RMO No. 24-2000: Prescribes the Year 2000 Audit Program for Revenue District Offices

Key points

1. Coverage. The Program covers investigation of 1998 and 1999 returns, including income tax returns of fiscal-period taxpayers whose taxable years ended any day from July 1, 1998 to June 30, 2000. Returns for 1997 may be audited with prior approval of the Assistant Commissioner, Assessment Service (ACIR, AS). Claims for tax credit/refund, sales/transfers of properties and tax clearance requests due to retirement of business must be acted on immediately.
2. Mandatory audit. This covers estate/donor’s tax returns and taxpayers retiring from business. It covers claims for income tax credit/refund, transfers of property in exchange for shares and sales of unlisted shares, and government withholding agents. Taxpayers selected based on third party information referred by the Assessment Service are also covered.
3. Priority taxpayers. If mandatory audits give too little workload, the Revenue District Officer may select taxpayers who filed break-even returns or showed net loss for at least two (2) consecutive years, or the top 100 taxpayers in the district by gross sales/receipts with no VAT or percentage tax payment for the current and preceding year. Taxpayers with substantial reduction in gross sales/receipts/tax payments or substantial increase in costs and expenses, and those with substantial tax deficiency from short-audit, may also be chosen. So may taxpayers in the top two industries in the area with the lowest tax compliance.
4. Letters of Authority. The Regional Director issues and approves all LAs. LAs for priority target taxpayers need prior written approval of the ACIR, AS. LAs are classified by gross assets or gross sales/receipts, whichever is higher, as of December 31, 1997, 1998 and 1999. The Assessment Service matches RDO lists against National Office audit lists to prevent multiple LAs to the same taxpayer for the same taxable year.
5. Conduct of audits. All liabilities of the taxpayer are investigated simultaneously. Mission orders, correspondence letters or similar orders for audit and assessment are strictly prohibited. Only Revenue Officers-Assessment Group may audit and investigate, and each starts with a minimum of twenty (20) and a maximum of thirty (30) cases.
6. Pending cases first. No new case goes to a Revenue Officer until pending cases are audited and reported within one (1) month from effectivity. These are prescribing cases, re-investigation cases, refund/credit claims assigned before April 30, 2000, third party information cases and retiring taxpayers assigned before April 30, 2000. Cases held for more than twelve (12) months are included.

Who is affected

• Taxpayers audited by Revenue District Offices
• Fiscal-period taxpayers with taxable years ended July 1, 1998 to June 30, 2000
• Revenue Officers-Assessment Group

Deadlines and effectivity

• Issued August 4, 2000
• Pending cases audited and reported within one (1) month from effectivity