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Many business owners don’t realize they’re tax-delinquent—until it’s too late. By the time the Bureau of Internal Revenue (BIR) serves a Letter of Authority or sends a Final Assessment Notice, you're already in deep water.
But here’s the truth: you don’t have to wait for an audit or investigation to address tax issues. If you know—or even suspect—that your business has unpaid taxes, late filings, or unfiled returns, now is the best time to take action.
In this guide, we’ll walk you through how to proactively resolve tax delinquency before the BIR comes knocking.
1. Know What Counts as Tax Delinquency
Tax delinquency includes more than just not paying your taxes. It can mean:
Unfiled tax returns (even if no tax is due)
Late or partial tax payments
Incorrect filings (underreporting income or overstating deductions)
Failure to remit VAT, withholding, or percentage taxes
Using unregistered receipts or operating without BIR registration
If any of these apply to your business, it’s time to act.
2. Conduct a Tax Compliance Review
Start with an internal audit of your tax records from the past 3 to 5 years. Focus on:
Missing or late returns
Mismatched financial reports
Outstanding tax liabilities
Errors in VAT, withholding, and income tax filings
Unregistered assets or transactions
Tip: Engage a tax professional to perform the review. An independent eye can spot issues you might miss.
3. File Delinquent Returns Voluntarily
If you’ve missed filing any returns, file them immediately—even if you can’t pay the full amount due.
Filing voluntarily may:
Reduce potential penalties
Show good faith to the BIR
Avoid automatic assessments or legal action
Note: The BIR may allow installment payments once your filings are updated.
4. Compute and Pay What You Can
After filing, determine how much you owe including:
Basic tax due
Surcharges (usually 25%)
Interest (typically 20% annually)
Compromise penalties (fixed rates depending on the violation)
Even if you can’t pay in full, pay a portion now to reduce penalties and interest from growing.
5. Consider a Compromise Settlement
Under Sections 204 and 229 of the National Internal Revenue Code, you may apply for a compromise settlement if:
There’s reasonable doubt about the validity of the assessment
Full payment would cause financial hardship
The BIR may allow you to settle for a reduced amount. You’ll need to file a formal application and provide supporting documents (e.g., financial statements, tax clearance).
6. Apply for Installment Payment Arrangement
If your liability is large but clear, the BIR may allow payment by installment, provided you show:
Proof of financial incapacity
A written payment proposal
A notarized promissory note or collateral, depending on the amount
Important: Missing an installment payment could void the agreement and trigger enforcement actions.
7. Secure a Tax Compliance Certificate (TCC)
Once you’ve filed and settled (or agreed on a payment plan), apply for a Tax Compliance Certificate. This certifies that your business is in good standing with the BIR—often needed for government contracts, financing, and business permits.
8. Improve Your Accounting System
Fixing your books now helps prevent future issues. Consider:
Hiring or training an internal accountant
Using BIR-compliant accounting software
Reconciling books monthly to match tax returns
Keeping digital copies of receipts and invoices
Consistent recordkeeping is your best defense against audits.
Final Thoughts
Tax delinquency isn’t always intentional—but ignoring it makes things worse. The BIR has become more aggressive and data-driven, and businesses with unresolved issues are at real risk of audit, garnishment, or even criminal charges.
The good news? The sooner you take action, the more options you have.
Need help assessing your tax exposure or negotiating with the BIR? Our experienced tax consultants and legal team are here to help. Book a confidential consultation today and take control of your tax situation—before the BIR does.
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