Worried About a BIR Audit?
Here Are 5 Red Flags That Could Trigger One in the Philippines
Late filings? Mismatched tax reports? Missing receipts? These aren’t minor oversights — they’re red flags that could land your business in the middle of a BIR audit.
The Bureau of Internal Revenue (BIR) doesn’t conduct audits randomly. They use risk profiling and data analytics to identify inconsistencies, gaps, or suspicious tax behavior — and issue audit letters accordingly.
If you’re a business owner in the Philippines, here’s what to avoid (and how to prepare) in 2025.
Red Flag #1: Late or Inconsistent Tax Filings
Frequent delays or mismatched returns (e.g., high sales in VAT filings but low income tax declarations) raise suspicion.
Example: You declare ₱5M in VAT sales, but your income tax return only shows ₱1M in revenue. The BIR may assume under-declaration and initiate a reconciliation audit.
What to do: Ensure timely and consistent filing across all taxes — VAT, ITR, and Withholding Tax (WHT). Let a trusted tax consultant help reconcile and align your returns.
Red Flag #2: Underreporting Sales or Overstating Expenses
The BIR now cross-checks your filings with:
- e-invoicing systems
- Third-party data (e.g., from banks or suppliers)
- Digital marketplace records
Reminder (RR No. 11-2018): All income and expenses must be fully documented and properly substantiated to be deductible.
What to do: Don’t pad your expenses or hide sales. Maintain proper documentation, especially for fringe benefits, rentals, and subcontracted services.
Red Flag #3: Failure to Issue or Keep Official Receipts
The BIR requires:
- Issuing receipts/invoices for all sales
- Maintaining records for at least 10 years
Marketplace receipts (e.g., from Shopee, Lazada) do not qualify as substitutes for official BIR-registered receipts.
What to do: Set up proper books of accounts and ensure your ORs and invoices are registered and properly stored.
Red Flag #4: Drastic Changes in Business Reporting
Sudden drops in revenue or big jumps in expenses — without valid explanation — are red flags.
Example: A business shows ₱12M in sales in 2024, then only ₱2M in 2025 — but doesn’t file for closure or dormancy.
This can prompt BIR to investigate for undeclared income, ghost operations, or tax avoidance.
What to do: If your business is slowing down or closing, file the proper deregistration with BIR, LGU, and SSS to avoid red flags.
Red Flag #5: Using Unregistered Accounting Software
Popular platforms like QuickBooks, Xero, or SAP are not automatically compliant with BIR rules. You must register them under:
- CAS (Computerized Accounting System) or
- CBA (Computerized Books of Accounts)
Failure to register or report system changes (e.g., cloud migration, new features) can lead to audit notices.
What to do: Register your software with the BIR and ensure it generates reports aligned with RR 09-2009 and updated e-invoicing regulations.
Risks of a BIR Audit
| Risk | Potential Impact |
| Penalties & Surcharges | For underpayment, late filing, or non-compliance |
| Rejected Tax Deductions | Due to lack of substantiation or mismatched returns |
| Disrupted Operations | Reconciliation and documentation requirements can take weeks |
| Delayed VAT Refunds | Refunds may be held until audit findings are resolved |
| Legal Action | In severe cases, businesses may face tax evasion cases |
How UNA Helps You Stay Audit-Ready
At UNA Tax & Accounting Services, we work with Philippine businesses to:
- Catch errors before the BIR does
- Prepare documentation for fast response
- Ensure proper systems and filing processes are in place
| Mistake | Risk | How UNA Helps |
| Late or inconsistent filing | Audit notice, surcharges | We track deadlines and ensure consistency |
| No receipt-keeping | Disallowed deductions | We set up compliant documentation systems |
| Overstated expenses | Disallowed deductions, penalties | We validate and document all tax claims |
| Unregistered accounting tool | System audit, non-compliance fines | We manage CAS/CBA registration for your system |
Book a Tax Health Check Before the BIR Calls
Don’t wait until an audit letter lands on your desk. Proactively assess your tax risks with UNA’s Tax Health Check a practical, confidential review of your tax filings, accounting systems, and documentation.
Email us at: sales@una-acctg.com
Let’s make sure your books are compliant, audit-ready, and stress-free.
