readjustment shall, however, be subject to the approval of the Commissioner. cdta VI. Transmittal and Sorting of Returns The Chief of the Assessment Branch shall periodically transmit office audit returns, subject to the approval of the Regional Director, to the Chief of the Office Audit Section. Upon receipt of the returns, the same shall be sorted into the following categories: A. Correspondence cases Under this classification will fall the simple cases which can be settled by correspondence, like those requiring additional information on one or two items and which the taxpayers may provide by correspondence. Those returns segregated during the pre-audit of "Reviewed Returns" because the exemptions and/or some deductions claimed need to be explained or supported shall also come under this classification. B. Interview cases These are the returns of taxpayers engaged in small businesses or in a limited practice of profession which necessitates the audit of their books of accounts and other supporting papers in the verification of their tax liabilities. VII. Procedure of Investigation A. Correspondence Cases 1. Mathematical Verification Since the returns have not been pre-audited, (except the returns classified as "Reviewed") all the returns selected as correspondence cases should first be verified for mathematical accuracy. 2. Audit and Classification Check Sheet The Assistant Chief of the Section, who may be assisted by the group supervisors, shall accomplish for each return classified as a correspondence case, an Audit and Classification Check Sheet (Annex "A") indicating the form letter to be used, as well as the items which need clarification, further information, explanation, or verification. 3. Assignment The returns with their respective Check Sheets shall then be arranged in numerical order on the basis of their assessment numbers and divided among the group supervisors or examiners in case there are no supervisors. The Chief of the Section shall see to it that as much as possible, an equal number of cases is assigned to each group or examiner. 4. Survey Cases The group supervisor shall go over the returns and if in his opinion further communication with the taxpayer is not necessary, the case may be closed as a "survey before assignment" case. The Survey Report (Annex "B") shall be accomplished and the reason or reasons for recommending that the case be closed on survey should be briefly but clearly stated. 5. Preparation of Correspondence and Examination Record Card As soon as the returns are ready for office audit, the following shall be prepared immediately: (1) the Form Letter (Annex "C") prepared in triplicate enumerating therein the information or documents indicated in the Audit and Classification Check Sheet; and (2) the Examination Record Card (Annex "D") After both the Form Letter and the Examination Record Card have been properly accomplished, the group supervisor shall schedule the letters to be released each day. The letters which are not yet to be released shall be maintained in a strictly alphabetical file with the complete set of the Examination Record Card attached to each return. The cases with the letters for release shall be processed in the following manner: a. Examination Record Card A card (original) to Assessment Branch for its control file. B card (duplicate) to the General Index Alpha File of the Office Audit Section C card (triplicate) to the Group Supervisor's file D card (quadruplicate) to be retained with the case file b. Correspondence After the group supervisor has checked the correctness of the letter, the complete case file shall be forwarded through the usual channels, to the Assistant Regional Director for signature. Due to the volume of these cases, the Assistant Director, may, however, designate the Chief or the Assistant Chief of the Assessment Branch or the Chief or Assistant Chief of the Office Audit Section to sign the same for him or in his behalf. After signature, the case file shall be returned to the Group Supervisor, who shall send the originals of the letters to taxpayers to the Administrative Branch for mailing. The duplicate shall be filed by the dates of the letters and the triplicates shall remain attached to the case files. The duplicates of letters released on a single date shall be kept in one folder by each group supervisor and forwarded with the second notice (Annex "E") for signature in the same manner that the original correspondence was processed. The second notice shall be prepared in triplicate and sent fifteen (15) days after the date the reply to the first letter was expected. The same procedure shall be followed with respect to the third or final notice (Annex "F"). The final notice shall likewise be prepared in triplicate and sent ten (10) days after the date set in the second notice. The triplicate copies of the second and final notices should also be attached to the case file. 6. Processing of Replies . All replies to letters released under this procedure shall be screened by the Group Supervisor and segregated into three groups: a. Those that will not affect the tax liability as shown in the return. The return and all copies of the correspondence and the examination record cards, shall be stamped "NO CHANGE" and initialed by the Group Supervisor and Chief of Section. The letter (Annex "G") informing the taxpayer of the results of the office audit of his return shall be prepared, attached to the case file and forwarded for review and processing to the Chief, Assessment Branch. The same shall be forwarded to the Assistant Regional Director for approval and signature. After the letter is signed the file shall be returned to the Assessment Branch, where the examination record card will be completed and detached from the case file. The Assessment Branch shall also indicate in their control card the final disposition of every case, keeping a separate file for closed cases. The disposition of each card shall be made in accordance with the instructions on the use of the Examination Record Card set forth in Revenue Memorandum Circular No. 22-64. The case file shall then be forwarded to the Administrative Branch for release of the original of the letter informing the taxpayer of the result of the investigation of his return. The case file shall then be processed as a closed case. b. Those that will involve adjustment and result in a deficiency assessment The case shall be referred to the examiners for the preparation of the audit sheet stating clearly therein the basis for the deficiency assessment. The case file shall then be processed in the same manner outlined in sub-paragraph a above. The case shall, however, not be considered closed until the deficiency tax is paid. c. Those cases which cannot be closed and may have to be converted into an interview case or where another set of correspondence is necessary In either case, the procedure outlined for such cases shall be followed. 7. Where no Replies are Received Thirty (30) days after the final notice has been sent and no reply is received, efforts should be exerted to contact the taxpayer by telephone whenever possible. If inspite of telephone follow-ups the taxpayer has not responded, or where the taxpayer cannot be contacted thru the telephone, the procedure prescribed for the same situation under Section VII paragraph B-8 of this Revenue Administrative Order shall be followed. B. Interview Cases 1. Sorting The Chief of the Office Audit Section shall sort the returns into: a. returns with purely salary, dividend and other fixed or determinable income. b. returns with purely professional income. c. returns with purely business income. (1) Segregate the returns of those subject to percentage taxes from those whose businesses are subject only to the graduated fixed tax. (2) When a taxpayer is subject to percentage taxes, the Group Supervisor shall immediately requisition the percentage tax returns from the Assessment Branch. d. Returns showing only gains or losses from sales or exchanges of shares of stocks or gains and losses from sales or exchanges of capital assets and property other than capital assets. cd e. Returns showing income from Schedule 1 and/or 6 and anyone or more than one of Schedules 2, 3 and 5. 2. The returns shall be equitably divided among the groups, taking care that each group, as much as possible, shall receive equal number of returns of each of the above mentioned categories. 3. Preparation of Office Audit Classification Check Sheets Upon receipt by the Supervisor of the returns allotted to his group, he shall go over them one by one and shall attach to each return an audit classification check sheet (Annex "A") indicating therein the items to be verified and examined. He may be assisted by the experienced and knowledgeable examiners in his group. 4. Survey Cases The procedure on correspondence cases shall apply to interview cases which may be closed as a "survey before assignment" case. 5. Preparation of Correspondence and Examination Record Card . a. The Examination Record Card and the appropriate form letter (Annex "H") shall then be prepared in accordance with the instructions in the Audit Classification Check Sheet. b. The letter and the Examination Record Card prepared shall then be processed in the same manner as correspondence cases. The letter attached to the return, shall be forwarded to the Assistant Regional Director for signature thru the regular channels. For a more systematic processing of these cases, the returns with the letters shall be forwarded for signature in batches of twenty cases per batch. Every batch shall be accompanied by a transmittal sheet indicating therein the name of the taxpayer, the assessment number and the name of the supervisor. After the letter is released, the Group Supervisor shall arrange the same files in alphabetical sequence. Care should be taken by the Supervisor so that only enough letters would be released for any one appointment date that his group can attend to without keeping many taxpayers waiting. A reasonable number should be given as an allowance for those who cannot make the appointment on the date set. Previous experience on the matter should be the guide in deciding on the number of letters to be released for a single appointment date. The second notice (Annex "I") shall be sent fifteen (15) days after the appointment date and the third notice (Annex "J") five (5) days after the appointment date set in the second notice. 6. Assignment of Cases . The cases shall be assigned to the examiner when the taxpayer comes in with his records. As much as possible, the case should be settled in one interview. If on any day all the examiners in the group are busy with a taxpayer and other taxpayers are waiting, the Group Supervisor may conduct the interview. Since the returns of taxpayers engaged in the business falling under the jurisdiction of the Office Audit Section are limited to those with gross sales or receipts of not more than P100,000.00 IN THE CASE OF CLASS A REGIONS AND P50,000.00 IN THE CASE OF CLASS B REGIONS, only one examiner may be assigned to verify both income and business taxes as an exception to Revenue Memorandum Order No. 57-75. 7. Where the taxpayer does not appear Where the taxpayer does not appear after three letters have been sent, the taxpayer should be contacted by telephone whenever possible. 8. Where follow-up by telephone calls have not produced any result or where taxpayers have no listed telephone numbers, examiners in the Office Audit Section may personally call on the taxpayers in accordance with the following procedure: a. Every Group Supervisor shall prepare a list of taxpayers who have not responded to the third or final notice and telephone follow-ups to the Chief, Office Audit Section every month. The list shall indicate the address indicated on the return as well as other possible addresses where taxpayers may be contacted, like the place of employment, business address, etc. b. For a more systematic follow-up, the Chief, Office Audit Section shall collate the lists submitted by the Supervisors, grouping together taxpayers whose addresses are contiguous or are within the same block or district. He shall assign the list of taxpayers to the Group Supervisor, by district or sections of the town or city. The Group Supervisors shall in turn assign examiners who shall call on the taxpayers by blocks or by streets as he thinks would produce the best results. c. The Group Supervisor shall submit a daily schedule of the examiners in his group authorized to make personal call-ups. Personal call-ups shall be scheduled only during the afternoons. At least half of the members of the group shall always be in the office with either the supervisor or the Assistant Supervisor to attend to taxpayers who may come in response to letters sent to them. d. An itinerary of each examiner should be submitted on the form provided for the purpose, Annex "M". e. In order to prevent unauthorized personal contacts with taxpayers, the examiner shall be issued an Authorization For Personal Follow Up (Annex "K") when he checks on taxpayers who have not responded to notices sent to them. f. The examiner shall render a weekly report on the personal call-ups made by him on the attached form, Annex "N". This report shall be rendered in duplicate, the original to be compiled by the Chief, Office Audit Section and the duplicate shall be kept on file by the Supervisors. The Chief of the Section shall evaluate these reports, for the purpose of determining further action on these cases. g. The examiner shall personally contact only taxpayers who were assigned to him by his Group Supervisor. h. The examiner shall never conduct an investigation in the taxpayer's premises, unless authorized by the Regional Director (See paragraph VII B 10). He may however, receive the books of accounts and other records for purposes of office audit. In such cases an Acknowledgment Receipt (Annex "L" BIR Form 19.14) for said records should be issued to the taxpayer. i. Where the taxpayers have transferred from the addresses stated on the return and their new addresses cannot be determined by the examiner after referring to all available records in the office, and after consulting the new occupants or neighbors in the stated address, the examiner shall make a report to his Supervisor stating therein the efforts he exerted and the records he referred to, to locate the subject taxpayer. The Supervisor shall then forward the report to the Chief, Office Audit Section. Whenever practical and if in the judgment of the Chief, Office Audit Section, additional efforts to locate the taxpayer is warranted, he may assign an examiner to refer to the records of the Data Processing Center, the City Hall, or the Municipal Treasurer, or the Bureau of Immigration, or other entities where a taxpayer's present address may be found. The Chief, Office Audit Section shall see to it that the personnel assigned for locating taxpayers with new or fictitious addresses, render daily itineraries in the form marked as Annex "O". A weekly report on his activities shall also be submitted in the form marked as Annex "P". 9. When letters are returned for the reason that the taxpayer is no longer at the address indicated, or there is no such address, this fact shall be confirmed by a test checking process. 10. Where the taxpayer requests that the examination be made in his office or place of business, the Regional Director may grant such request or he may direct that the case be referred to the proper field office, depending upon the merits of the request. 11. Interview Procedure At the start of the Interview the examiner should introduce himself and in a courteous and tactful manner, proceed with the examination of the return, discouraging any form of conversation which will be alien to the business at hand. The chapters in the Manual of Audit Techniques dealing with the examination of non-business returns and business returns will be very helpful in the investigation of returns classified for office audit. While the taxpayer is in for interview, the examiner should find time to verify the mathematical computations in the return so that any error in computation can be explained. Note taking and the preparation of working papers during the interview should be the standard practice. There is no necessity for preparing a transcript of all ledger accounts. The only transcripts of ledger accounts necessary are the Cash, Sales, Purchases, Receivable, Payable and Capital Accounts and only when business returns are being examined. An analysis of the income and expense accounts which are indicated in the check sheets will be more useful for purposes of review and evaluation of the quality of work performed in each case. An analysis of the income and expense accounts which are indicated in the check sheets will be more useful for purposes of review and evaluation of the quality of work performed in each case. Efforts shall be exerted to complete the examination in one interview. The importance of note taking during the interview cannot be over-emphasized. Everything pertinent and material to the case must be written so that any examiner may continue the work on a case by just reading the notes taken during a previous interview without asking the taxpayer all over again questions propounded by the first examiner. 12. Taxpayer not agreeable to proposed deficiency assessment Where the taxpayer does not agree with the findings and the recommendations of the examiner and the Group Supervisor, an informal conference shall be conducted by the Chief, Office Audit Section. Whether or not the taxpayer agrees with the final determination in the informal conference conducted, the Group Supervisor shall prepare a memorandum report on the results of the informal conference, which shall form part of the case file to be forwarded for processing to the Assessment Branch. The examiner, shall however prepare his report in accordance with the findings during the conference. VIII. Preparation of Reports A. The preparation of an office audit report (Annex "Q") is much simpler than that for field audit case. All information is available in the working papers prepared during the interview and only the adjustments which will give rise to a deficiency assessment would be shown in the report form. A "No discrepancy" statement on the report form itself in applicable cases would be sufficient. B. Working Papers The working papers should include all notes taken during the interview, the ledger accounts required above and analysis of accounts pertinent to the case. Enclosed are samples (Schedule I to XXI) of what should be included in the working papers. These samples are only illustrative. The examiner may adopt or design other working papers which will effectively explain the matter under audit and which will be reasonably adequate to support conclusions made in the report. IX. Letter of Confirmation Where a taxpayer requests for a Letter of Confirmation, one may be prepared in the form attached as Annex "R". This Letter of Confirmation which shall be prepared by the Chief, Office Audit Section for the signature of the Chief, Assessment Branch shall be issued only upon submission of the report of investigation. The Chief, Office Audit Section shall be the custodian of the blank Letters of Confirmation. Where a taxpayer desires to pay the deficiency tax liability found due upon investigation immediately upon completion of the investigation to avoid the accrual of interest, he may be allowed to do so after the issuance of the Letter of Confirmation. The Authority to Issue Revenue Tax Receipt (ATIRTR) shall be prepared for the signature of the Chief, Assessment Branch or of the Chief, Office Audit Section, if authorized by the former official. X. Termination Letter Where a taxpayer had paid the deficiency tax based upon the report of the examiner before the same was finally approved, the taxpayer shall be informed of the final action on his tax case through a letter attached as Annex "S". This letter shall be prepared in the Assessment Branch and attached to the case file which shall be forwarded to the proper official for approval of the report and signature of the letter, in accordance with the delineation of authority embodied in Revenue Memorandum Order No. 65-75, dated November 28, 1975. XI. Substitution Any reference in this Order to Group Supervisor or group shall be substituted by the Assistant Chief, Office Audit Section for the Group Supervisor and examiner for the group where the Office Audit Section does not have enough examiners to be divided into groups. XII. Repealing Clause The provisions of the Manual on Audit and Investigation Procedure, Field Circular No. V-136 and Revenue Memorandum Order No. 16-72 which are inconsistent herewith are hereby repealed. XIII. Effectivity The provisions of this Revenue Administrative Order are effective immediately. aisadc EFREN I. PLANA Acting Commissioner of Internal Revenue TAN P4519-F2828-A-8 ANNEX A FOR BUSINESS TAX REQUIREMENTS : I. Privilege Taxes ______ Segregation of Sales under different schedules ______ Official receipts of privilege tax payments for the year under review ______ Official receipts of privilege tax payments for the current year if the business is subject to the graduated rates. II. Percentage Taxes A. Manufacturer's Sales Tax ______ Description of articles manufactured and raw materials used Schedule ______ ______ Statement of Cost of Goods Manufactured and sold for the year under review and the previous year ______ Determination of Raw Materials deductible in Work in-Process and Finished Goods inventories beginning and ending, Schedule ______ ______ Computation of correct sales taxes due or still payable ______ Four quarterly percentage tax returns for the year under review and their corresponding official receipts of payment B. Contractor's tax and Percentage Tax on Compensation ______ Kind of services rendered or nature of business transactions ______ Cash analysis of actual gross receipts received subject to tax ______ Computation of correct percentage taxes due or still payable ______ Four quarterly percentage tax returns for the year under review and their corresponding official receipts of payment C. Advance Sales Tax ______ Articles imported and date of arrival ______ All importation costs paid or incurred before release from custom's custody ______ Computation of correct advance sales taxes due or still payable ______ Official receipts evidencing payment of advance sales tax. INSTRUCTIONS TO EXAMINERS: _____________________________________________________ _____________________________________________________ ANNEX "B" Republic of the Philippines Department of Finance BUREAU OF INTERNAL REVENUE Regional Office No. _____ Assessment Branch Office Audit Section SURVEY BEFORE ASSIGNMENT Name of Taxpayer ________________________________ Assessment No. ________ Address of Taxpayer ___________________________________________________ ________________ (Date) The Assistant Regional Director _______________________ A survey before assignment of the return filed by the above-named taxpayer for the year ________ indicates that an audit would not result in a material change in his tax liability. The conclusion was arrived at because of the following reasons: ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ It is, therefore, recommended that the return showing a net income of P _________ be accepted as filed, after the following compromise penalties have been suggested to and accepted and paid by the taxpayer: Compromise penalty for violation of Rev. Reg. V-1 P_______ Compromise penalty for violation of Rev. Reg. V-13 P_______ Others P_______ Total P_______ ________________________ Group Supervisor CONCURRED IN: ____________________________ Chief, Office Audit Section APPROVAL RECOMMENDED: APPROVED: ____________________________ ____________________________ Chief, Assessment Branch Assistant Regional Director ANNEX "C" Republic of the Philippines Department of Finance BUREAU OF INTERNAL REVENUE Revenue Region No. _____ Assessment Branch Office Audit Section ____________________ _________________ OAS _______________ CC Date __________________ _____________________ _____________________ _____________________ Sir/Madam : In connection with the routine verification of your income tax return for the year _________, information in addition to that furnished therein is necessary. In order that the examination may be completed as soon as possible, please furnish this Office with the following: You are requested to send the above items to this Office at the address indicated above within fifteen (15) days from receipt of this letter. cdta If you prefer to supply the information in person, you may come to this Office at ________________, between the hours of 8:30 a.m. to 4:30 p.m., Monday through Friday. If you do so, please bring this letter with you. Very truly yours, ___________________________ Assistant Regional Director In Reply Refer To: ______________________ ANNEX "E" Republic of the Philippines Department of Finance BUREAU OF INTERNAL REVENUE Revenue Region No. _____ Assessment Branch Office Audit Section ____________________ Date _______________ SECOND NOTICE _____________________ _____________________ _____________________ Sir/Madam : A letter was previously written to you requesting the following additional information which are needed in the correct determination of your income tax liability for the year _____. As of this date, we have neither received the information, nor a reply. In order to expedite the examination of your return, you are requested to furnish the desired information within fifteen (15) days from the date of this letter. In the event that you wish to come in person, you may call at this Office between the hours of 8:30 a.m. and 4:30 p.m., Monday through Friday. Further action on your return will be withheld for a period of fifteen (15) days from the date of this letter. Very truly yours, _____________________ Assistant Regional Director In Reply Refer To: ____________________ Dates of Previous Letter: ____________________ Original Notice Number: OAS _____________ CC ANNEX "F" Republic of the Philippines Department of Finance BUREAU OF INTERNAL REVENUE Revenue Region No. _____ Assessment Branch Office Audit Section ________________ Date _______________ THIRD NOTICE _____________________ _____________________ _____________________ Sir/Madam : Two letters were previously sent to you requesting certain information needed in the correct determination of your tax liabilities for the year ______. As of this date, we have not heard from you. If this Office does not hear from you within ten (10) days from the date of this letter, your tax liabilities shall be assessed on the basis of the information available in your returns. Very truly yours, _____________________ Assistant Regional Director In Reply Refer To: ____________________ Dates of Previous Letters: ____________________ ____________________ Original Notice Number: OAS _____________ CC ANNEX "G" Republic of the Philippines Department of Finance BUREAU OF INTERNAL REVENUE Regional Office No. _____ ____________________ _________________ _____________________ _____________________ _____________________ Sir/Madam : Please be informed that upon routine verification of your income tax return for 19_____, no discrepancy was found as regards the gross income you reported and the deductions and exemptions claimed herein. Accordingly, no deficiency income tax is found due from you. In view thereof, your case is considered closed and terminated. Very truly yours, _____________________ Assistant Regional Director ANNEX "H" Republic of the Philippines Department of Finance BUREAU OF INTERNAL REVENUE Regional Office No. _____ Assessment Branch Office Audit Section ____________________ OAS _______________ Date _______________ _____________________ _____________________ _____________________ Sir/Madam : Your income and business tax returns for the year ______ are now the subject of a routine examination. Information in addition to that furnished with the return is necessary in the verification of your reported tax liability. In order that the examination may be completed as promptly as possible, please come to this Office at the address indicated above on _____________________ between the hours of 8:30 a.m. 4:30 p.m. Please bring with you the records enumerated hereunder: If you are unable to appear on the date set, please notify this Office by telephone or by letter, so that a more convenient appointment may be arranged. aisadc Very truly yours, _____________________ Assistant Regional Director In Reply Refer To: _______________________ Telephone Nos. ___________________________ PLEASE BRING THIS NOTICE WITH YOU. ANNEX "I" Republic of the Philippines Department of Finance BUREAU OF INTERNAL REVENUE Revenue Region No. _____ Assessment Branch Office Audit Section ____________________ Date _______________ SECOND NOTICE _____________________ _____________________ _____________________ Sir/Madam : A letter was previously sent to you requesting you to come to this Office on _________________________ with the records enumerated hereunder, which are necessary in the verification of your reported income tax liability for the year shown above: Since you were unable to appear on the first appointment date, you are requested to come to this Office on ____________________________ between the hours of 8:30 a.m. and 4:30 p.m. If the date specified in this letter would not be convenient for you, please notify this Office by telephone or by letter of the date when you would be able to call at this office. Further action on your case will be withheld for a period of ten (10) days from the date indicated in the next preceding paragraph. Very truly yours, _____________________ Assistant Regional Director In Reply Refer To: ____________________ Date of Previous Letter: ____________________ Telephone Nos.: _____________ Original Notice Number: OAS ________________ ANNEX "J" Republic of the Philippines Department of Finance BUREAU OF INTERNAL REVENUE Revenue Region No. _____ Assessment Branch Office Audit Section ____________________ Date _______________ THIRD NOTICE _____________________ _____________________ _____________________ Sir/Madam : Two letters were previously sent to you requesting you to come to this Office with certain records necessary in the routine examination of your income tax return for the year _______. Since you were unable to appear on the dates specified in our other letters, a final appointment date is set for you on ____________________, between the hours of 8:30 a.m. and 4:30 p.m. If this office does not hear from you or should you fail to call at this Office on the specified date, your tax liabilities shall be determined on the basis of the information available in your return. cdti Very truly yours, _____________________ Assistant Regional Director In Reply Refer To: ____________________ Tel. Nos. ____________ Original Notice Number: Dates of Previous Letters: OAS ________________ _____________________ _____________________ ANNEX "K" Revenue Region No. ______ Assessment Branch AUTHORIZATION FOR PERSONAL FOLLOW-UP ___________________ Date Revenue Examiner ________________________________, whose signature appears below is hereby authorized to contact the following taxpayers at their respective addresses or place/s of business for the purpose of requesting compliance with letters of request previously sent (copies of which are available for inspection): Name of Taxpayers Address In case you with to surrender your books of accounts and other records, you shall be given an acknowledgment receipt. cdta Please give him your full cooperation. __________________________ Assistant Regional Director _________________ Signature of Examiner ANNEX "L" B.I.R Form No. 19.14 (Revised May, 1974) B NO 015601 _______________________________, 19______ RECEIVED from _________________________________________________ at __________________________________, _______________________________ (Street Number/Barrio) (Municipality) _________________________________________, the following INTERNAL (Province) REVENUE TAX RECEIPTS, BOOKS OF ACCOUNTS, RECORDS and/or DOCUMENTS: __________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ The above-listed documents or items were taken by me pending payment/investigation of a case against said taxpayer for violation of the National Internal Revenue Code. __________________________ Name of Internal Revenue Officer __________________________ (Designation/Title) __________________________ Examiner's Code Number ANNEX "Q" BUREAU OF INTERNAL REVENUE Revenue Region No. ________ ASSESSMENT BRANCH EXAMINER'S OFFICE AUDIT REPORT (Income) _________________ Date 1. Name of Taxpayer ________________ 1(a) T.A.N. ____________________ 2. Address ________________________ 2(a) Assessment No. _______________ 3. Citizenship _______________________ 4. Kind of business __________________ 4(a) Principal Product ________________ 5. Authority No. _____ 5(a) Date ____ 5(b) Confirmation No. ___ 5(c) Date ____ 6. Taxable year ending ______________ 6(a) Prescription Date ____________ 7. Gross profit percentage on sales per return ___% 7(a) Net income to capital _____ 8. Previous examination: Period covered _______ 8(a) Date Reported _______ 8(b ) Examiner _______ 9. Accounting method (actual or accrual) _________________________________ 10. Disposal: ( ) Agreed ( ) Survey 10 (a) Mans hours spent ___________ ( ) Non-agreed ( ) Others 10 (b) Examiner's monthly salary ____ 11. Enclosures: ______________________________________________________ AUDIT RESULTS (a) Per investigation (b) Per Review 12. Net income per return P ______________ P _____________ 13. Add: Total Discrepancies per attached BIR Form 1717 A-2 14. Net income per investigation ______________ _______________ 15. Less: Exemptions ______________ _______________ 16. Net taxable income ______________ _______________ 17. Tax due ______________ _______________ 18. Less: Tax due per return and/or assessed ______________ _______________ 19. Deficiency Tax ______________ _______________ 20. Surcharge _________% ______________ _______________ 21. Interest from ________ to ________ ______________ _______________ 22. Total amount due (refundable) ______________ _______________ 23. Compromises: Nature of Violation ___________________ ______________ _______________ ___________________ ______________ _______________ ___________________ ______________ _______________ 24. Amount paid as per O.R. No. _______ Date ______ 25. Additional Residence Tax Class "B" I hereby certify that I have examined the books of accounts and/or pertinent records of the taxpayer in accordance with the prescribed investigation procedures and prepared this report in accordance with the reporting requirements officially prescribed and, to the best of my knowledge, with present laws and regulations. I also certify that the working papers attached hereto are in my own handwriting. cdt ________________________________ Examiner (Code No.) I hereby certify that I have actually supervised the investigation of this tax case and have duly reviewed this report and found it to be in accordance with the prescribed audit, investigation and reporting procedures and requirements. ____________________ _____________________ Date Supervisor CONCURRED IN: _____________________________ Chief , Office Audit Section APPROVAL RECOMMENDED: APPROVED: ________________________ ______________________ Chief, Assessment Branch Asst. Revenue Regional Dir. NOTE: All blanks should be properly filled. Indicate non-applicability of any item on the space provided. ANNEX "R" Republic of the Philippines Department of Finance BUREAU OF INTERNAL REVENUE Regional Office No. _____ Assessment Branch LETTER OF CONFIRMATION ___________________ _____________________ _____________________ _____________________ Sir/Madam : With reference to the routine verification of your income and business tax returns for the year 19_____, please be informed that the corresponding report(s) have been submitted by Examiner _____________________________________________. The findings as reported will be subject to review and approval by higher authorities. You will be informed of the final action taken thereon. Very truly yours, _____________________ Chief, Assessment Branch Letter of Authority Number: OAS _________________ ANNEX "S" Republic of the Philippines Department of Finance BUREAU OF INTERNAL REVENUE Revenue Region No. _____ ____________________ _____________________ _____________________ _____________________ _____________________ Sir/Madam : In connection with the routine verification of your income and/or business tax liabilities for the year _______, please be informed that the report of investigation submitted by Examiner __________________ was duly approved. The records show that you paid the following amounts as deficiency tax/es upon the conclusion of the audit of your returns: Basic Official Kind of Tax Tax due Surcharge Interest Total Receipt No. In view thereof, this case is now considered closed. Very truly yours, _____________________ Assistant Regional Director EXAMINER'S FIELD/OFFICE AUDIT REPORT ON WITHHOLDING TAX ON WAGES 1. Name of Taxpayer _________________ 5. Employer I.D. No. _____________ 2. Address ________________________ 6. Date assigned _________________ 3. Taxpayer Account No. _____________ 7. Date reported _________________ 4. Authority No. ____________________ 8. Calendar year covered __________ (Examiner must answer and/or supply all the information asked below) 9. If taxpayer has no employer identification number, attach BIR Form W-5, duly accomplished by taxpayer. 10. Has taxpayer withheld tax on wage payment? a) If yes, accomplish payment record below. b) If not, (1) State why _______________________________________________ (2) Attach working papers showing names of employees subject to tax, exemptions, wages (salaries, bonuses, overtime pay, allowances, commissions, etc.) per payroll period, and withholding tax due thereon. 11. PAYMENT RECORD: (Attach signed additional sheet if space is insufficient.) AMOUNT PAID Official Receipt No. Date of Payment Basic Penalties TOTAL 1st Quarter ____________ ___________ P ________ P ________ P _______ 2nd Quarter ____________ ___________ ________ ________ _______ 3rd Quarter ____________ ___________ ________ ________ _______ 4th Quarter ____________ ___________ ________ ________ _______ TOTAL P====== P====== P===== 12. Are amounts withheld in accordance with withholding tax tables? If not, attach working papers showing (a) names of employees subject to tax; (b) wages (salaries, bonus, overtime pay, allowances, commissions, etc.) per payroll period; (c) exemptions; (d) correct tax due; (e) tax withheld; and (f) deficiency withholding tax. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 13. a. Has taxpayer filed BIR Form W-1? _____ _____ _____ _____ b. Office where filed _____ _____ _____ _____ c. Date filed _____ _____ _____ _____ d. If not yet filed, require same to be accomplished and attach to this report. 14. Has taxpayer filed BIR Form W-3 and alphabetical list? ______________________ a. Office where filed ________________ b. Date ________________________ c. If not yet filed, require same to be accomplished and attach to this report. 15. Total deficiency withholding tax reported: Principal P _______ Penalties P _______ 16. Recommendations: _________________________________________________ _________________________________________________________________ 17. Enclosures: ________________________________________________________ _________________________________________________________________ I hereby certify that I have examined the books of accounts and pertinent records of the taxpayer in accordance with the prescribed investigation procedures and prepared this report in accordance with reporting requirements officially prescribed and, to the best of my knowledge, with present laws and regulations. I also certify that the working papers attached hereto are in my own handwriting. ___________________________ Examiner (Code No.) I hereby certify that I have actually supervised the investigation of this tax case and have duly reviewed this report and found it to be in accordance with the prescribed audit investigation and reporting procedures and requirements. ___________________ ____________________ Date Supervisor CONCURRED IN: ___________________________ Revenue District Officer APPROVAL RECOMMENDED: APPROVED: ____________________________ ________________________________ Regional Director/Chief of Division Revenue Service Chief (Assessment) NOTE: After this report has been reviewed, send immediately together with pertinent enclosures to National Office, Attn's. Chief, Withholding Tax Division, for final review, approval and assessment. ADJUSTMENTS TO NET INCOME ________________ Date 1. Name of Taxpayer ________________________ 3. T.A.N. ________________ 2. Address ________________________________ 4. Assessment No. _________ ________________________________________________________________ 5. Net income disclosed by the return as audited P_____________ 6. Unallowable deductions and/or additional income: __________________________ P_______ __________________________ _______ __________________________ _______ __________________________ _______ __________________________ _______ __________________________ _______ __________________________ _______ __________________________ _______ __________________________ _______ __________________________ _______ __________________________ _______ __________________________ _______ __________________________ _______ __________________________ _______ __________________________ _______ 7. TOTAL ADJUSTMENTS P_____________ 8. NET INCOME AS PER INVESTIGATION P_____________ 9. EXPLANATION OF DISCREPANCIES Computations Reviewed by: checked by: Submitted by: ___________________ ____________________ __________________ Examiner Code No. NOTE: The same order or sequence of the discrepancies enumerated above should be adopted in the preparation of the memorandum of explanation and in the working papers to facilitate reference between this report and said related papers. Each working paper should be properly marked and after each discrepancy, as reported above, there should be indicated the corresponding page of the working papers where said discrepancy is to be found and how it was arrived at. cd If more space is need for the explanation of discrepancies, please use additional sheet. BUREAU OF INTERNAL REVENUE Revenue Region No. _____ ______________________________ ASSESSMENT BRANCH EXAMINER'S OFFICE AUDIT REPORT (Business) __________________ Date 1. Name of Taxpayer ____________________ 1(a) T.A.N. ____________________ 2. Address ____________________________ 2(a) Assessment No. _____________ 3. Citizenship __________________________ 3(a) Accounting Method __________ 4. Kind of business ________ 4(a) NIRC Sec/s ___ 4(b) Principal Products ____ 5. Taxable year ending __________________ 5(a) Prescription Date ____________ 6. Previous Examination: Period covered ______ 6(a) Date Reported ______ 6(b) Examiner _______ 7. Disposal: ( ) Agreed ( ) Survey 10 (a) Mans hours spent ____________ ( ) Non-agreed ( ) Others 10 (b) Examiner's monthly salary ______ 8. Enclosures: ________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ AUDIT RESULTS: (a) Per investigation (b) Per Review 9. Gross taxable sales/receipts per return P______________ P______________ 10. Total discrepancies per attached BIR Form 1717B-2 ______________ _______________ 11. Total taxable sales/receipts per investigation ______________ _______________ 12. _____________% Tax Due ______________ _______________ 13. Less: Tax Paid ______________ _______________ 14. Deficiency tax due ______________ _______________ 15. _____________% Surcharge ______________ _______________ 16. Compromise: _________________ ______________ _______________ _________________ _________________ 17. Total amount due ______________ _______________ 18. Amount paid per O.R. No. __ Date ___ ______________ _______________ 19. If not paid, Demand No. ___ Date ____ ______________ _______________ 20. Other taxes: (Specify) _____ _______ ______________ _______________ 20 (a) Tax Base ____________ ______________ _______________ 21. Tax Due ______________ _______________ 22. Tax Paid ______________ _______________ 23. Deficiency ______________ _______________ 24 ___________% Surcharge ______________ _______________ 25. Compromise ______________ _______________ 26. Total amount due ______________ _______________ 27. Amount paid per O.R. No. ___ Date __ ______________ _______________ 28. If not paid, Demand No. _____ Date __ ______________ _______________ 29. Were the above discrepancies considered in the corresponding income tax report? ____________________________________________________________________ ____________________________________________________________________ I hereby certify that I have examined the books of accounts and pertinent records of the taxpayer in accordance with the prescribed investigation procedures and prepared this report in accordance with reporting requirements officially prescribed and, to the best of my knowledge, with present laws and regulations. I also certify that the working papers attached hereto are in my own handwriting. ____________________________ Examiner (Code No.) I hereby certify that I have actually supervised the investigation of this tax case and have reviewed this report and found it to be in accordance with the prescribed audit, investigation and reporting procedures and requirements. ____________________ _____________________ Date Supervisor CONCURRED IN: _______________________ Chief, Office Audit Section ____________________ _____________________ Date Supervisor CONCURRED IN: _______________________ Chief, Office Audit Section APPROVAL RECOMMENDED: APPROVED: ______________________ __________________________ Chief, Assessment Branch Asst. Revenue Regional Director NOTE: All blanks should be properly filled. Indicate non-applicability of any item on the space provided. 1717B-2 _________________ Date ADJUSTMENTS TO SALES/RECEIPTS 1. Name of Taxpayer ________________________ 3. T.A.N. ________________ 2. Address ________________________________ 4. Assessment No. _________ ________________________________________________________________ 5. Gross taxable sales/receipts per return P_____________ 6. Discrepancies: _________________________ P __________ _________________________ __________ _________________________ __________ _________________________ __________ _________________________ __________ _________________________ __________ _________________________ __________ _________________________ __________ _________________________ __________ _________________________ __________ _________________________ __________ _________________________ __________ _________________________ __________ _________________________ __________ _________________________ __________ _________________________ __________ _________________________ __________ _________________________ __________ 7. TOTAL DISCREPANCIES P_____________ 8. TOTAL TAXABLE SALES/RECEIPTS PER INVESTIGATION P_____________ 9. EXPLANATION OF DISCREPANCIES Computations Reviewed by: checked by: Submitted by: ____________________ ___________________ ___________________ Examiner (Code No.) NOTE: The same order or sequence of the discrepancies enumerated above should be adopted in the preparation of the memorandum of explanation and in the working sheet to facilitate reference between this report and said related papers. Each working paper should be properly marked and after each discrepancy, as reported above, there should be indicated the corresponding page of the working sheet where said discrepancy is to be found and how it was arrived at. cdta If more space is need for the explanation of discrepancies, please use additional sheet. SCHEDULE I Name of Taxpayer Address Tax Year Taxpayer appeared on Monday, September 3, 1964, at 8:30 in the morning with following records: (Enumerate records presented) He is the Sales Manager of XYX Company receiving fixed monthly salary and travelling and representation allowances, etc. SCHEDULE II Name of Taxpayer Address Tax Year ANALYSIS OF INCOME ACCOUNTS Salary of P2,000 per month Total received for the year P24,000.00 Traveling allowance at P300 per month Total received for the year 3,600.00 Representation allowance P500 per month Total received for the year 6,000.00 __________ Total amount received for the year P33,600.00 SCHEDULE III Name of Taxpayer Address Tax Year ANALYSIS OF RENTAL INCOME Name of Tenant Address Monthly Rate Total Rentals Received Total __________________ Total Reported per Return __________________ Adjustments if any __________________ SCHEDULE IV Name of Taxpayer Address Tax Year DIVIDEND INCOME If not shown in the return, show Name of Company Paying Dividends Amount P ______ TOTAL ====== SCHEDULE V Name of Taxpayer Address Tax Year COMMISSION INCOME Show the persons or entities from whom commissions were received and the corresponding amounts. SCHEDULE VI Name of Taxpayer Address Tax Year PROFESSIONAL INCOME If retainers, show the person or entities paying the retainer's fee and the corresponding amount paid by each. For professional income other than retainers and for business income, copy ledger account. SCHEDULE VII Name of Taxpayer Address Tax Year Gain or Loss From Sales or Exchange of Shares of Stocks Date of Date Number of Gross COSTS Acquisition of Sale Shares Sold Sales Price Cost of Expenses Gain Acquisition or Loss Taxable amount per verification _____ Taxable amount per return _____ Adjustment _____ * Show computation of cost prices and nature of expense below: SCHEDULE VIII Name of Taxpayer Address Tax Year FARMING INCOME Taxpayer owns a ricefield with an area of ________________________ hectares, located in _________________________. He harvests secondary crops, etc.. SCHEDULE IX Name of Taxpayer Address Tax Year Gain or Loss from Sales or Exchange of Property Other than Capital Assets Nature of Property Sold _______________ Date of Acquisition _______________ Gross Sales or Contract Price _______________ Deduct Costs: Cost of Other Basis * _______________ Cost of Improvements * _______________ Total Costs _______________ Less: Depreciation _______________ Value as of date of Sale _______________ Expenses of sale (Itemize) _______________ Total Cost _______________ Gain or Loss ============= * Show the details SCHEDULE X Name of Taxpayer Address Tax Year A. ANALYSIS OF TAXES CLAIMED Date of Payment O.R. # Kind of Tax Amount Interest Penalties Total Total Total per return Adjustment SCHEDULE XI Name of Taxpayer Address Tax Year B. ANALYSIS OF INTEREST CLAIMED O.R. # Date of Payment To Whom Paid Amount of Principal Amount of Interest Total _________________ Claimed per return _________________ Adjustment _________________ SCHEDULE XII Name of Taxpayer Address Tax Year C. LOSSES a. Nature of Loss (Theft, Casualty, etc.) b. Profit of Loss presented c. Value of Property Lost Date Acquired Cost Price Depreciation Claimed (if any) Book Value ________________ Loss per return ________________ Adjustment ________________ SCHEDULE XIII Name of Taxpayer Address Tax Year D. CONTRIBUTIONS O.R. # Date of Payment To Whom Paid Amount Total _________________ Claimed per return _________________ Maximum allowable _________________ Adjustment _________________ SCHEDULE XIV Name of Taxpayer Address Tax Year E. OTHER DEDUCTIONS (Sundries) Item (Nature of Expense) Amount O.R. # Total ___________ Total per return ========== SCHEDULE XV Name of Taxpayer Address Tax Year F. TRAVEL Car Expense Nature of Expenses Supporting Papers Date Amount __________ Total ========= (State briefly the nature and the extent of the travelling done by the taxpayer). SCHEDULE XVI Name of Taxpayer Address Tax Year G. REPRESENTATION & ENTERTAINMENT Name of Persons Type of Entertained, their occupation Reasons for Date Inv. # Entertainment title of designation Entertainment Amount Total ________ Claimed per return ________ Adjustment ________ SCHEDULE XVIII Name of Taxpayer Address Tax Year ANALYSIS OF RENT-EXPENSE To Whom Paid _______________ Address _______________ Monthly Rental P_______________ Total Rent Expense Claimed _______________