Revised Procedures on the Refund of Excess Taxes Withheld on Individual Income

September 28, 1988 REVENUE MEMORANDUM ORDER NO. 46-88 SUBJECT : Revised Procedures on the Refund of Excess Taxes Withheld on Individual Income TO : All Internal Revenue Officers and Others Concerned I. Objectives : This Order is issued: A. To prescribe an effective system of processing and payment of tax refund arising from excess of withholding taxes on individual income in line with the requirements of the New Disbursement System (NDS). B. To restate the delineation of functions of each office/division/unit involved as a result of the implementation of Executive Order No. 127 reorganizing the BIR and RAO No. 22-88 dated September 15, 1988. II. Policies : A. The processing of refundable income tax returns (ITRs) shall be given priority over other returns by all offices involved. aisa dc B. Refundable ITRs with purely compensation income (1701A) shall be refunded after pre-audit. C. Refundable ITRs with Mixed or Purely Business Income (1701) shall be investigated before issuance of tax refund. D. The servicing and encashment of all processed tax refunds shall be done by the Land Bank of the Philippines after the necessary funds shall have been deposited therein by the Department of Budget and Management in accordance with the New Disbursement System. III. Procedures : The following procedures are prescribed for compliance by all concerned: A. OFFICE OF THE COLLECTION OFFICER. 1. Receive two (2) copies of ITRs from taxpayers; 2. Bundle and transmit the returns to the Revenue District Office (RDO) within five (5) days from receipt; B. REVENUE DISTRICT OFFICER (RDO) 1. Receive ITRs from Collection Officers; 2. Separate out-of-district returns (including 1701C returns) from those properly belonging to the district; 3. Segregate refundable ITRs from other returns; 4. Classify refundable ITRs into those with purely compensation income (1701A) and those with mixed or purely business income (1701); casia 5. Batch ITRs by 100s according to the above classification; 6. Forward batches of ITRs including the out-of-district returns to the Assessment Branch within five (5) days from receipt; 7. Conduct investigation on refundable 1701 returns transmitted by Assessment Branch for field audit; 8. Prepare Enforcement Officer's Audit Report and attach the same to the return; 9. Forward investigated refundable tax dockets to Tax Credit/Refund Division. C. ASSESSMENT BRANCH 1. Receive batches of ITRs from RDOs; transmit out-of-district returns to proper RDO and International Tax Affairs Division (ITAD), if any; 2. Assign assessment numbers to classified batches of ITRs in accordance with RMO Nos. 9-76 and 2-77; For refundable ITRs with compensation income (1701A) - 3. Pre-audit the returns; 4. Re-batch ITRs by 100s; 5. Prepare Block Control Sheet (BCS), in 3 copies; attach the original BCS to the corresponding batch of refundable ITRs; original Revenue Computer Center (RCC) duplicate Tax Credit/Refund Division (TC/RD) triplicate office copy 6. Forward batches of original and duplicate copies of refundable 1701A returns with the attached BCS to RCC; forward the duplicate of the BCS to TC/RD for reference purposes; file office copy. For refundable ITRs with mixed or purely business income (1701) - 7. Classify refundable 1701 returns into field audit and office audit returns; 8. Forward refundable 1701 returns classified for field audit to the Revenue District Office concerned; 9. Conduct investigation on refundable 1701 returns classified for office audit; 10. Prepare Enforcement Officer's Audit Report and attach the same to the return; 11. Forward audited refundable tax dockets to TC/RD. D. INTERNATIONAL TAX AFFAIRS DIVISION (ITAD) 1. Receive two (2) copies of 1701C returns directly from taxpayers and regional offices for returns filed in the Philippines; receive 1701C, 1701 and 1701A from revenue post, embassies and consulate offices abroad, for returns filed outside the Philippines; 2. Segregate refundable ITRs from other returns; 3. Assign assessment numbers to the refundable ITRs in accordance with RMO Nos. 9-76 and 2-77; 4. Pre-audit 1701A returns/conduct office audit on 1701C and 1701 returns; cdt 5. Prepare and attach to the return the Audit Sheet for review and approval of the Division Chief; 6. Prepare BCS in 3 copies; attach the original BCS to the corresponding batch of refundable ITRs; original RCC duplicate TC/RD triplicate office copy 7. Forward batches of original and duplicate copies of refundable 1701C, 1701 and 1701A returns with the attached BCS to RCC; forward the duplicate of the BCS to TC/RD for reference purposes; file office copy. E. REVENUE COMPUTER CENTER (RCC) 1. Receive batches of original and duplicate refundable 1701A returns from the Assessment Branches, approved tax dockets on refundable 1701 returns from the TC/RD and original and duplicate refundable 1701C, 1701 and 1701A returns from the International Tax Affairs Division (ITAD) with their corresponding covering BCS; acd 2. Match the ITR 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; 3. Conduct computer audit preparatory to the preparation of the tax refund; 4. Pull-out from the batches defective refundable returns (those which became either collectible, even or will still need resolution) after computer audit. These shall be the basis for the preparation of the Report of Defective Refundable Returns; 5. Conduct duplication run to preclude the possibility of a taxpayer claiming tax refund more than once on the same income; 6. Generate the following: a) Tax Refund Payroll (TRP) not more than 2,000 refundees in a payroll (3) Original Auditor Duplicate Disbursement Accounting Division (DAD) Triplicate Land Bank of the Philippines (LBP) All copies shall be transmitted to LBP first. The original and duplicate shall be returned to the BIR later duly signed by the individual payees and shall be used for liquidation purposes. b) TRP Summary per LBP Branch (4) Original LBP Duplicate DAD Triplicate Budget Division (BD) Quadruplicate RCC c) Tax Refund Notices (TRN) (1) Tax Refundee d) TRN Transmittal List (2) Original General Services Division (GSD) Duplicate TC/RD e) List of Refundable ITRs (for attachment to corresponding batch of ITRs) cdt (1) Original Regional Office concerned (Administrative Branch) f) Report of Defective Refundable Returns (1) Original TC/RD g) Tax Refund Alpha List (overall and by region) Overall: (1) Original - TC/RD By region: (1) Original - Regional Office concerned (Adm. Branch) h) Reconciliation Report (3) Original Commission on Audit (COA) Duplicate DAD Triplicate RCC 7. Forward to TC/RD the TRP, Summary per LBP Branch, TRN, TRN Transmittal List and List of Refundable ITRs including the corresponding ITRs within 30 days from receipt of the refundable ITRs; 8. Forward to TC/RD the Report of Defective Refundable Returns with corresponding defective returns and Tax Refund Alpha List (overall and by region) at the end of the semester); 9. Forward original and duplicate copies of Reconciliation Report to DAD within 15 days from receipt of refund documents from LBP thru DAD. F. TAX CREDIT/REFUND DIVISION 1. Review tax dockets on refundable 1701 returns received from the Revenue District Offices and Assessment Branches; 2. Prepare BCS in 2 copies; attach the original BCS to the corresponding batch of approved tax dockets; original RCC duplicate office copy 3. Forward the batch of approved tax dockets with the attached BCS to RCC within 15 days from receipt; file office copy of the BCS; 4. Receive and check/match ITRs, TRN, List of Refundable ITRs, TRN Transmittal List, etc. from the RCC; 5. Certify to the correctness of the TRP by signing on the space provided thereon. aisa dc 6. Forward to Disbursement Accounting Division the three (3) copies each of the TRP and the TRP Summary per LBP Branch; 7. Insert TRNs individually in window envelopes provided for the purpose and forward the same with both copies of the TRN Transmittal List of GSD; 8. Forward the List of Refundable ITRs with the corresponding returns to the Administrative Branch of the Regional Office concerned; 9. Received from RCC at the end of the semester, the Report of Defective Refundable Returns with the corresponding defective returns and Tax Refund Alpha List (overall and by region); 10. Forward to the Administrative Branch of the Regional Office concerned thru GSD the Tax Refund Alpha List for the region's information and reference; retain overall list for its reference; 11. Undertake appropriate action on the returns of taxpayers indicated in the Report of Defective Refundable Returns as needing further investigation/verification and/or collection. G. BUDGET DIVISION (BD) 1. Prepare in 7 copies and sign Request for Obligation of Allotment (ROA) based on TRP Summary; original DAD duplicate BD (suspense file) triplicate DAD quadruplicate BD (with obligation no.) quintuplicate to be attached to voucher sextuplicate DAD sextuplicate COA 2. Retain office copy of ROA and TRP Summary; forward ROA with TRP Summary to DAD. H. DISBURSEMENT ACCOUNTING DIVISION (DAD) 1. Receive and re-check the mathematical accuracy of the totals reflected on the TRP and TRP Summary from TC/RD; 2. Retain TRP; forward TRP Summary to Budget Division; 3. Receive ROA with TRP Summary from the Budget Division; 4. Certify to the availability of funds by signing on the appropriate space in the ROA and TRP; cd i 5. Retain office copy of the documents; forward TRP and attachments to Internal Control Unit (ICU). 6. Prepare Request for Fund Transfer addressed to Land Bank of the Philippines (LBP), Quezon City; 7. Forward Request to Financial Service, for signature of Asst. Commissioner Financial Service (FS) or his authorized representative; 8. Receive signed Request for Fund Transfer from FS; retain office copy of the same; await approved TRP from Administrative Service (AS); 9. Receive approved TRP from the AS; 10. Receive and forward the original, duplicate and triplicate copies of the TRP, the original copy of the TRP Summary, and the original and duplicate copies of signed Request for Fund Transfer to LBP as basis for the payment of tax refunds, furnishing TC/RD a copy of the signed Request for Fund Transfer to serve as notice that said batches are ready for payment after 2 weeks from receipt of refund documents by LBP; notify GSD too; 11. Receive from LBP and forward the original copy of the TRP to COA and the duplicate to RCC as basis for the generation of the Reconciliation Report; 12. Receive Reconciliation Report from RCC, forward original copy to COA and retain duplicate for DAD's use. I. INTERNAL CONTROL UNIT (ICU) 1. Receive TRP and attachments from DAD; 2. Pre-audit TRP and forward to the Administrative Service (AS). J. GENERAL SERVICES DIVISION (GSD) 1. Receive TRNs with both copies of the TRN Transmittal List from TC/RD and check enclosed TRNs against transmittal; aisa dc 2. Mail TRNs to refundees after 2 weeks from receipt of refund documents by LBP, reflect date when mailed on the space provided for the purpose on both copies of the TRN Transmittal List, return duplicate copy of TRN Transmittal List to TC/RD for its reference and file office copy; K. ADMINISTRATIVE SERVICE (AS) 1. Receive TRP and attachments from the ICU; 2. Approve for payment the TRP and forward the documents to DAD. IV. Repealing Clause : This Order amends RMO No. 8-88 dated February 9, 1988 and all other existing issuances or portions thereof inconsistent with this Order. casia V. Effectivity : This Order shall take effect immediately upon approval. (SGD.) EUFRACIO D. SANTOS Deputy Commissioner