Acceptance of Compromise Penalties on Real Property Transactions and Use of Manager's Checks in Payment of Certain Tax Liabilities

September 10, 1991 REVENUE MEMORANDUM ORDER NO. 28-91 SUBJECT : Acceptance of Compromise Penalties on Real Property Transactions and Use of Manager's Checks in Payment of Certain Tax Liabilities TO : All Revenue Regional Directors, Revenue District Officers, Collection Agents and Others Concerned A. Acceptance of compromise penalties . It has been reported that a Revenue District Officer in Metro Manila authorized the acceptance by his Collection Agent of the payment of capital gains tax and compromise penalty from a taxpayer who is under investigation by the Special Team on Real Property Transactions created under RSO 74-91 dated April 1, 1991 and the agents of the National Bureau of Investigation. Because of this, this Office can no longer pursue the criminal prosecution of the taxpayer. cdt In order to prevent the recurrence of such incident in the future, you are hereby directed to first consult the Overall Coordinator or Asst. Overall Coordinator of the special team, before accepting payments of compromise penalties for non-, under-, or late-payment of capital gains tax, documentary stamp tax, and creditable withholding tax on sales and transfers of real properties. If you are in doubt or have no time to consult the above officials, and the taxpayer is insistent on making payment of his tax liabilities, only payments for deficiency tax plus surcharge and interest (without the compromise penalty) should be accepted. The Overall Coordinator is also instructed to give a list of pending cases being investigated by the NBI to the Regional Directors. B. Use of manager's checks in payment of tax liabilities . Existing rules allow taxpayers to issue personal checks in payment of their internal revenue tax liabilities, except documentary stamp taxes which must be paid in manager's, cashier's, or certified checks under RMO 11-73 dated March 2, 1973. This practice resulted in some checks bouncing either because there are no sufficient funds, the account is closed, or the taxpayer issued stop payment order to the bank. Because it takes several days before the BIR knows about the bouncing checks, in many cases it is already too late for the BIR to stop registration of the property in the name of the new owner. Going after the seller of real property to enforce collection of deficiency taxes has been difficult because the seller's address in the capital gains tax return and even on the Deed of Sale is fictitious. aisa dc In order to ensure payment of taxes from individual taxpayers selling or disposing real properties classified as capital assets, henceforth all collection officers, including the accredited agent banks, are enjoined to accept only cash and/or manager's, cashier's, or certified checks, showing the name of the taxpayer, for the payment of the individual's capital gains tax and documentary stamp tax. (Sgd.) EUFRACIO D. SANTOS (Officer-in-Charge) Deputy Commissioner of Internal Revenue