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
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
Conduct treatment of Unserved Letter Notices, LAs
and TVNs where the concerned TP cannot
Verification/
be located.
Investigation

Prepare Report
15-Day Notice
Submit Final Report

A
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.
The Assessment Division
A

Review Report RETURN/S

submitted by the Returns
Report of Invest.
RDO Returns
Form 2302

Issue Preliminary TP to respond within

Notice (PAN) 15 days

Yes Close the Case/

TP
Pays Issue Termination
? Letter (TL)/
No Closing Letter
Yes

Issue Final Prepare Form

TP No
Assessment Notice/ Pays
40.00/ Forward to
Demand Letter ? Collection Division
TP to respond within
30 days
B
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.
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.
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.
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.
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.
At the Collection Division
B

Tax Docket
Receive 40.00
Returns
Tax Docket
Returns
BIR Form
Encode/ Assign 40.00
Number/Record in
the Index Card

Forward to
respective RDOs
for Collection

Monitor
Movement of Tax
Dockets

To
RDO
The Collection Process
at the RDO Level
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
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.
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.
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.
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 discretionalry
with 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.
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.
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.
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.
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).
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,
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.
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.
Non-Payment of Liability
• Non-payment of tax liability will resort
to the enforcement of administrative
summary remedies.
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 .
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.
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.
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.
Service of WDL
Type of TP Actual Service Constructive Service
Individual • Serve warrant w/in 10 • Indicate the date of
days to TP or his/her the service of the
authorized representative warrant on the
(AR) acknowledgement
• TP/AR must voluntarily receipt portion.
sign over printed name in • Have two (2) credible
the designated portion. witnesses sign in the
• Indicate the date of spaces provided for
service of warrant. witnesses.
• Indicate contact • Sign over his printed
number, address of TP/ AR. name as the service
• Give copy of warrant to officer and indicate his
TP/AR; the rest of the office address or Tel. No.
copies should be where the TP could
attached to the docket. contact him/her.
Service of WDL
Type of TP Actual Service Constructive Service
• Leave copy warrant at
the premises. The rest of
the copies to the
docket.
Corporation • Serve warrant w/in 10 • SAME AS ABOVE
days to the Pres./VP/
Manger/Treasurer/
Comptroller or any
responsible official of the
corp.
• If corp. could not be
located, secure Articles of
Incorporation from SEC
and locate the addresses
of authorized officials of
the company. Serve WDL
to anyone of the officials.
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)
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.
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.
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
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.
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.
End of Presentation