BIR related, How is a particular taxpayer selected for audit?

Officers of the BIR, like for example the Revenue District Officers, the Chief of Large Taxpayer Assessment Division, or the Chief of Excise Taxpayer Operations Division, or even the Chief of Policy Cases and Tax Fraud Division, are responsible for the conduct of audit and/or investigation.  The same offices are the one responsible for the preparation of a list of all taxpayer who fall, again, again, who fall within the selection criteria prescribed in a Revenue Memorandum Order issued by CIR to establish guidelines for the audit program of a particular year.

The list of taxpayers shall then be submitted to their respective Assistant Commissioner for pre-approval and to the Commissioner of Internal Revenue for final approval. The list submitted by RDO shall be pre-approved by the Regional Director and finally approved by Assistant Commissioner, Assessment Service.

The following statements were lifted from RMO 19-2000 for your reference

Selection of said returns for audit shall be based on the following order of priority:

(1) tax cases for audit based on policy direction of the Commissioner;

(2) taxpayers with third party information which resulted to substantial reduction in tax payments; and

(3) taxpayers with low tax compliance.

Taxpayers under the jurisdiction of the Large Taxpayers Service and Excise Taxpayers Service are not covered by the Order. Only the Revenue District Offices are authorized to conduct a short-term audit. In no case shall the Assessment Division and Special Investigation Division in the Regional Offices be allowed to perform a short-term audit of tax returns. All Letters of Authority (Las)/Audit Notices (ANs) shall be issued and approved by the Regional Director. However, no Las/ANs shall be issued by the Regional Director without prior written approval of the ACIR, Assessment Service. Only Revenue Officers-Assessment Group shall be authorized to conduct audit and investigation of tax cases, whether in a principal or assisting capacity. The same Revenue Officer and/or Group Supervisor shall not be assigned to audit/investigate the same taxpayer during the year except when this is not possible due to limited number of Group Supervisor/Revenue Officer in the RDO.

HOWEVER, pleaser refer RMOs 64-99, 67-99, 18-2000 for further information.

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