Revised Procedures Relative to Refund of Excess Taxes Withheld on Individual Incomes

April 23, 1986 REVENUE MEMORANDUM ORDER NO. 12-86 SUBJECT : Revised Procedures Relative to Refund of Excess Taxes Withheld on Individual Incomes TO : All Internal Revenue Officers and Others Concerned I. Objective : This order is issued to: a. provide an effective system in the receipt, transmittal and processing of individual refundable income tax returns; and, b. expedite the release of individual tax refunds. II. Policies : 1. Refundable ITRs with purely compensation income (1701A) shall be automatically refunded. 2. The respective Assessment Branches in the regions shall undertake the pre-auditing work of their refundable 1701A returns. 3. Refundable ITRs with Mixed or Purely Business Income (1701) shall be investigated first, and the report thereon submitted within 60 days from the date of the issuance of the authority, subject to an extension of another 60 days (for exceptional cases), prior to processing of tax refund. cd i III. Procedures : In order to attain the above objectives, the following procedures are to be followed by all concerned. A brief description of the prescribed documents including the definition of certain terms is provided as an attachment to this Order for information and reference purposes. OFFICE OF THE COLLECTION AGENT 1. Receive Income Tax Returns (ITRs) from taxpayer/s; 2. Bundle and transmit ITRs to Revenue District Office within five (5) days from receipt; REVENUE DISTRICT OFFICE 1. Ascertain that the ITRs belong to the district. Separate out-of-district returns; 2. Segregate the refundable individual ITRs giving them priority over other returns; 3. Classify the refundable individual ITRs with compensation from mixed or purely business income; 4. Batch ITRs by 100's according to the above classification; 5. Forward batches of ITRs (including the batch of out-of-district returns) to Assessment Branch within three (3) days from receipt; 6. Conduct investigation on refundable returns transmitted for field audit by the Assessment Branch (except Regions 38, 4A and 4B); 7. Prepare report of investigation; 8. Prepare 1701 Update Sheet (copy attached) to be used as basis of RCC in preparing the tax refund and attach the same to the report of investigation together with the original and duplicate copies of the returns; 9. Forward the entire tax docket to Assessment Branch, for review. ASSESSMENT BRANCHES 1. Transmit out-of-district returns to proper office/s; 2. Assign assessment number to ITRs; REFUNDABLE ITRs WITH COMPENSATION INCOME (1701A) 3. Pre-audit the returns; aisa dc 4. Re-batch ITRs by ROD, by 100's; 5. Attach Block Control Sheet and adding machine tape reflecting the amount refundable for each batch; 6. For the last single batch composed of several RDOs whose final batches are less than 100 returns, indicate in any conspicuous place in the control sheet MIXED RDOs with the document count per RDO. 7. Transmit the original of Batch Control Sheets with 1701A returns and W-2 to Revenue Computer Center (RCC); forward the duplicate of the Batch Control Sheets to Withholding Tax Division (WTD); retain the duplicate copy of the returns, for file; REFUNDABLE ITRs WITH MIXED OR PURELY BUSINESS INCOME (1701) For RR Nos. 38, 4A and 4B 8. Prepare transmittal letter and forward both copies of refundable 1701 returns to Refund Audit Division; FOR RR Nos. 1, 2, 3A, 4C, 5, 6A, 6D, 7, 8, 9, 10A, 10B, 11A & 11B 9. Conduct examination on those returns classified as office audit returns; forward both copies of those classified as field audit returns to the RDOs concerned; 10. Prepare Report of Investigation and attach to the ITR; 11. Prepare 1701 Update Sheet to be used as basis of RCC in preparing the tax refund and attach the same to the ITR; 12. Forward the entire docket to the Review and Evaluation Section; 13. Forward the original copy of 1701 returns which remained refundable after review together with their corresponding 1701 Update Sheet and W-2 and/or 1743.1 to RCC furnishing the WTD a copy of the transmittal letter; 14. Forward the rest of the tax docket to Administrative Branch for safekeeping. The Assessment Branches in the regions shall: a. Match the data in the Tax Refund Control List against the result of the investigation of 1701 ITRs. b. Post audit 1701A returns and match the data in the ITR against the Tax Refund Control List. c. Assess, if the post audit results in a collectible amount; forward to RCC for processing of additional refund duly accompanied by original ITR, Audit Sheet or 1701 Update Sheet, if the post audit results in a refundable amount. REFUND AUDIT DIVISION 1. Receive both copies of refundable 1701 returns from the Assessment Branches of RR Nos. 38, 4A and 4B; cdt 2. Conduct investigation; 3. Prepare report of investigation; 4. Prepare 1701 Update Sheet to be used as basis of RCC in preparing the tax refund and attach the same to the report of investigation together with the original and duplicate copies of the return; 5. Forward the original copy of 1701 returns with their corresponding 1701 Update Sheet and W-2 and/or 1743. 1 to RCC furnishing the WTD a copy of the transmittal letter; 6. Forward to National Assessment Office or the Office of the Asst./Deputy Commissioner, as the case may be, the rest of the tax docket for final approval; 7. Receive from RCC one copy of Report on Defective Refundable Returns (by regions) with the corresponding ITRs, Report of deviations and Report of Discrepancies; 8. Undertake appropriate action on the returns of taxpayers indicated in the Report on Defective Refundable Returns as needing further investigation/verification and/or collection. REVENUE COMPUTER CENTER 1. Receive original copies of refundable 1701A returns with their corresponding attachments from the Assessment Branches of the regions; 2. Receive original refundable 1701 returns of Regions 3B, 4A and 4B with their corresponding attachments from Refund Audit Division and from Assessment Branches of RR Nos. 1, 2, 3A, 4C, 5, 6A, 6B, 7, 8, 9, 10A, 10B, 11A and 11B; 3. Receive original copies of refundable returns - 1701C, 1701 and 1701A - with their attachments from International Operations Division; 4. Match the ITRs against the Annual Return of Income Tax Withheld on Compensation (W-3) and the Annual Return of Creditable Income Tax Withheld (expanded Withholding Tax System), 1743-B, as basis for preparation of the Report of Discrepancies and Report of Deviations; 5. Conduct computer audit preparatory to the preparation of the tax refund; 6. Pull out from the batches defective refundable returns - those which became either collectible, even or will still need resolution, after computer audit (basis for the preparation of the Report on Defective Refundable Returns); 7. Conduct duplication run to preclude the possibility of a taxpayer claiming refund, more than once on the same income; 8. Generate the following reports; (Refer to the attachment for a descriptive statement of each report.) No. of Copies 5 a. Summary of Disbursement per PNB Branch 1 original) - PNB duplicate) triplicate) - Rev. Acctg. Div. quadruplicate) quintuplicate - RCC b. Tax Refund Notices Register (maximum of 5,000 refundees per register) 3 original) - Rev. Accounting Div. duplicate) triplicate - RCC c. Schedule of Disbursements 3 original) - PNB duplicate) triplicate - RCC d. Tax Refund Payment Voucher 2 original) - PNB duplicate) e. Tax Refund Notices 1 original - to refundee f. Tax Credit Certificates Register (1 copy, by region) 4 original) - Rev. Acctg. Div. duplicate) triplicate - RCC quadruplicate - region concerned g. Tax Credit Certificate 2 original - to refundee (surrendered upon encashment/use) duplicate - to refundee h. Tax Refund Alpha List by region, by RDO) 2 (RR/RDO) original) - Region/RDO concerned duplicate) - RCC i. Tax Refund Control List - by region 2 (100 returns per batch) original - Assessment Branch of the region concerned duplicate - RCC j. GSD-WTD* Listing 2 original - Withholding Tax Div. duplicate - RCC k. Reconciliation Report on Tax Refund Notices 3 original) - Rev. Accounting Div. duplicate) triplicate - RCC l. Report on Availments and Outstanding Tax Credit Certificates 3 original) - Revenue Accounting Div. duplicate) triplicate - RCC m. Report of Discrepancies 3 original - Refund Audit Division duplicate - WTD triplicate - RCC n. Report of Deviations 3 original - Refund Audit Division duplicate - WTD triplicate - RCC o. Report on Defective Refundable Returns 2 (overall, by region/IOD) (overall) overall: original - WTD 2 duplicate - RCC (by region/10D) by region/IOD: original - Refund Audit Div./IOD duplicate - RCC NOTE: Each time RCC shall make additions on the Tax Refund Inquiry File, simultaneously it shall advice WTD, in writing, of the total refundees already included and available in the WTD terminal. cd * General Services Division - Withholding Tax Division 9. Forward to Revenue Accounting Division: a. Two copies each of the Tax Refund Notices Register and the Summary of Disbursements per PNB Branch; b. Two copies of Tax Credit Certificates Register; c. One copy of Reconciliation Report on Tax Refund Notices with their corresponding schedules/lists; d. One copy of Report on Availments and Outstanding Tax Credit Certificates with their corresponding schedules/lists prepared on the basis of the withholding tax returns, income tax returns, etc. 10. Transmit to General Services Division; a. Tax refund Notices (one copy) and/or the Tax Credit Certificates (both copies), in individual envelopes, with one copy of GSD-WTD Listing: (If the amount of tax refund is One Hundred Pesos (P100.00) and above, the refund is made thru the issuance of Tax Refund Notice, which is encashable at the designated PNB Branch. If the amount of tax refund is less than One Hundred Pesos (P100.00), the refund is made thru the issuance of Tax Credit Certificate.) b. One copy of Tax Credit Certificates Register (by region); c. One copy each of Tax Refund Alpha List by region and Tax Refund Alpha List by RDO; d. One copy of the Tax Refund Control List (by region) with the corresponding ITRs. e. Two copies each of Summary of Disbursements per PNB Branch and Schedule of Disbursements with the corresponding Tax Refund Payment Voucher. 11. Forward to Refund Audit Division one copy each of Report on Defective Refundable Returns (by region) with the corresponding ITRs; 12. Forward to Withholding Tax Division one copy each of Report on Defective Refundable Returns (overall), Report of Deviations as well as Report of Discrepancies; 13. Forward to International Operations Division one copy of Report on Defective Refundable Returns (IOD portion) together with the corresponding ITRs in case there are refundable returns transmitted to IOD for refund purposes that were found defective; REVENUE ACCOUNTING DIVISION 1. Receive from RCC two copies of the Tax Refund Notices Register and the Summary of Disbursements per PNB Branch; 2. Tape each page of the Tax Refund Notices Register and tape the totals of all pages; 3. Prepare the corresponding Disbursement Voucher (DV) based on the Summary of Disbursements per PNB Branch and the Tax Refund Notices Register for the total amount of refunds to be paid thru PNB; 4. Forward DV with required attachments to Financial & Management Service; 5. Receive from RCC two copies of the Tax Credit Certificates Register; acd 6. Process TCC Register and record in the books of accounts; 7. Record the amount of availments on the basis of the report furnished by RCC; 8. Record the amount of claimed/unclaimed tax refunds based on the Reconciliation Report on Tax Refund Notices submitted by RCC; 9. Process DV on direct payment of refund. FINANCIAL & MANAGEMENT SERVICE 1. Review documents and sign Box 3 of the DV for refunds payable thru PNB. INTERNAL CONTROL UNIT 1. Pre-audit the DV for refunds payable thru PNB with the attachments from Financial & Management Service; 2. Pre-audit the DV on direct payment of refund from Revenue Accounting Division. PERSONNEL & ADMINISTRATIVE SERVICE 1. Review documents; approval/sign DV; 2. Review and countersign the check. GENERAL SERVICES DIVISION 1. Prepare and sign check in favor of PNB corresponding to the aggregate amount of refundables as indicated in the approved DV; 2. Receive from RCC: a. The envelopes containing the Tax Refund Notices and/or Tax Credit Certificates with one copy of the GSD-WTD Listing (date-stamp the listing upon receipt); b. One copy of the Tax Credit Certificates Register (by region); c. One copy of Tax Refund Alpha List by region and by RDO; d. One copy of the Tax Refund Control List (by region) with the corresponding ITRs; e. Two copies each of Summary of Disbursements per PNB Branch and Schedule of Disbursements with the corresponding Tax Refund Payment Voucher. 3. Deliver to PNB the check and the refund documents consisting of the Summary of Disbursements per PNB Branch, Schedule of Disbursements with the corresponding Tax Refund Payment Voucher; 4. Mail TRNs to the refundees two (2) calendar weeks after delivery to PNB of the required documents; also mail all TCCs on hand; indicate date of mailing on the GSD-WTD Listing and forward the same to WTD on the same day; 5. Send to the regions concerned the Tax Credit Certificates Register, Tax Refund Alpha List (by region and by RDO) and Tax Refund Control List (by region) with the corresponding ITRs; 6. Receive from PNB the check corresponding to the amount of unclaimed tax refunds with the refund documents consisting of: a. "PAID" Tax Refund Payment Vouchers (with the "Acknowledgments" portion signed by the refundees) and the corresponding Tax Refund Notices surrendered by the refundees. b. "CANCELLED" Tax Refunds Payment Vouchers which cover refunds unclaimed after the expiry date. cd 7. Issue OR for the PNB check received and remit the same to the Bureau of Treasury furnishing Revenue Accounting Division with a copy of the advice, for recording purposes; 8. Maintain a separate cash book covering all transactions pertaining to unclaimed individual income tax refunds, for control purposes; 9. Prepare and sign treasury warrant (Type B) for refunds approved under direct payment; 10. Release treasury warrant for refunds approved under direct payments to refundees; 11. Report to RCC monthly or as the need arises, refunds paid under direct payment scheme furnishing the Rev. Accounting Division and Withholding Tax Division copy of said report. WITHHOLDING TAX DIVISION 1. Receive from RCC one copy each of Report on Defective Refundable Returns (overall), Report of Deviation and Report of Discrepancies; 2. Receive and compile copy of transmittal letters to RCC covering refundable ITRs for processing of tax refunds furnished by the Refund Audit Division, International Operations Division and Assessment Branches of RR Nos. 1, 2, 3A, 4C, 5, 6A, 6B, 7, 8, 9, 10A, 10B, 11A and 11B for reference purposes; 3. Receive from GSD the GSD-WTD Listing, date-stamp and keep for reference purposes; 4. Answer queries from taxpayers relative to refunds; 5. Prepare disbursement voucher covering request for direct payment of the refund by the BIR to the refundee duly approved by the Commissioner of Internal Revenue/Chief, Collection Office, under meritorious cases, and accompanied by a certification from RCC that the refund was not claimed and the allotted money returned to the bureau. NOTE: Box 3 of the disbursement voucher must be signed by the Chief, Collection Office prior to processing by Revenue Accounting Division. INTERNATIONAL OPERATIONS DIVISION 1. Receive 1701C returns (original and duplicate) directly from taxpayers and regional offices, for returns filed in the Philippines; receive also 1701C, 1701 and 1701A from revenue posts, embassies and consulate offices abroad, for returns filed outside the Philippines; 2. Segregate refundable returns giving them priority over other ITRs; 3. Pre-audit 1701A returns/conduct office audit on 1701C and 1701 returns; 4. Attach to the returns Audit Sheet for the approval of the proper authorities: 5. Assign assessment number to duly processed ITRs for transmittal to RCC; cd 6. Prepare 1701 Update Sheet to be used as basis of RCC in preparing the tax refund and attach the same to the ITR; 7. Forward original copies of refundable 1701C, 1701, 1701A returns with their corresponding 1701 Update Sheet to RCC, furnishing the Withholding Tax Division, a copy of the transmittal letter; 8. Forward the rest of the docket to SOO for final approval; 9. Take appropriate action on the returns of taxpayers indicated in the Report on Defective Refundable Returns (IOD portion) as needing further investigation/verification and/or collection. TAXPAYER-TRN REFUNDEE 1. Submit required identification such as acknowledged copy of his ITR, TAN card, office ID, driver's license, etc.; 2. Acknowledge receipt of tax refund in cash by signing the acknowledgment portion of the Tax Refund Payment Voucher and surrender the Tax Refund Notice to the PNB Disbursing Office. (If the refundee fails to claim his refund after the expiry date, a written request addressed to the Commissioner of Internal Revenue with the expired tax refund notice is necessary in order that another Tax Refund Notice could be issued and provided that PNB has forwarded to RCC the cancelled Tax Refund Payment Voucher pertinent to the expired TRN and has remitted to the Bureau the amount corresponding to the unclaimed refunds.) IV. Tax Credit Certificate (TCC) Availments : TCC may be availed of thru the following: 1. Encashment with the employer The refundee may encash with his employer indicated in the TCC. In case refundee changed employment, the TCC may be encashed with his past employer. However, if the refundee is unemployed, the TCC may be encashed with the past employer. In case of joint return, where the husband is unemployed, the wife may encash the TCC with her employer even if it is in the husband's name as long as she can prove that she is the real wife as indicated in the return. The employer in turn, shall use said TCCs as credit against its remittances of taxes withheld to the BIR. 2. Applied against tax obligation The refundee may also choose to apply the TCC against his current income tax obligation with the BIR provided the amount of the TCC is equal or less than the tax due, in which case the balance is payable in cash. 3. Encashment with the BIR Should the above alternatives not be possible, specially if the refundee's former employer no longer exist and he is unemployed, the TCC may be encashed with the BIR. cdt 3.1 For this purpose, a trust fund with an initial amount of P1,000 for each revenue region is created chargeable against income account (Fund 104). This amount may be increased upon the request of the Regional Director and with the approval of the Revenue Service Chief, Financial & Management: 3.2 The treasury warrants (Type B) to be issued shall be in the name of the respective Special Disbursing Officers (SDO) of the regions and for deposit with their authorized government depository banks; 3.3 A sum shall be withdrawn in advance and made available to the TCC Holders provided they submit their original copy of the TCC, duly signed by the taxpayer-refundee and satisfy the requirements for identification purposes; 3.4 This cash shall be subject to periodic cash count by the Regional Auditor; 3.5 The Special Disbursing Officer (SDO) shall issue in duplicate, Tax Refund Payment Voucher (see form attached) everytime a cash payment is made. 3.6 For replenishment purposes, the following duly signed documents shall be submitted to the Revenue Accounting Division: a) Disbursement Voucher (Gen. Form 5A); b) Original copy of TCC; c) Original copy of Tax Refund Payment Voucher (duplicate for SDO's file) d) Summary of Paid TCC's duly approved by the Chief, Administrative Branch. cd i 3.7 The Summary of Paid TCCs shall indicate the name, TCC No., amount paid, date paid and serial number of Tax Refund Payment Voucher. Four (4) copies shall be prepared and distributed as follows: Original and Duplicate - Rev. Accounting Division Triplicate - Revenue Computer Center Quadruplicate - SDO's file 3.8 As regards encashment thru authorized representative, provisions of RMO No. 24-84 dated August 27, 1984 still applies and the additional requirements stated therein are necessary with the other supporting documents for purposes of replenishment; 3.9 The required journal entries for the creation and replenishment of the Trust Fund are the following: a) Issuance/Creation of Initial Trust Fund 104-92-417-1 104-70-702-1 xxx xxx 104-70-400-1 104-84-900-1 xxx xxx b) Upon replenishment 104-84-900-1 104-70-400-1 xxx xxx 104-92-417-1 104-70-702-1 xxx xxx 104-70-400-1 104-84-900-1 xxx xxx All TCCs issued shall have life of five years from date of issue. cdt V. Repealing Clause : This Order supersedes RMO No. 30-83 dated September 22, 1983. VI. Effectivity Clause : This Order takes effect upon approval. (SGD.) BIENVENIDO A. TAN Commissioner