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ASSESSMENT AND COLLECTION PROCESS

COMPREHENSIVE SEMINAR FOR TAX AGENTS AND PRACTITIONERS Social Hall, RR 19 – Davao City Bldg., Bolton Ext., Davao City. ASSESSMENT AND COLLECTION PROCESS. Prepared by: ALICE S.A. GONZALES, CPA, DBA Chief, Collection Division. Returns are filed and processed at the RDO. Start. Returns.

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ASSESSMENT AND COLLECTION PROCESS

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  1. COMPREHENSIVE SEMINAR FOR TAX AGENTS AND PRACTITIONERS Social Hall, RR 19 – Davao City Bldg., Bolton Ext., Davao City ASSESSMENT AND COLLECTION PROCESS Prepared by: ALICE S.A. GONZALES, CPA, DBA Chief, Collection Division

  2. Returns are filed and processed at the RDO Start Returns Process Returns Returns Serve eLA, TVN, MOA • RMO 44-2010 dtd. May 12, 2010 on the • Electronic Issuance of LAs. • RMC 98-2010 dtd. Dec. 8, 2010 on the guidelines and procedures for the treatment of Unserved Letter Notices, LAs and TVNs where the concerned TP cannot be located. Conduct Verification/ Investigation Prepare Report 15-Day Notice Submit Final Report A

  3. THE ASSESSMENT DIVISION • Tasked to prepare and issue Preliminary Assessment Notice(PAN) and Final Assessment Notice (FAN) pursuant to RMO 37-94 sets the guidelines and procedures on the preparation, approval and release of assessment notices and demand letters and the preparation of BIR Form 40.00.

  4. The Assessment Division A Review Report submitted by the RDO Returns RETURN/S Returns Report of Invest. Form 2302 Issue Preliminary Notice (PAN) TP to respond within 15 days TP Pays? Yes Close the Case/ Issue Termination Letter (TL)/ Closing Letter No Yes Issue Final Assessment Notice/ Demand Letter TP Pays? Prepare Form 40.00/ Forward to Collection Division No TP to respond within 30 days B

  5. Protest on the Assessment • Stamp “Received” letter of protest and attach the same to the docket. • Determine if protest was filed within 30-day prescribed period. • Require taxpayer to accomplish and sign a Waiver of the Statute of Limitation not lesser than six (6) months. • Indorse request to the RDO for the disposition of the case.

  6. Protest on the Assessment • If request is approved at the level of the RDO, forward docket to the Assessment Division who shall be responsible for evaluating the veracity of the protest. All follow-ups shall be done at the Assessment Div. • If request is denied at the RDO level, inform TP of such denial & proceed with the next step.

  7. Requirements for the Waiver of the Statute of Limitation to be valid and binding • Must be signed by the taxpayer himself or his representative with an SPA or the President or any responsible official if taxpayer is corporation; • Must be accepted and signed by the Regional Director; • Extention period must be specified in the document not lesser than six mos.

  8. Protest on the Assessment • If protest is resolved at the Assessment Division (question of facts) or at the Legal Division (question of law): • Full cancellation of the liability, prepare ATCA); • If portion of the liability has been cancelled, prepare new assessment notice and ATCA the amount cancelled. Note: Once protested case has already been resolved, the TP can no longer pay his tax liability by way of validity or jeopardy assessment except for reasons of financial capacity.

  9. Protest on the Assessment • If TP still fails to respond on the new assessment within the prescribed period, docket shall be returned to the RDO for enforcement of collection. • SA shall prepare the 2nd Collection Letter to be signed by the RDO and mail or serve to TP concerned.

  10. At the Collection Division B Receive 40.00 Returns Tax Docket Returns Tax Docket BIR Form 40.00 Encode/ Assign Number/Record in the Index Card Forward to respective RDOs for Collection Monitor Movement of Tax Dockets To RDO

  11. The Collection Process at the RDO Level

  12. Assignment of Dockets to RO • Memorandum of Assignment (MOA) • RO to prepare Preliminary Collection Letter signed by the RDO and mail/serve to TP. • With response from TP • Willing to pay • In Full amount • By Installment • Settle liability by way of compromise • Files a protest on the assessment • Without response from TP within 10 days, prepare Final Notice before Seizure Letter • If no response within 10 days from service of Final Notice of Collection Letter, issue WDL

  13. Delinquent Accounts • In general, once an assessment is issued with FAN and no response was received from the TP within the prescribed 30-day period, the assessment becomes final and executory. Taxpayer loses all his rights to refute the findings or file a protest on the assessment. Except: • If taxpayer did not received the FAN. • If taxpayer availed of the amnesty program.

  14. Payment of Liability • Payment in Full • Fill-up BIR Form 0605 • TP to sign the form • RDO must also sign the form before payment is made. • TP shall pay directly to the bank or in the absence thereof, to the RCO. • TP shall photocopy the validated 0605 and deposit slip and submit to SA for attachment to the docket. • SA renders final closure report and forward docket to Assessment Division for Termination Letter or Closure Letter as the case may be.

  15. Payment of Liability • Payment by Installment • Request letter from the taxpayer specifying his intent to pay the liability by way of installment. • Wait for the approval of request. • If granted, SA shall compute the penalties up to the last installment and the installment payment that TP is supposed to pay based on approved request. • If disapproved, TP will be informed in writing of such denial and collect the amount in full. If no action or response is received from TP, issued WDL.

  16. Payment by Compromise Settlement • Rules on Compromise • Sec. 204(A), the authority given to the Commissioner to compromise includes the civil and criminal aspects. Compromise in the Civil Case • Doubtful validity (reasonable doubt) • Financial Incapacity (demonstrate clear inability to pay) • Criminal aspects of the tax case may be compromised only before institution of the criminal action in court. • Power of the CIR to compromise is discretionalrywith him and no court can compel him/her to exercise such discretion one way or the other. • CIR should not compromise a case out of pity. There must always be a basis.

  17. Payment by Compromise Settlement • A case that has already been finally decided by the SC is no longer open to compromise. • If a party refuses to abide by the compromise, the other party may insist upon the original demand. Example: Case with Signed Agreement Form. • Compromise may be set aside by reason of fraud, mistake or violence. • A compromise between the TP and the BIR properly entered into is binding and enforceable. However, a judicial compromise can also be honored by the Bureau. • The surcharge of 25% cannot be compromised unless approved by the Commissioner.

  18. Payment by Compromise Settlement • The TP cannot be compelled by the CIR to accept a compromise penalty for violations of the NIRC, compromise being mutual in nature. Example: Case where collectible involves payment of compromise . • compromise internal revenue cases subject to such limitations and restrictions as may be imposed under rules and regulations to be promulgated for the purpose. Example: One-time abatement program (RMO 15-2006); AREC, etc.

  19. Payment by Compromise Settlement • Procedures in a Compromise Settlement • Letter request from the TP to avail of the compromise payment. • Complete docket of the case • Business data of the TP • Latest ITR for salaried employees and certificate of Total Landholdings from the City or Municipal Assessor or Register of Deeds. • Latest ITR for registered business TP with latest Financial Statements as Certified by an accredited CPA. • Waiver of the secrecy of bank deposits (provisions of RA 1405, in case of financial incapacity) and Sworn Statement that he has no TCC on hand or in transit or claim for tax refund.

  20. Payment by Compromise Settlement • All requests for Compromise Settlement shall be forwarded to the Regional Evaluation Board (REB) who shall evaluate the filed application and approve the cancellation of the unpaid amount through ATCA. • REB shall evaluate and approve ATCA for cases involving basic deficiency taxes of P500.000 and below only. More than this set threshold, is under the jurisdiction of the National Evaluation Board (NEB).

  21. Resolution by Abatement/Cancellation • Sec. 204(B). Gives the BIR the authority to abate/cancel a tax liability when the following conditions are met: • The tax or any portion thereof appears to be unjustly or excessively assessed, or • The administration & collection costs involved do not justify the collection of the amount due, • Taxpayer is dead, leaving no distrainable/leviable property. • Taxpayer is abroad leaving no forwarding address with no distrainable or leviable property,

  22. Resolution by Abatement/Cancellation • In case of corp., when already dissolved and all subscribed shares of stock have been fully paid, without prejudice from the filing of any criminal charges against the responsible officials of the corporation for non-payment of the tax. • The tax case has already prescribed.

  23. Resolution by Abatement/Cancellation • Procedures in the Abatement of Tax Liability • The taxpayer shall file a request letter attaching therewith documentary evidences addressed to the CIR to the RDO stating the reason of the request. • The RDO shall evaluate the TP’s request and prepare recommendation which will pass through the RDO and RD for signature before the same shall be submitted to the CIR for approval. • If during his evaluation, the RDO finds out that the reason(s) for TP’s request for abatement is not satisfactory, he shall notify the TP that the offer will be denied stating the reasons of the denial. • Once denied, the entire docket and all attachments will be returned to the RO to enforce the collection of tax.

  24. Non-Payment of Liability • Non-payment of tax liability will resort to the enforcement of administrative summary remedies.

  25. Civil Remedies of the State for Collection of Taxes • Sec. 205 – Remedies for the collection of Delinquent Taxes: • By Distraint of Goods, chattels, effect and other personal property • By Civil or criminal action * Both remedies can be pursued simultaneously in the discretion of the authorities charged with the collection of taxes • The remedies of distraint and levy shall not be availed of where the amount involved is not more than P100 .

  26. Warrant of Distraint and Levy • Distraint– refers to seizure by the government of personal property, tangible and intangible, to enforce the collection of taxes. • Levy – refers to the seizure by the government of real properties and interest in or rights to such properties in order to enforce the payment of taxes.

  27. General Rule in the issuance of WDL • Issuance of WDL shall be effected if taxpayer fails to respond in the preliminary letters sent but not earlier than 90 days from date assessment becomes due and collectible. Exceptions: • Where the tax shown in the return is not paid on time (including dishonored checks and DST) it can be collected immediately by distraint or levy. • In case of failure by taxpayer to pay the 2nd installment of the tax as shown on the return, which is July 15, the tax may also be collected immediately by distraint or levy.

  28. Procedure in the issuance of WDL • Fill-up BIR Form 1301 – Warrant of Distraint and/or Levy. • Forward the accomplished form together with the docket to the authorized signatory. • The WDL shall be numbered and posted in the Warrant Register in the manner prescribed in RR 3-69 dated April 21, 1969 maintained in the RDO’s office.

  29. Service of WDL

  30. Service of WDL

  31. Next steps after service of WDL • If TP still fails to pay his delinquent account/no response to the WDL: • RO shall start looking for properties that can be attached to the tax liabilities: • Go to City Assessor’s Office • Go to the Registry of Deeds • Go to LTO • Go to Business Bureau • Go to SEC • Bank Accounts • Prepare Notice of Tax Lien (NTL)

  32. Notice of Tax Lien (NTL) • Use to validate the legal claim or charge by the government on the property of the taxpayer either personal or real, as security for the payment of his tax liability. • Requisites of a Tax Lien • There must be a sum due by means of an assessment; • There must be a demand for payment of the tax liabilities; and • There must be failure from the taxpayer to pay the liabilities.

  33. Procedure in the Preparation of NTL • Prepare NTL and forward to Authorized Signatory. • File NTL to the ROD or City Assessor’s Office where the property is located. Make sure that the receiving office will indicate the date of receipt of NTL. • If TP has real property with TCT, have the lien annotated at the back of the title in favor of the gov’t. then secure copy of the annotated title and attach to the docket. • If no title, secure photocopy of Tax declaration from the City Assessor’s office.

  34. Procedure in the Preparation of NTL • Send copy of filed NTL to the taxpayer concerned for his/her information • Follow procedures contained n the preparation and service of Notice of Tax Levy on real property, if taxpayer fails to pay his/her tax liabilities after receiving the filed NTL. • Secure certificate of no property holdings from ROD if taxpayer has no real property. • Recommend case for suspense file by accomplishing the form under RMO

  35. Distraint of Personal Property • RO to prepare list of goods, chattels, effects, or other personal properties using BIR Form 2801 (Constructive) or 2802 (Actual) • Stocks and other securities shall be distrained by serving copy of Warrant of Distraint. • Debts and credits shall be distrained by leaving with the person owing the debts or having in his possession or under his control any credit belonging to the TP to remit to the CIR the amount of such debts or credits. • Bank account shall be garnished by serving Warrant of Garnishment to the President, Manager, Treasurer, Cashier or other responsible officials. • Seized properties shall be subject to auction sale. Two failed auction shall cause the office to transfer ownership of seized properties in the name of RP.

  36. Levy on Real Property • Refers to actual seizure of real properties in order to enforce payment of taxes. • Procedures: • Issue Notice of Levy • Service Notice of Levy • Within 20 days after Levy, RO conducting the proceedings shall proceed to advertise the property which shall last within 30 days. • Property shall be subject to auction sale. • Property shall be awarded to the highest bidder. • Two failed auction shall result to the actual forfeiture of real property in favor of the government. Title shall be consolidated in the name of RP. • TP is entitled to one year redemption period within which to redeem the property.

  37. End of Presentation

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