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Filing an amended tax return

Filing an amended tax return

By Senen M. Quizon

You’ve just filed your tax return and discovered that you failed to claim a credit you are entitled to.  What can you do to correct your tax return?

Likewise, suppose you filed your income tax return based on “tentative” financial statements prepared by an independent Certified Public Accountant (CPA).  Later, when you received the audited financial statements as certified by your CPA, you found out that you were not able to report all your taxable income or some of the deductions were not taken against your gross income.  How do you make the necessary changes in your tax return?

If you find errors or omissions in your tax return, you can file an amended tax return to correct your previously filed tax return. This right granted to taxpayers to file an amended tax return covers returns, statements, and declarations which are required to be filed with the Bureau of Internal Revenue (BIR) including, among others, your income tax, VAT, and DST returns.

Under Section 6(A) of the Tax Code, you have within three years from the date of filing of your original tax return to modify, change or amend your tax return. Hence, in case you filed your income tax return yesterday, April 16, 2007, you have until April 15, 2010 to introduce changes on your income tax return.

This privilege, however, is available only while the BIR has not issued a notice of investigation against the company.  Once such notice is issued, which may come in the form of a Letter of Authority, Tax Verification Notice, or Letter Notice,  then you lose your right to file an amended return. 
Notably, the BIR has been quite aggressive in its tax investigations.  In the case of some taxpayers, notices of investigations covering taxable year 2005 had been issued a few months after the income tax returns were filed last year.  If you intend to file an amended tax return, it would be advisable to do this as soon as possible.

There are no special forms required to correct your original tax return.  In filing an amended tax return, you should use the same type of form which you use when you filed your original return.  For example, if you file Form 1702 (Annual ITR for corporations), you must use the same form in amending your tax return.  You should just check the amended return box (to the right of taxable year section) to indicate the return is an amended return, and attach thereto a copy of your original return.  If you are an eFPS taxpayer or you have submitted a return electronically, amended returns can also be filed electronically.

A taxpayer who subsequently amends his/her tax return must pay interest if the amendment disclosed the taxpayer owed additional taxes. Currently, interest is charged at the rate of 20% per annum on any additional tax due on the amended return which shall run from the due date of return until the date of payment.

Another consequence of filing an amended tax return is that it will start anew the running of the three-year prescriptive period for assessment under Section 203 of the Tax Code from the filing of original return to the date of filing of the amended tax return.

Thus, to avoid unduly prolonging the prescriptive period for assessment, it is to the best interest of taxpayers to file an amended tax return immediately upon discovery of any mistake, error or omission in their original tax return.

In making the decision to undertake adjustment on their original tax return, taxpayers often weigh the risk of being assessed and its consequences if they just wait for the prescriptive period to lapse against the benefits of amending their tax return.  This is particularly true if the amendment has an adverse impact on the taxpayer’s tax liability.

However, as part of our duty as taxpayer to pay the correct amount of taxes due to the government, it behooves us to correct any non-compliance error or omission whether the result of the amendment i s favorable or not to us.

What is important to remember is that almost all tax return errors or mistakes can be avoided through careful preparation, and thorough review of your tax returns. 

However, if a mistake was made on the tax return, the Tax Code gives you a right to correct any flaw in your tax return by filing an amended tax return. Since you will no longer enjoy this privilege when you receive a notice for audit or investigation from the BIR, you should exercise this right before it is already too late.

(The author is a tax manager at Punongbayan & Araullo, member firm of Grant Thornton International. For comments and inquiries, please e-mail the author  or call 886-5511.)