.png)
No business owner wants to be on the Bureau of Internal Revenue’s (BIR) watchlist. Yet, many companies—whether out of neglect, lack of knowledge, or poor accounting practices—make avoidable mistakes that trigger audits, assessments, and even criminal investigations.
The good news? You can avoid a lot of headaches just by knowing what not to do.
In this post, we highlight the most common mistakes that lead to BIR investigations and how you can steer clear of them.
1. Underreporting Income
This is one of the fastest ways to attract the BIR’s attention. Whether intentional or not, declaring less income than what’s supported by third-party data (like bank deposits or supplier records) is a major red flag.
Tip: Make sure your reported sales match your issued receipts and bank transactions. The BIR now uses data-matching tools to catch inconsistencies.
2. Filing Late or Not at All
Late filings or missed tax returns send a clear message to the BIR: non-compliance. This applies to:
VAT and percentage tax
Withholding tax (compensation and expanded)
Quarterly and annual income tax returns
Tip: Set up reminders for tax deadlines or use accounting software that tracks and alerts you of filing schedules.
3. Frequent Amendments to Tax Returns
Amending a return once is understandable. Doing it repeatedly may suggest that you’re adjusting numbers to manipulate your tax liability.
Tip: Review your records carefully before filing. Once submitted, your returns should be final unless a genuine error is found.
4. Claiming Excessive or Questionable Deductions
Some businesses try to reduce taxable income by inflating deductions—such as high representation expenses, vague consulting fees, or non-existent supplier transactions.
Tip: Ensure all deductions are legitimate, reasonable, and supported by valid receipts and contracts. If you can’t prove it, don’t claim it.
5. Mismatched Financial Statements
When your financial reports submitted to the BIR differ from what you submit to banks, LGUs, or the SEC, the inconsistencies are bound to raise suspicions.
Tip: Maintain consistent reporting across all platforms. One version of your financial story is enough—multiple versions will invite scrutiny.
6. Failure to Withhold and Remit Taxes
Businesses are required to withhold taxes on employee salaries, rent payments, professional services, and more. Failing to withhold or remit these taxes can trigger investigations and penalties.
Tip: Regularly review withholding tax requirements and make sure you’re remitting on time. Even small lapses can accumulate into big issues.
7. Using Unregistered Invoices or Receipts
If you issue invoices that are not BIR-registered, or fail to use your official receipts, it can be grounds for assessment or even padlocking of your establishment.
Tip: Use only BIR-authorized invoices and keep your books registered and updated as required.
8. Operating Without Proper Registration
Running a business without registering with the BIR or operating under the wrong tax type (e.g., claiming you're non-VAT when you're clearly over the threshold) is an open invitation for investigation.
Tip: Make sure your business is properly registered, and update your status when your operations grow.
9. Ignoring BIR Notices
One of the worst mistakes businesses make is ignoring Letters of Authority (LOAs), assessment notices, or other correspondence from the BIR.
Tip: Always open, read, and respond to BIR notices promptly. Ignoring them won’t make the problem go away—it will only escalate.
10. Poor Record-Keeping
Disorganized, incomplete, or missing records make it hard to defend your tax filings during an audit—and the BIR might interpret this as intent to evade taxes.
Tip: Keep all tax records, receipts, books of accounts, and returns organized and accessible for at least 3–10 years (depending on the type of document).
Final Thoughts
Most BIR investigations don’t begin with malicious intent—they start with small, avoidable errors that snowball into bigger issues. By understanding what triggers audits and taking steps to stay compliant, you can avoid unnecessary trouble and focus on growing your business.
Stay compliant. Stay organized. And when in doubt, consult a tax professional.
Worried about your compliance status? Our team of tax and legal experts can help you assess risk, fix issues, and avoid BIR trouble. Schedule a confidential consultation today.
إرسال تعليق