Congratulations! You’ve filed your 2024 Income Tax Return. You deserve a pat on the back, a cup of coffee, and maybe even a celebratory donut. But before you get too comfy, let’s talk about a not-so-fun plot twist in the life of a taxpayer: the dreaded Letter of Authority (LOA).

“Surprise! You’re Being Audited.” —Sincerely, the BIR

Yes, even after you’ve painstakingly filed your tax returns, the Bureau of Internal Revenue (BIR) can still come knocking. Or emailing. Or couriering. Whatever the method, the message is the same: “We’d like to take a closer look at your books.”

This invitation to a tax audit comes in the form of a Letter of Authority (LOA). It’s not a recommendation letter. It’s not fan mail. It’s a document that legally authorizes BIR revenue officers to examine your books to see if you’ve been a good (read: compliant) taxpayer.

Let’s break it down.

What Is a Letter of Authority?

A Letter of Authority, or LOA, is the BIR’s official passport to audit your tax affairs. It’s not a threat; think of it more like your doctor requesting a full blood panel—just a health check to make sure everything’s running smoothly. The LOA gives designated BIR revenue officers the legal authority to examine your books of accounts, returns, and supporting documents to verify whether the correct taxes have been paid. It’s not a penalty—it’s a procedure. In fact, it can be a useful opportunity for you, as a taxpayer, to review and correct any discrepancies before they become costly mistakes.

This document is no generic form letter. A valid LOA must specifically identify which tax types (e.g., income tax, VAT, withholding tax) are being examined, the particular year or years covered, and the names of the revenue officers authorized to conduct the audit. Without an LOA, any assessment issued is invalid—as repeatedly held by the Supreme Court, including in the case of Commissioner of Internal Revenue v. Sony Philippines, Inc., (G.R. No. 178697, November 17, 2010). The Court has consistently emphasized that an audit without a valid LOA is void and cannot give rise to a legitimate tax deficiency assessment.

So, if you ever receive a LOA, don’t treat it like a tax apocalypse. Instead, see it for what it is—a procedural step in tax compliance where both the BIR and taxpayer get a chance to align. It’s not about punishment; it’s about clarity. And clarity, as we know, is golden when it comes to taxes.

What to Do When the LOA Arrives

If you ever receive a LOA, don’t panic. Do this instead:

1. Observe proper service.

It’s not valid if it just magically appears on your desk one day. According to rules (see Revenue Audit Memorandum Order No. 1-2000), the LOA must generally be personally served—either at your registered address, known business location, or wherever you may be found. 

It’s important to note that while Revenue Memorandum Circular No. 82-2022 removed the previous requirement to serve the LOA within 30 days from its issuance, it emphasized that this change should not be used to delay service. The entire audit process must still be completed within 180 days for Revenue District Office (RDO) cases and 240 days for Large Taxpayer (LT) cases from the date of issuance of the LOA.

2. Check the names.

Only the revenue officers or group supervisors named in the LOA can conduct the audit. If someone else shows up asking about your 2024 receipts, you can politely say, “You’re not on the list.”

Under Revenue Memorandum Order (RMO) No. 57-2010 and RMO No. 75-2010, only the revenue officers named in the LOA are authorized to examine the taxpayer’s books of accounts and other records. Any audit conducted by a person not named in the LOA, or conducted after reassignment without a new or amended LOA, is unauthorized and void.

So, yes—you are well within your rights to ask, “Are you on the LOA?” And if the answer is no, you can (politely) send them back to the BIR for proper documentation.

3. Check the covered taxable years.

The BIR only has three years from the date you filed your return (or from the deadline, whichever is later) to audit you. This is under Section 203 of the Tax Code. So, for your 2024 ITR filed in April 2025, the audit must be done by April 2028—unless there’s fraud or a false return involved. (Hopefully, that’s not your story.)

What Should You Prepare?

Once a Letter of Authority lands on your desk, the next step is to gather the necessary documents that will support your compliance. This typically includes your filed Income Tax Returns (ITRs), Audited Financial Statements (AFS), and all other tax returns (such as VAT, withholding tax, and percentage tax) along with their respective attachments. But don’t stop there—your books of accounts (manual or computerized) must also be made available, as these form the backbone of your financial records. Equally important is the substantiation of your claimed expenses: invoices, contracts, payroll records, and other supporting documents must be on hand to justify deductions and defend against possible disallowances. The BIR may also ask for any other relevant documents depending on the scope of the audit, including proof of foreign transactions, inventory listings, or even email correspondences that may corroborate financial entries.

Now, what happens if you decide to ignore the audit altogether and pretend the LOA never arrived? That’s where things can get serious. Under Section 5 of the Tax Code, the Commissioner of Internal Revenue or his duly authorized representatives may issue a Subpoena Duces Tecum—a formal legal order compelling you to submit specific documents under pain of contempt. Refusal to comply without justifiable cause can lead to penalties including criminal prosecution, and yes, even imprisonment. The Supreme Court has made this clear in Ungab v. Cusi Jr. (G.R. No. L-41919, May 30, 1980), holding that the BIR has lawful authority to issue a subpoena and that noncompliance constitutes a violation of law.

So, the takeaway? Treat an audit like a serious meeting with your accountant’s more powerful cousin. Be prepared, be transparent, and submit your records. You’re not just doing it for the BIR—you’re also doing it to protect your business from costly findings and to correct honest mistakes before they turn into legal liabilities.

Final Thoughts: Be Audit-Ready, Always

Even if you’ve filed your 2024 ITR, the game isn’t over. In the world of taxes, the best mindset is “always be audit-ready.” Think of it like brushing your teeth before going to the dentist. It’s not just polite—it saves you pain later.

Need help navigating the audit process? Our team at Apeiron Consultancy can walk you through it, translate BIR-ese into human language, and make sure your rights as a taxpayer are protected.

Until then—file right, keep records tight, and never delete that Excel sheet.