On to the tax audit period

Physical exhaustion, sleepless nights, and anxiety are among the words that some might use to describe the experience of taxpayers and their accountants in this tax season just concluded, an ordeal heightened by the effects of the pandemic and lockdowns.

Thinking about the tax filing season, I remember Sisyphus, from Greek mythology, who was made to push a boulder up a hill, only for it to roll down every time he approached the top, condemning him to repeat this action for all eternity. I hope taxpayers do not compare their burden to that of Sisyphus.

HEAVY IS THE HEAD THAT WEARS THE CROWN…

Bewildered by the rapid surge of COVID cases, the government reacted by implementing another strict lockdown in a bid to quell the spread of the virus. As the nation continues to grapple with safety and travel restrictions, speculation and calls for the extension of the April 15 deadline grew louder.

The Bureau of Internal Revenue (BIR) heeded the taxpayers’ calls, but it answered in a different manner. By releasing Revenue Memorandum Circular (RMC) No. 46-2021, the BIR allowed for a “pseudo-extension” of the filing of income tax returns. While the deadline remained April 15, taxpayers were given the opportunity to file a “tentative” Annual Income Tax Return before the deadline. They may then amend their tentative returns on or before May 15, 2021. If the amendment results in the additional payment of taxes, there will be no penalty, while any resulting overpayment may be carried over as credit against tax due in the succeeding period.

While the RMC provided a bit of relief for taxpayers during the tax filing season, a number of problems and mishaps loom on the horizon. Some mistakes can be expected due to the hasty preparation of tax returns just to meet the April 15 deadline. Hence, while the April 15 filing season may be over, taxpayers should revisit the income tax returns they have filed. Caution is warranted to avoid possible tax exposure in future audits by the BIR.

While the RMC could be seen as far from perfect, it is an unalterable fact that the government needs the taxes to address the effects of the COVID-19 pandemic, among other problems — a challenging dilemma, to be sure. Indeed, heavy is the head that wears the crown.

ONCE MORE UNTO THE BREACH, DEAR FRIENDS

With the April 15 filing season now over, what should the taxpayers look forward to? Do recall that the BIR did not do away with some of their audits and assessments during the tax filing season. With the pandemic far from over and with the government’s ever-increasing need for more funds, taxpayers might expect more active assessment cases and BIR audits in the foreseeable future.

In relation to tax assessment cases, the BIR recently issued RMC No. 52-2021 which paused the runtime on the statute of limitations on assessment and collection of taxes while the Enhanced Community Quarantine (ECQ) was in effect, including any extensions thereof and for 60 days thereafter. RMC 52-2021 applies to those in areas within the “NCR Plus Bubble” and other locations under ECQ. 

With the suspension of the running of the statute of limitations, taxpayers hope that they will be allowed more breathing room for the meantime, as the April 15 filing has just come and gone and amendments to tax returns loom.

This could also open an opportunity for taxpayers to prepare and ensure that their records and supporting documents are kept intact and are readily available once the BIR conducts its audit. Needless to say, for taxpayers, preparing for the fast-approaching BIR assessment season is key to avoid any lopsided assessments.

As a new chapter of the taxpayers’ journey unfolds, which may or may not be filled with surprise and which may either be for the better or for the worse, taxpayers and accounting professionals alike, all equally positioned and burdened by this pandemic and forced to adapt in this era of ever-changing government policies, can take heart in Shakespeare’s Henry V: “Once more unto the breach, dear friends, once more.”

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

John Patrick L. Paumig is an associate from the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

As published in BusinessWorld, dated 20 April 2021