REVENUE MEMORANDUM ORDER NO. 25-2012 issued on November 19, 2012 prescribes
the guidelines and procedures in the pre-audit of annual Income Tax Returns (ITRs) of individual
taxpayers engaged in business or in the practice of their profession and corporate taxpayers that
are registered in the Revenue District Offices (RDOs).
The pre-audit of annual ITRs shall be conducted without field investigation and shall not
be covered by electronic Letter of Authority (eLA) or Tax Verification Notice. For Revenue
Regions where the storage and processing of tax returns are assigned to the Data Processing
Divisions, pre-audit shall be done by the Revenue Officer (RO) by viewing the imaged returns.
Only where there are discrepancies/findings upon pre-audit shall the tax returns be printed. In the
conduct of the pre-audit, the RO shall verify the following:
a. Mathematical computation of income tax due and payment;
b. Correctness and applicability of personal and additional exemptions claimed by
individuals against the registration records per ITS;
c. Correctness and validity of the following deductions/expenses subject to the
ceiling/limitations prescribed under existing laws and regulations:
c.1 Interest expense;
c.2 Charitable and other contributions;
c.3 Representation expense; and
c.4 Miscellaneous expense.
d. Validity of claims for income tax holiday, tax exemption and other claimed tax incentives
which resulted to non-payment or reduced payment of tax due;
e. Correctness of the application of the minimum corporate income tax (MCIT);
f. Claimed creditable withholding taxes against tax due and substantiation of claims
through the certificates of withholding taxes attached to the tax returns or submitted
electronically to the BIR;
g. Correct utilization of Tax Credit Certificates which should be duly supported by an
approved Tax Debit Memo issued by the authorized Revenue Official;
h. Correctness of deductions claimed by taxpayers who opted for Optional Standard
Deduction (OSD);
i. Accuracy and applicability of the computation of the Net Operating Loss Carry-Over
(NOLCO); and
j. Completeness of the required attachments to annual ITRs as prescribed under existing
revenue issuances.
All pre-audited annual ITRs with “no discrepancy” and ITRs where the taxpayer had
settled the deficiency tax shall no longer be transmitted to the Assessment Division. The said
return shall be retained in the RDO for possible audit/investigation as may be prescribed in the
Audit Program. Pre-audited annual ITRs may also be selected for regular audit if they qualify
under the selection criteria prescribed in the annual Audit Program.