It would not come as a surprise if many taxpayers receive tax assessments these days. If they are to stand a chance, it is important for them to have knowledge of their best options to challenge the issues raised by the Bureau of Internal Revenue (BIR). In responding to these assessments, they can either employ the services of a tax agent or manage the assessment on their own — a do-it-yourself (DIY) approach, just as how most millennials are achieving their travel goals by engaging in DIY adventures.
Like other millennials, I am an avid fan of traveling and DIY has been my practice. Most of the time, I travel alone because of two main reasons taxpayers may relate to — cost and experience.
First, going DIY helps me cut the cost required to reach my destination. In planning my DIY travels, I passionately read travel-related blogs, articles, and reviews. I search for tips that will help me reach my targeted destinations without maxing out, or worse, exceeding my budget. Likewise, in a DIY assessment, you should read tax-related cases, court decisions, and BIR issuances and filter those which can help you in the protest process. On your own, you can draft the so-called “protest letter,” which contains legal and factual support to your tax position. By yourself, you can discuss your responses with the BIR to convey the essence of your arguments.
In DIY travel, research also includes asking relatives and friends for free advice. In a DIY assessment, on the other hand, you have friends, auditors, and colleagues who can give advice for free. Although it is not part of a regular financial auditor’s scope of work, you can ask for their point of view for free as part of their value-adding services. You can ask them what the necessary documents are or how to reconcile the noted discrepancies, among others. Like my travel friends, these financial auditors will gladly share what they know, though they may not claim to be experts in tax assessments. Then, the savings a taxpayer may get from not paying a tax agent can be devoted to other business needs, such as acquiring supplies, new investments, or employee benefits.
Second, DIY is very challenging yet a great learning experience. It needs your utmost diligence, patience, and time. In DIY travel, it is not easy to prepare the itinerary, to haggle with travel operators, or to negotiate with the homestay owners. In a DIY assessment, it takes time to learn the ins and outs of handling a tax assessment, let alone to organize or prepare supporting documents and draft the response letter. Despite the various inputs you gather based on your research, there might come a time when it becomes difficult, especially on where or on how to begin your response to the BIR. It is challenging to put together all your research to come up with a protest letter that will argue the BIR findings. You also have to be patient in constantly inquiring with your BIR examiner in order to set a meeting. If you successfully hack all these challenges, however, there is a deep sense of accomplishment, as signified by the new knowledge and skills acquired in the process.
Yes, DIY is a great learning experience. It is because it allows us — as travelers or taxpayers — to better immerse ourselves in traveling or tax assessments. Since you are doing all the tasks, you are able to better absorb all the learning and you feel you’ll do better next time.
However, DIY makes us move at a slower pace. Travel allows travelers to explore at their own time and pace; tax assessment does not give taxpayers the luxury of time, because of the strict timeline as specified in tax rules and issuances.
If you miss a turn while traveling, you just have to go back. If you miss your bus, you just wait for the next one. Besides, it will not cost you that much. In a tax assessment, though, it is costlier to miss something. If you are unable to send your protest letter or submit the required documents in the subpoena on time, you may lose the assessment. This can cost you a lot, which might even exceed the amount that you thought in the first place, was your savings in DIY. So, it is reassuring to have a tax professional you can rely on to ensure compliance with the requirements within the set deadline.
Travel agents help travelers cover many destinations within a short period because they have organized the logistics. They also prepare the itinerary. The same goes with responding to a tax assessment with a tax agent. Tax agents are well-experienced in protesting assessments. A tax agent works with taxpayers to sort through vast amounts of information. Working with a tax agent can save hours of DIY research and hours of thinking where and how to begin writing your protest letter.
With their accumulated experience and being well-versed on the assessment process, tax agents can share legal and factual defenses for assessments mentioned in court decisions, BIR rulings, and BIR issuances that we may have not yet read or researched. Tax agents ask questions which help make an informed decision. They can offer options that we may not have considered.
Tax assessment is a special field in our country’s eccentric tax practice, which requires more than technical knowledge. By handling it DIY, you can save on costs and learn from personal experience. Getting a tax agent’s help could cost you more, as they often go above and beyond to provide you with their advice. Working with tax agents minimizes errors and may result in less hassle; although you might not feel as accomplished had you done it by yourself.
Choosing between going DIY or hiring a tax agent in handling tax assessments is like travel — it all comes down to your budget, appetite for research, and need for a sense of accomplishment. If you decide to pursue a DIY approach, it is important to know whether, at some point, you should seek professional help. We must be able to evaluate when to select either option — to hire a tax agent or to do it yourself — or to select both. It is because, other than obtaining the necessary knowledge about what options are available, we also have to ensure that we reach our desired destination — to successfully challenge the BIR’s tax assessment — on time.
Rey Mark M. Mondragon is a senior with the Tax Advisory and Compliance division of P&A Grant Thornton.
As published in BusinessWorld, dated 12 September 2017