Prescribing Policies, Guidelines and Procedures on the Filing of Tax Returns of Purely Compensation Income Earners Without Cash or Check Payments (BIR Form No. 1700) and the Processing of Refundable Income Tax Returns of Employees with Excess Withholding Taxes on Compensation Income

February 22, 1999 REVENUE MEMORANDUM ORDER NO. 17-99 SUBJECT : Prescribing Policies, Guidelines and Procedures on the Filing of Tax Returns of Purely Compensation Income Earners Without Cash or Check Payments (BIR Form No. 1700) and the Processing of Refundable Income Tax Returns of Employees with Excess Withholding Taxes on Compensation Income TO : All Revenue District Officers, Revenue Officers, Document Processing Division of the Information Systems Operation Service, Withholding Agents Monitoring Division, Revenue Data Centers and Others Concerned I. COVERAGE This order shall prescribe the venue for the filing of income tax returns (BIR Form 1700) of purely compensation income earners without cash or check payments classified below and shall be filed directly with the Revenue District Offices (RDO) where the TPs is registered. Exempt ITRs Refundable ITRs Taxable Break-even (the tax due is equals to the tax withheld) tax returns Those tax returns covered fully by a Tax Debit Memo (TDM) Taxable ITR's of Taxpayers (TPs) electing to pay in two (2) installment where the 1 st installment is fully covered by their withholding taxes. II. OBJECTIVES The objectives of this Order are: 1. Prescribe uniform procedures for the filing of income tax returns (BIR Forms 1700) without cash or check payments and the processing of the tax returns at various BIR Offices. 2. To effectively implement Section 2.80 of Revenue Regulations No. 2-98 on the liability of employers who fail to refund excess withholding taxes to its employees and the forfeiture of refunds of employees in case they failed to file on time the application for registration and/or the correct/accurate withholding exemption certificate. 3. To minimize claims for tax refunds due to the compliance of the employer/withholding agents in preparing the Year-End Adjustments. III. GENERAL POLICIES AND GUIDELINES A. Venue for the Filing of BIR Form 1700 - Income Tax Returns 1. All income tax returns (BIR Form 1700) of taxpayers receiving purely compensation income without cash or check payment classified as exempt, refundable or break-even (the tax due is equals to the tax withheld) tax returns, those to be covered fully with a Tax Debit Memo (TDM) or taxable ITR's of taxpayers electing to pay in two (2) installment where the 1 st installment is fully covered by their withholding taxes and shall be filed directly with the Revenue District Offices (RDO) where the TP is registered. 2. BIR Form 1700 tax returns with a tax due and payable shall be filed with the accredited agent banks (AABs) under the jurisdiction of the RDO where the TP is registered . cdll 3. All other tax returns not covered by III.A.1 & III.A.2 above whether exempt, refundable or taxable shall be filed and the tax due therein paid with the Accredited Agent Bank (AAB) where the taxpayer has his/her legal residence or place of business. B. Late Filing of BIR Form 1700 - Income Tax Returns When tax returns without cash or check payment are filed after due date, the RDO having jurisdiction over the taxpayer shall receive the tax return, compute the corresponding penalties and request the concerned TPs to pay said penalties to an AAB under its jurisdiction using BIR Form 0605 (Payment Form). C. Income Tax Returns Without Cash or Check Payments Received by the Revenue Districts shall follow the procedures prescribed under Section IV-A of this Order. D. All 1700 with claims for tax refunds shall not be sent to the Document Processing Division of the Information Systems Operations Service (ISOS) unless the Revenue District Offices have processed the refundable 1700s following the guidelines prescribed under Section IV-B of this Order. E. Revenue Officers of the Assessment Sections of the RDO's are not authorized to cancel or revise the amount of exemptions reflected in the Certificate of Income Tax Withheld on Compensation (BIR Form W-2 or 2316),which were prepared and furnished by the employers. F. Claims for refund of Excess Withholding Tax of TPs who checked the option box "to be refunded" in BIR Form 1701 and 1702 shall be processed in accordance with the procedures prescribed in a separate Revenue Memorandum Order issued for this purpose. G. Claimants for Value-Added Tax (VAT) refund and other claims not covered by tax returns shall be filed with the RDO thru an application form BIR Form 1914. llcd IV. PROCEDURES For uniformity and in order to effectively implement the policies of this Order, the following activities shall be undertaken by the respective offices in addition to other existing procedures in the processing and filing of income tax returns without cash or check payment and the refundable BIR Form 1700s. A. Filing and Processing of the Income Tax Returns Without Cash or Check Payments Received by all Revenue District Office/Regional Office A.1 The Taxpayer (TP) shall File his/her income tax return without cash or check payment with the Revenue District Office where the TPs are registered. A.2 The Revenue District Office and Revenue Officers (Collection Agents) under them shall: 1. Receive three (3) copies of the tax return from the taxpayer. 2. Verify whether the taxpayer: 2.1.1 is qualified to file within the jurisdiction of the RDO; 2.1.2 has fully accomplished and signed all copies of the tax return; and 2.1.3 is not a late filer. 3. Stamp "RECEIVED" on the appropriate portion of all copies of the tax returns, initial the same and give the taxpayer a copy of the same. 4. Segregate the tax returns classified under I above and batch each category by fifty (50) or less returns per batch. 5. Encode the following data in Section IV.A.4 of this Order using a separate program developed by ISDS to be installed in the respective RDOs computer. This program is not the same as that of the ITS and LBDE system. Only the following data shall be captured: Taxpayer Identification Number (TIN) Name of Taxpayer Gross Income Tax Due Before Withholding, if any Tax Due After Withholding, if any 6. Indicate the Document Locator Number (DLN) in each tax return using the TIN as the DLN. 7. Prepare a Batch Control Sheet B (BCS-B) report after encoding and submit to the Regional Office. 8. Process the refundable tax returns as batched in accordance with Section IV.B of this Order. 9. Prepare and submit a Summary Report to the Regional Office indicating the total number of taxpayers filed and classified under I above. A.3 The Regional Office shall 1. Receive from the Revenue District Offices all BCS-B reports together with the tax returns filed. 2. Process in accordance with Section IV of this Order. 3. File all income tax returns to be placed at the Regional Office Administrative Archive. 4. Prepare a Consolidated Statistical Report of the total number of taxpayers filed per district classified as exempt, break-even and refundable returns, a copy of which is submitted to the Office of the Collection Service before June 30 of each year. llcd B. Processing of Refundable 1700s tax returns Assessment Section of Non-Computerized Revenue District Offices shall : 1. Pre-audit refundable 1700s, as follows: A. Compare the amount of GROSS INCOME and EXEMPTION reflected in the 2316 issued by Employer against the refundable 1700 filed by Employee. a) If both figures tallies ,but the Employer failed to do the year-end adjustment, resulting to over withholding/refund, the Revenue Officer shall: i) Process the employee's refund favorably. ii) List down the names of employers who failed to do the Year-End Adjustment based on the refundable 1700s processed. iii) Submit the list above to the Withholding Agents Monitoring Division for appropriate action, if the employers registered under Metro Manila RDOs except RDO No. 30-Binondo. iv) Pre-audit the employer's Annual Information Return (1743IR/1604) and penalize the employer for non-compliance of the year-end adjustment, if the employer is registered within the RDO of other Regions outside Metro Manila. v) Refer to the RDO concerned for their verification the list of employers registered outside of Metro Manila. b) If the gross income and exemption per 2316 does not tally with the 1700, i) Inform the employee that his claim for refund shall not be processed if he/she failed to submit the Application for Registration (BIR Form No. 1902) or an updated Exemption Certificate (BIR Form No. 2305),using "ANNEX A". ii) Evaluate and process the refund if the employee submit his 1902 or an updated copy of BIR Form 2305 which is duly acknowledged by the Employer and officially transmitted to the BIR receiving office, and a CERTIFICATION from his employer as to the correct and actual amount of exemption claimed based on his 2305 filed. iii) Adjust the Exemption Unit by basing it on his 2316, using BIR Form No. 0500 (Revenue Officer's Audit Report on Income Tax),if the employee failed to present his 1902 or an updated 2305. iv) Require submission of CERTIFICATION from employer as to the actual amount of exemption claimed per 1902/2305 filed, if the 2316 of an employee does not reflect any amount of exemption. 1) Process claim based on employees compliance. 2) Inform the employer of his failure to supply complete information per 2316 issued to employees. 2. Prepare a transmittal list of employees whose claims for refunds were favorably granted as well as those whose refunds were reduced due to adjusted exemptions and send to the Document Processing Division of the Information Systems Operation Service, for refund processing. 3. Indicate in the transmittal list the phrase: "PROCESSED UNDER RMO No. 17-99". LibLex 4. Prepare a list of employees whose claims for refunds were forfeited and became collectible, for file and verification purposes. 5. Send preliminary assessment notices to employees with deficiency taxes due (employees whose claims for refunds became collectible),and require payment of taxes still due or collectible. Document Processing Division of the Information Systems Operations Service (ISOS) shall : 1. Receive copies of the transmittal list from the RDOs with notation that the 1700s were processed based on this RMO. 2. Receive BCS-B (refundable) with corresponding returns. 3. Process refundable claims as endorsed by the respective RDOs. 4. Follow existing procedures in the processing of refundable 1700. Withholding Agents Monitoring Division of the Collection Service shall : 1. Receive the list of employers who failed to do the year-end adjustment from RDO within Metro Manila. 2. Verify if the employer's 1604 are among those transmitted by RDOs for processing, pursuant to RMO 80-98. 3. Pre-audit 1604 of these listed employers and impose penalties for failure to comply with the provisions of the Year-End Adjustment. V. REPEALING CLAUSE This Order hereby repeals or amends accordingly all issuances or portions thereof inconsistent herewith. VI. EFFECTIVITY This Order shall take effect immediately. (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue