[Ask The Tax Whiz] Is there a surcharge in amending tax returns?

For what kinds of tax violations would I get imposed a 25% surcharge penalty? What are the cases that require an additional 25% surcharge under Sec. 248(A)  of the tax code?

Under Sec. 248(A) of the Tax Code, a 25% surcharge penalty is imposed for:

1. Failure to file any return and pay the tax due thereon as required under the provisions of this Code or rules and regulations on the date prescribed; or
2. Unless otherwise authorized by the Commissioner, filing a return with an internal revenue officer other than those with whom the return is required to be filed; or
3. Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; or
4. Failure to pay the full or part of the amount of tax shown on any return required to be filed under the provisions of this Code or rules and regulations, or the full amount of tax due for which no return is required to be filed, on or before the date prescribed for its payment.

Upon examination of our Income Tax Return, we found out that we were not able to pay the correct amount due. Would we still be liable for surcharge if we amend the tax return?

No. Under Revenue Memorandum Circular (RMC) No. 43-2022, you will not be imposed the 25% surcharge upon amendment of the return as long as you filed your initial tax return on or before the prescribed due date for its filing. However, if the deficiency is discovered because of BIR Audit, then you will still be liable for the 25% surcharge.

For example, if the taxpayer was able to file the Annual Income Tax return for taxable year 2022  on April 15, 2023, and later, on December 15, 2023, it was found that there is an additional income tax due to be interest and compromise penalty to be imposed, per Revenue Memorandum Order 7-2015.paid, no 25% surcharge shall be imposed on the additional tax due. Note, however, that there is still an interest and compromise penalty to be imposed, per Revenue Memorandum Order 7-2015.

On the other hand, if a taxpayer is audited and this audit examination results in a finding of deficiency taxes due, then it would be subject to 25% surcharge, interest and compromise.

What is the purpose of Revenue Memorandum Circular  43-2022?

Previously, under RMC No. 54-2018, the 25% surcharge was imposed on the additional tax to be paid, even if the tax return was amended. On the other hand, under RMC No. 46-99, if the deficiency tax assessment resulted from a BIR audit, then the surcharge would not be imposed.

The BIR recognized that this policy unduly penalized a taxpayer for amending tax returns to pay the correct tax due, but it also unintentionally rewards situations where the unremitted taxes are paid only during the BIR audit. This policy thus discourages taxpayers to amend their tax return to voluntarily pay the correct tax due.

RMC 43-2022 was issued to remedy this conflict between the two circulars and was made to encourage  the taxpayers to voluntarily pay their correct tax liabilities.

Remember, however, that this new policy of the BIR still requires that you have filed your initial tax return on time. This can easily be done by keeping track of your deadlines and knowing what taxes you have to pay. The TaxWhizPH Mobile App provides a built-in tax calendar which reminds you of tax deadlines that have become due. You can also file your tax returns through the app so that you can do your taxes at your own convenience.

Interested in knowing more about the surcharge on the amended tax returns?  Schedule a consultation with us by downloading the TaxWhizPH Mobile App.