Modified Policies and Procedures on the Processing of Refundable Income Tax Returns and the Refund of Excess Taxes Withheld on Individual Income

May 6, 1994 REVENUE MEMORANDUM ORDER NO. 39-94 SUBJECT : Modified Policies and Procedures on the Processing of Refundable Income Tax Returns and the Refund of Excess Taxes Withheld on Individual Income TO : All Internal Revenue Officers and Others Concerned I. Objectives This Order is issued to: 1. State clearly the revised policies and delineation of functions and responsibilities of each section/division/office involved in the processing of refundable 1701, 1701A and 1701C returns including the payment of the corresponding refund due thereon in accordance with Revenue Administrative Order No. 4-93; aisa dc 2. Provide a more effective system for processing refundable 1701, 1701A and 1701C returns and controlling, releasing/distributing and monitoring of refunds due thereon; 3. Forge stronger BIR - Taxpayer relations through more expeditious action on their tax refunds. II. Policies The following policies shall be observed by all concerned: 1. The processing of refundable income tax returns (ITRs) shall be given priority over other returns by all offices involved. 2. Refundable ITRs ( 1701A and 1701C) shall be refunded after pre-audit. 3. Refundable ITRs with Mixed or Purely Business Income (1701) shall be audited before issuance of tax refund. 4. Pre-audited refundable 1701A and 1701C returns shall be reviewed and approved at the Revenue District Office level only. 5. Refundable 1701C, 1701A and 1701 returns filed with the foreign service posts abroad shall be picked-up from the Department of Foreign Affairs (DFA) and processed by RDO No. 33, Intramuros, Ermita, Malate having jurisdiction over the area. III. Procedures The following shall be the procedures on the refund of excess taxes withheld on individual income: REGIONAL OFFICES A. REVENUE DISTRICT OFFICES (RDOs) Office of the Collection Officer (CO) 1. Receive in triplicate, properly accomplished refundable/exempt/ break-even BIR Form No. 1701A/1701C from taxpayer; 2. Process ITRs in a similar manner as the VAT returns in accordance with pertinent provisions of RMO No. 31-91 as amended by RMO 43-91 and release to taxpayer the duplicate copy of the return; cd i 3. Batch returns into 25s or less and prepare in three (3) copies Batch Control Sheet (BCS-B) for each batch of returns received during the day; Original - Information Systems Operations Service (ISOS) Duplicate - RDO Triplicate - Office of CO 4. Attach to the original and duplicate copies of the BCS-B, the corresponding original and triplicate copies of the returns and forward to the Document Processing Section; Document Processing Section 5. Receive the following documents from offices/sections concerned: a. From accredited bank branches - quadruplicate copies of BCS-As with triplicate copies of tax returns/ATAPs and duplicate copies of BCS-Bs with triplicate copies of tax returns/ATAPs (except 1701A and 1701C returns with no cash/check payment). b. From Office of CO - original and duplicate copies of BCS-Bs with the corresponding batches of original and triplicated copies of 1701A and 1701C returns with no cash/check payment (refundable, exempt and break-even). c. From Office of COs/Deputized Municipal Treasurers, in places where there are no accredited banks - original and duplicate copies of BCS-As and BCS-Bs with the corresponding batches of original and triplicate copies of tax returns/ATAPs. 6. Stamp "Received" and initial copies of BCS and indicate therein the date of receipt; 7. Maintain for each bank branch and/or Office of CO, a "Register of BCS Received"; 8. Check the completeness and correctness of the documents received; 9. For documents received from the Office of CO/Deputized Municipal Treasurer: a. Number all BSC-As and all BCS-Bs separately. The numbering shall be done consecutively each starting with 001 for the first batch of returns received during the year, 002 for the second batch and so on, regardless of whether there are less than 25 returns/ATAPs received during the day. Each BSC number shall be preceded by RDO code and the year of the receipt of the return. b. Attach the numbered original BCS to the corresponding original copies of the return and forward the same to Information Systems Operations Service (ISOS). 10. Assign and indicate Document Locator Number (DLN) on triplicate copies of tax returns except ITRs reflecting therein the Bank Branch Code - BCS Number - Line Number of taxpayer on BCS. ITRs shall be assigned DLN after segregation and classification (see no. 14). 11. Segregate tax returns according to type such as ITRs, VAT returns, etc. 12. Classify the ITRs into: a. Individual (including estates and trusts) BIR Form No. 1701 BIR Form No. 1701Q BIR Form No. 1701A BIR Form No. 1701C b. General Professional Partnership (BIR Form No. 1704) c. Corporations BIR Form No. 1702 BIR Form No. 1702Q BIR Form No. 1702A-1 13. Subclassify the above ITRs into: Type Classification Code a. Taxable Break-Even 1a b. Taxable Collectible 1b c. Exempt 2 d. Refundable Taxable 3 e. Refundable Exempt 4 14. Assign and indicate DLN on ITRs in accordance with RMO No. 9-91 reflecting therein RDO Code - Type/Kind of ITR Filed - Year of the Return - Serial Number; cd 15. Determine the total tax returns received for purposes of the revised "Monthly Summary of Tax Returns Filed" (Annex A) required under RMO No. 2-92 as amended by RMO Nos. 16-92 and 25-92; 16. Post pertinent information from tax returns on the TIN Master received from ISOS for purposes of establishing/updating the "List of Stop-Filers/Non-Filers" and for the preparation of the "Monthly Alpha List of Tax Filers" as required under RMO No. 16-92 giving priority to refundable returns over other types of returns; 17. Forward numbered ITRs (1701, 1701A and 1701C) to Assessment Section, giving priority to refundable returns over other types of returns. Assessment Section 18. Receive returns from Document Processing Section and assign for pre-audit/audit in accordance with existing procedures; 19. Pre-audit/audit refundable 1701A, 1701C and 1701 returns giving them priority over other types of returns; For 1701A and 1701C returns without any discrepancy: 20. Rubber-stamp on the lower middle right portion of each pre-audited refundable 1701A and 1701C indicating the RDO, complete name and signature of the Revenue Officer, date of completion of pre-audit and approval for refund by the Revenue District Officer as illustrated: 21. For 1701A and 1701C returns with discrepancies: a. Accomplish the Revenue Officer's Audit Report on Income Tax (BIR Form No. 1717-A), revised October, 1993 (ANNEX B) and prepare Post Reporting Notice for each pre-audited 1701A and 1701C returns with discrepancies; b. Forward pre-audited 1701A and 1701C returns with discrepancies together with their: - corresponding BIR Form No. 1717-A, and - Post Reporting Notice to the Revenue District Officer (RDO) for approval and signature; c. Batch all approved pre-audited 1701A and 1701C returns with their corresponding attachments into 100s or less by kind of return and prepare in duplicate pre-numbered Control Sheet for Refundable Returns. CS-R (ANNEX C) for each batch of return: original - ISOS duplicate - RDO d. Attach to the original CS-R the corresponding batches of approved pre-audited refundable 1701A or 1701C returns with attachments; retain duplicate copy of CS-R e. Forward the pre-numbered CS-R with the corresponding batches of pre-audited refundable 1701A or 1701C returns with attachments to ISOS; 22. For 1701 returns: a. Accomplish BIR Form No. 1717-A and prepare Post Reporting Notice for each audited 1701 return; b. Prepare transmittal letter in two (2) copies for the signature of the RDO enumerating: - the name and TIN of Taxpayer, - taxable year, - tax due per return, and - the amount of deficiency tax for each tax docket original - Assessment Division (AssD) duplicate - RDO c. Attach original of signed transmittal letter to the corresponding tax dockets and retain duplicate copy of transmittal letter for file. Each transmittal letter shall cover a maximum of twenty five (25) tax dockets; d. Forward tax dockets to AssD; 23. Forward refundable 1701A/1701C which became break-even to Administrative Division (AdmD) for file. Forward dockets of refundable ITRs that became collectible and remained unpaid, to AssD for appropriate action in accordance with pertinent issuances, thirty (30) days from the date of the Post Reporting Notice; 24. Receive duplicate copy of CS-R from AssD; match it with transmittal letters (see step 22b) on file to reconcile record on tax dockets covering refundable 1701 returns; 25. Receive Report of Defective Refundable Returns with the corresponding returns from ISOS thru GSD, for appropriate action. 26. Receive duplicate copy of Semestral Alpha List of Refundable Returns by RDO from ISOS thru GSD for reference purposes. B. ASSESSMENT DIVISION ( AssD ) 1. Receive from RDOs the tax dockets with the covering transmittal letter; 2. Review tax dockets for final approval by the Chief, AssD; 3. Batch all approved refundable tax dockets into 100s or less and prepare CS-R (ANNEX C) in triplicate for each batch; original - ISOS duplicate - RDO concerned triplicate - AssD 4. Attach the original CS-R to the corresponding batches of approved refundable tax dockets; forward duplicate copy of CS-R to RDO concerned and retain triplicate copy for file; 5. Forward the approved refundable tax dockets with corresponding CS-R to ISOS; 6. Receive Tax Refund Payroll Summary and TRP from the Finance Division (FD); 7. Certify on the space provided, the TRP Summary that expenses are necessary and lawful and return the same to FD. C. FINANCE DIVISION ( FD ) 1. Receive Tax Refund Payroll (TRP) including TRP Summary from Accounting Division (AD); Notice of Fund Transfer (NFT) and Sub-Allotment Advice (SAA) from Budget Division (BD); 2. Draw Journal Voucher (JV) to record the receipt of NFT and SAA; 3. Forward to the AssD the TRP and TRP Summary for certification that the expenses are necessary and lawful; 4. Prepare Request for Obligation of Allotment (ROA) to cover tax refund; assign obligation number thereto; 5. Post ROA to Journal and Analysis of Obligation; 6. Certify on the space provided in the TRP Summary as to availability of funds, upon certification of the TRP by the Chief, AssD; 7. Prepare and forward Advice to Land Bank of the Philippines (LBP) to debit BIR account for every TRN encashed to the Assistant Director for signature; 8. Draw JV to take up the debit/credit advice received from LBP; 9. Prepare Trial Balance under Fund 105 (Tax Refund) and its supporting schedules: copy furnished the Accounting Division; 10. Reconcile the encashed TRNs against the TRP to determine the claimed and unclaimed Tax Refund Notices (TRNs) and prepare in three (3) copies Reconciliation Statement for distribution to the following offices: original - COA resident Auditor duplicate - LBP Branch triplicate - file copy D. ADMINISTRATIVE DIVISION ( AdmD ) 1. Receive TRNs and TRN Transmittal List with corresponding processed ITRs/dockets covered by a Transmittal of Refundable ITRs by batch from ISOS thru GSD; 2. Mail TRNs to refundees after 2 weeks from the date LBP Branch received the TRP including the TRP Summary and Advice. Reflect mailing date on the space provided for the purpose on the TRN Transmittal List; 3. Receive original copy of "Semestral Alpha List of Refundable Returns" by RDO from ISOS thru GSD for reference purpose. 4. Keep processed ITRs/dockets on file. E. OFFICE OF THE ASSISTANT REGIONAL DIRECTOR 1. Receive and approve TRP Summary for payment purposes; 2. Forward the approved TRP Summary to Finance Division (FD). 3. Receive and sign Advice to LBP Branch to debit BIR account for every TRN encashed and return the same to FD. NATIONAL OFFICE F. INFORMATION SYSTEMS OPERATIONS SERVICE ( ISOS ) 1. Receive and process original copies of the returns and prepare the necessary NPCS reports; 2. Forward original returns to AdmD, for safekeeping and future reference; 3. Receive batches of pre-audited refundable 1701A/1701C returns and attachments with their corresponding CS-Rs from RDOs; 4. Receive the batches of tax dockets with their corresponding CS-Rs from the Assessment Division; 5. Check the completeness and correctness of the attached returns/tax dockets against the CS-Rs; note down any discrepancy or inconsistency found and inform concerned RDO immediately; 6. Encode pertinent data from the returns; 7. Conduct computer audit preparatory to the preparation of the tax refund; validated declaration on withholding tax against the Annual Information Return of Income Tax Withheld on Compensation, Expanded and Final Withholding Taxes (BIR Form No. 1743-IR) and prepare corresponding discrepancy reports; 8. Conduct duplication run to preclude the possibility of a taxpayer claiming refund more than once on the same income; 9. Generate the following reports: a. Tax Refund Notice (TRN) - to be forwarded to Administrative Division, thru the General Services Division b. Tax Refund Payroll (TRP) including TRP Summary Original - COA Auditor Duplicate - (LBP) Branch Triplicate - FD Note: TRP shall contain not more than 2,000 refundees in a payroll c. TRP Recap by Region Original - AD Duplicate - BD Triplicate - AD (supporting document to Disbursement Voucher) d. Transmittal List of Refundable ITRs by batch for the AdmD e. Semestral Alpha List of Refundable Returns by RDO Original - AdmD Duplicate - RDO f. TRN Transmittal List by region (for refunds amounting to below P1,000.00) acd Original - AdmD Duplicate - ISOS g. TRN Transmittal List by region (for refunds amounting to P1,000.00 or more which shall be sent by registered mail to refundees) Original - AdmD Duplicate - ISOS h. Report of Defective Refundable Returns Original - RDO concerned Duplicate - Performance Monitoring Service (PMS) Triplicate - ISOS 10. Forward the defective refundable returns together with the corresponding report to RDO concerned; 11. Forward generated reports and documents to offices concerned. G. PERFORMANCE MONITORING SERVICE ( PMS ) 1. Receive duplicate copy of "Report of Defective Refundable Returns" from ISOS, for evaluation and appropriate action. H. FINANCIAL AND ADMINISTRATIVE SERVICE ( FAS ) 1. Receive SAA from BD, approve and return the same to BD; 2. Receive Disbursement Voucher (DV) with TRP Recap by region and SAA, NFT and request for fund transfer from AD; 3. Review and approve aforementioned documents; forward approved DV with the attachment to GSD for preparation of check; return the signed NFT and request for fund transfer to AD; 4. Countersign checks covering fund transfer and return the same the GSD. ACCOUNTING DIVISION 1. Receive in three (3) copies each TRP including TRP Summary and TRP Recap by Region from ISOS; 2. Transmit the duplicate and triplicate copies of TRP Recap by Region to Chief, BD as basis for preparation of SAA; 3. Receive three (3) copies of approved SAA with triplicate copy of TRP Recap from BD; file duplicate copy of TRP Recap; 4. Prepare in three (3) copies DV covering transfer of funds from the National Office bank account to Regional Office concerned based on the SAA; attach quintuplicate copy of SAA and triplicate copy of TRP Recap to DV to serve as supporting documents: original - COA duplicate - AD triplicate (onion-skin copy) - GSD 5. Prepare in two (2) copies NFT addressed to the Regional Director of the Regional Office concerned; original - Regional Office concerned duplicate - AD 6. Prepare request for fund transfer addressed to the Land Bank of the Philippines - Quezon City Branch (LBP - Q.C.) based on the NFT; forward the same together with NFT and two (2) copies of DV attached with the quintuplicate copy of SAA and triplicate copy of TRP Recap to FAS for approval; retain duplicate copy of DV for file; Note: Approved DV will be the bases for preparation of check by GSD. 7. Receive approved NFT and request for fund transfer from FAS; acd 8. Forward original copy of NFT to Budget Division for mailing to Regional Office concerned; retain duplicate copy of NFT for file; 9. Receive check from GSD; 10. Forward the check together with the request for fund transfer to LBP - Q.C. 11. Forward the original and duplicate copies of TRP including TRP Summary to the GSD for mailing to FD of concerned regional office. 12. Receive and consolidate Trial Balances including the supporting schedules prepared by Regional Offices. BUDGET DIVISION 1. Receive duplicate and triplicate copies of TRP Recap by Region from AD; 2. Prepare in five (5) copies SAA by region and forward to FAS for approval: original - FD duplicate - BD triplicate - AD quadruplicate - AD (to be attached to JV) quintuplicate - GSD (to be attached to DV) 3. Forward three (3) copies of approved SAA with triplicate copy of TRP Recap by Region to AD and retain duplicate copy of SAA for file; 4. Receive original copy of NFT from AD and forward the same together with the original copy of SAA to FD of concerned regional office. GENERAL SERVICES DIVISION ( GSD ) 1. Receive from ISOS TRNs and TRN Transmittal Lists with corresponding processed ITRs covered by a Transmittal List of Refundable ITRs by batch and mail to AdmD concerned; 2. Receive defective refundable returns with the corresponding report from ISOS and mail to the RDO concerned; 3. Receive the approved DV together with quintuplicate copy of SAA and triplicate copy of TRP Recap from FAS; 4. Draw checks in favor of LBP - Q.C. covering transfer of funds and forward the same to FAS; receive and forward signed check to AD. 5. Transmit to Commission on Audit (COA) original DV together with onion-skin copy of the checks, SAA and TRP Recap per Region for audit purposes; retain triplicate copy of DV and onion-skin copies of check for file; 6. Receive original and duplicate copies of TRP including TRP Summary from AD; mail to FD of concerned regional office. 7. Receive from ISOS original and duplicate copies of Semestral Alpha List of Refundable Returns by RDO and mail to AdmD and RDO concerned, respectively. III. Repealing Clause This Order amends pertinent portions of RMO No. 25-92 dated June 9, 1992 (II.3) and all other issuances or portions thereof inconsistent herewith. IV. Effectivity This Order shall take effect immediately. VICTOR A. DEOFERIO, JR. Acting Commissioner of Internal Revenue ANNEX A Monthly Summary of Tax Returns Filed ANNEX B Revenue Officer's Audit Report on Income Tax ANNEX C Control Sheet for Refundable Returns Tranmitted to ISOS May 5, 1994 MEMORANDUM FOR: Acting Commissioner Victor A. Deoferio, Jr. Submitted for your review and approval is the proposed Revenue Memorandum Order (RMO) re: Modified Policies and Procedures on the Processing of Refundable Income Tax Returns and the Refund of Excess Taxes Withheld on Individual Income. BEETHOVEN L. RUALO Deputy Commissioner