Prescribing updated procedures for receiving, handling and processing of income tax returns

February 4, 1991 REVENUE MEMORANDUM ORDER NO. 10-91 SUBJECT : Prescribing Updated Procedures for Receiving, Handling and Processing of Income Tax Returns TO : All Revenue Regional Directors, Revenue District Officers, and Other Officers and Employees Concerned I. Objectives This Revenue Memorandum Order is issued to: 1. State the revised delineation of functions of each office/division/unit involved in processing income tax returns (ITRs); 2. Provide more effective control and efficient system and procedures for the receiving, handling and processing ITRs through decentralization of these functions; and 3. Further improve BIR-Taxpayer relations through more expeditious action on taxpayers' needs, most especially claims for tax refunds. Highlights of updated procedures: 1. A revised system of classifying ITRs is provided for based on the type of return filed and on whether it is taxable, exempt, refundable taxable and refundable exempt. 2. The terminology "Assessment Number" (AN) has been raised to "Document Locator Number" (DLN). cd i 3. The practice of indicating the AN (now DLN) in every return by the Assessment Branch prior to its transmittal to Revenue Information Systems Services, Inc. (RISSI) or any other further processing is discarded. Instead, every return shall be assigned a DLN by the Revenue District Office (RDO) following strictly the provisions of RMO No. 9.91 on revised system for numbering of income tax returns before transmitting these returns directly to RISSI. There is no need to forward these returns to the Assessment Branch in order to streamline and hasten the processing thereof. 4. The processing of income tax returns of non-resident citizens (1701Cs) has been decentralized such that the RDOs shall henceforth be responsible for receiving, numbering and pre-audit/ audit of returns filed therein. 5. All original copies of taxable, exempt and refundable 1701, 1702 and 1702A-1, as well as taxable and exempt 1701A and 1701C returns shall after assignment of DLN by the RDOs be immediately forwarded to RISSI in order to hasten the processing of these returns by said office. The original and duplicate copies of refundable 1701A and 1701C returns shall be retained together for pre-audit purposes. 6. The duplicate copies of the income tax returns shall be retained initially in the RDOs for purposes of evaluation and monitoring prior to selective audit by the RDOs concerned. Those not selected for field audit and returns classified as office audit cases shall be transmitted to Assessment Branch in accordance with the procedures prescribed in RMO No. 36-90. cd i 7. The type of audit prescribed for refundable return is as follows: a. refundable 1701A and 1701C - pre-audit based on the original copy of the return. b. refundable 1701, 1702, 1702A-1 and 1704 - office or field audit based on the duplicate copy of the return. 8. Specific deadlines for all the offices involved in the processing of the income tax returns have been set to ensure speedy action. II. Procedures The following updated and more simplified procedures for receiving, handling and processing income tax returns are hereby prescribed for the information, guidance and compliance of all concerned: A. OFFICE OF THE COLLECTION OFFICER 1. Receive three (3) copies of ITRs including attachments, if any, from the taxpayer; check the completeness of information stated in the returns; 2. Date-stamp the (3) copies and initial on the space provided for in the return. 3.1 For Returns Involving Payment thru Banks a. Prepare Payment Order (PO) in accordance with the existing procedures; b. Give the required copies of the PO to taxpayer for presentation to the Accredited Agent Bank (AAB) which shall issue the corresponding Confirmation Receipt (CR) upon payment of the tax due; c. Instruct taxpayer to come back to receive his file copy of the return after providing the Collection Officer with a photocopy of the CR; d. Annotate on the return the PO and CR numbers, the amount paid and date of payment, after which, issue to taxpayer his file of copy of the return with the attachments, if any; e. Accomplish Daily List of POs Issued (BIR Form 809) using as basis the file copies of PO; f. Attach the corresponding returns to the duplicate copy of BIR Form 809 and forward the same to the RDO the following day; 3.2 For Returns Involving Payment thru Collection Officers (COs) a. Prepare Revenue Official Receipt (ROR) upon receipt of payment for tax due from taxpayer; b. Annotate on the copies of the return the ROR number, amount paid and date of payment; casia c. Issue to taxpayer his file copy of the ROR and the return; d. Prepare transmittal list for all returns paid thru ROR indicating therein the name of taxpayers and the amount paid; e. Attach the returns to the transmittal list and forward the same to the RDO the following day. 3.3 For all other Returns a. Prepare transmittal letter indicating therein the names of taxpayers; b. Attach returns to the transmittal letter and forward the same to the RDO the following day. B. REVENUE DISTRICT OFFICE (RDO) 1. Receive transmittal letter and two (2) copies of returns including attachments, if any, from COs and RDOs; 2. Check notation of payment in the returns and send the necessary reminder notices to taxpayers with taxes to be paid on second installment; 3. Segregate out-of-district returns; 4. Prepare transmittal list for out-of-district returns received during the week; attach therein the copies of out-of-district returns and forward the same to the respective RDO not later than Friday of the following week ; 5. Classify the remaining ITRs into: 5.1 Individual (including estates and trusts) 5.1/1 Form 1701 5.1/2 Form 1701A 5.1/3 Form 1701C 5.2 General Professional Partnership (Form 1704) 5.3 Corporations (including partnership taxable as corporations) and other associations 5.3/1 Form 1702 5.3/2 Form 1702Q 5.3/3 Form 1702A-1 6. Subclassify the above into: 6.1 Taxable: Tax due is equal to or exceeds taxes withheld/quarterly payments, if any 6.2 Exempt: No tax due, no taxes withheld/quarterly payments 6.3 * Refundable Taxable: Taxes withheld/quarterly payments exceed tax due 6.4 * Refundable Exempt: No tax due, with taxes withheld/quarterly payments * For purposes of this RMO, these are hereinafter referred to as "refundable returns". 7. Assign and indicate a DLN on the original and duplicate copies of the return filed, except on tentative returns, following the provisions of RMO No. 9-91; 8. Segregate the original from duplicate copies and batch by 100s or less, whenever applicable, in accordance with the previous classification made, 1701, 1702, 1702A-1, 1704, 1702Q, 1701A and 1701C, except refundable 1701As and 1701Cs, the original and duplicate of which are to be retained for pre-audit purposes; 9. Prepare a transmittal list for each batch of original copies of returns indicating therein the corresponding DLNs of the returns; 10. Forward to RISSI the transmittal lists together with the batches of original copies of returns received during the month not later than the 20th day of the following month ; Prepare Summary of Income Tax Returns Filed, in the prescribed format as Annex "A" of this memorandum and furnish a copy each to the Statistical Analysis Division, the RISSI and the Assessment Branch not later than the 20th day following the end of each month ; 12.1 For Refundable 1701, 1702, 1701A-1 and 1704 Returns a. Classify the duplicate copies of refundable 1701, 1702, 1702A-1 and 1704 into office audit or field audit cases; b. Transmit refundable returns classified as office audit cases to the Assessment Branch not later than thirty (30) days from the receipt of the same ; casia c. Assign refundable returns classified as field audit cases to Revenue Officers (ROs) for investigation which must be completed not later than 120 days from date of issuance of Letters of Authority (LA) . d. Forward for review the field audit reports on refundable 1701, 1702, 1702A-1 and 1704 to the Tax Credit/Refund Division (TC/RD) or to the Assessment Branch if the audit resulted into deficiency tax within thirty (30) days from the termination of investigation ; 12.2 For Taxable And Exempt 1701, 1702, 1702A-1, 1704 and 1702Q Returns a. Consolidate quarterly to final corporate returns; b. Classify all duplicate returns received into office audit or field audit cases; c. Transmit returns classified as office audit cases to the Assessment Branch not later than thirty (30) days from the end of the month when the returns were received ; d. Segregate from the duplicate returns classified as field audit cases the returns listed by the National Office under a Revenue Memorandum Order (RMO) approved by the Commissioner of Internal Revenue (CIR) and transmit the same to the Special Operations Service (SOS); e. Select and list taxpayers from among the remaining field audit cases in accordance with the selective audit program prescribed under RMO No. 36-90; f. Assign to ROs the duplicate copies of the selected field audit cases for examination which must be completed within 120 days from date of issuance of LA ; g. Forward all field audit reports resulting into deficiency taxes to Assessment Branch for review; h. Transmit to Assessment Branch the remaining returns not selected for audit. 13.1 For refundable 1701A and 1701C Returns a. Pre-audit the original and duplicate copies of the refundable 1701A and 1701Cs following the procedures prescribed in RMO No. 28-89; b. Prepare transmittal list for the pre-audited refundable 1701As and 1701Cs indicating therein the names of taxpayers and the corresponding DLNs; c. Forward the pre-audited original and duplicate copies of 1701A and 1701C resulting into refunds together with the transmittal list to the RISSI not later than sixty (60) days from the end of the month when the returns were received; furnish the Assessment Branch with a copy of the transmittal list; d. Forward the pre-audited original and duplicate copies of 1701A and 1701C which resulted into deficiency taxes to Collection Unit/Branch for issuance of the necessary collection letters/ notices not later than sixty days (60) from the end of the month when the returns were 13.2 For Taxable and Exempt 1701A and 1701C a. Pre-audit duplicate copies of the taxable 1701A and 1701C the audit of which must be completed not later than 120 days from the receipt of the returns ; b. transmit the audit reports/ sheets of 1701A and 1701C returns the resulted in deficiency taxes to Collection Unit/Branch for issuance of the necessary collection letters/notices; c. File duplicate copies of returns not resulting in any assessment; C. ASSESSMENT BRANCH 1. Receive refundable 1701, 1702 and 1702A-1 and other taxable and exempt returns classified as office cases from various RDOs; cd i 2.1 For Refundable Returns (1701, 1702, 1702A-1, 1704) a. Assign returns to ROs for office audit which must be completed not later than 120 days from assignment; b. Forward for review all audit reports of refundable 1701, 1702, 1702A-1 and 1704 returns to the TC/RD; c. Forward audit reports of refundable 1701, 1702, 1702A-1 and 1704 returns which resulted into deficiency taxes to Collection Unit/Branch for issuance of the necessary collection letters/notices; 2.2 For Taxable and Exempt Returns (1701, 1702, 1702A-1, 1704, 1702Q) a. Select and list taxpayers from among the office audit cases transmitted by the RDO in accordance with the selective audit program prescribed under RMO No. 36-90; b. Assign to ROs duplicate copies of the selected office audit cases for investigation which must be completed within 120 days from date of issuance of LA ; c. Transmit audit reports/ sheets and Transcript of Assessment of taxable returns which result into deficiency tax to Collection Branch for issuance of the necessary collection letters/notices; 3. File all received taxable and exempt returns classified as field audit cases for future reference by the Selective Audit Committee in the National Office. D. INTERNATIONAL TAX AFFAIRS DIVISION (ITAD) 1. Receive returns with enclosed foreign check, if any, from the Foreign Posts and/or through the mail; 2. Date-stamp and initial on the space provided for in the return for ITRs received through mail; For all other returns received follow procedures prescribed in items 5 to 11 of Part B of this RMO, and items (a) to (c) of 13.1 and items (a) to (c) of 13.2. E. SPECIAL OPERATIONS SERVICE (SOS) 1. Receive from the RDOs the returns selected for audit by the National Office pursuant to the RMO approved by CIR; acd 2. Distribute said returns to the divisions under SOS for field audit. F. REVENUE INFORMATION SYSTEMS SERVICES, INC. (RISSI) 1. Receive batches of returns together with the transmittal list from the RDOs and ITAD; 2. Capture required data from the returns as may be prescribed by the Information Technology Policy Coordinating Committee; 3. Generate the following: (a) Alpha list of income tax filers and their tax payments (1) nationwide; (2) by revenue regions; (3) by revenue districts; (4) listing of non-resident citizens; and (5) listing of non-resident citizen based on foreign country residence; (b) Statistical data required by the Statistic Analysis Division. 4. Furnish documents generated in 3(a) and (b) to the respective offices/divisions concerned; 5. Transmit original returns, already processed, accompanied by a transmittal list indicating the DLN for the returns to the Administrative Branch (except original 1701Cs, received from ITAD, which shall be transmitted to the Records Division). III. Monitoring and Management Audit The Management Information and Data Control Systems Division (MIDCSD) shall conduct regular compliance audit to check if the deadlines set forth in this RMO are being met and if the procedures are being complied with. The RISSI shall notify the Commissioner of Internal Revenue of any delay in the transmittal of returns for processing. IV. Repealing Clause All prior instructions, orders, circulars and other existing issuances or portions thereof inconsistent with this Memorandum Order is hereby amended or modified accordingly. cd V. Effectivity This Memorandum Order shall apply for returns received starting January, 1991. All internal revenue officers and employees concerned are hereby enjoined to comply strictly with the procedures prescribed in this Order. (SGD.) JOSE U. ONG Commissioner of Internal Revenue