BIR Audits Are Changing: What Taxpayers Need to Know About RMO No. 22-2026
Receiving a notice from the Bureau of Internal Revenue (“BIR”) can be unsettling for any taxpayer or business owner. Questions immediately come to mind:
“Why was I selected?”
“What documents do I have to submit?”
“How long can the audit take?”
“How do I know whether the BIR officer examining my records is properly authorized?”
These questions have become even more important with the issuance of Revenue Memorandum Order (“RMO”) No. 22-2026, which prescribes the BIR's consolidated and revised policies, guidelines, and procedures for its audit program.
Issued on 24 August 2026 and effective immediately, RMO No. 22-2026 brings together and further implements several reforms introduced earlier this year under RMO No. 1-2026, as amended and supplemented by RMO No. 6-2026 and clarified by Revenue Memorandum Circular No. 14-2026. Among these reforms are the Single-Instance Audit Framework, risk-based taxpayer selection, electronic Letters of Authority (“eLAs”), anonymized assignment of audit cases, standardized documentary requirements, and stronger controls over the audit process.
For taxpayers, however, the more important question is: what actually changes when the BIR comes knocking?
1. Who may be selected for audit?
As a general rule, all taxpayers are considered potential candidates for audit or verification for purposes of determining the correctness of their internal revenue tax liabilities. RMO No. 22-2026, however, goes further by identifying two principal categories of audit cases: Mandatory Cases and Priority Cases.
Mandatory Cases generally arise from transactions or circumstances that require audit or verification. These include taxpayers with:
underdeclaration of sales or income, or overstatement of expenses or deductions, by at least 30%;
intelligence information or Mission Order findings indicating possible substantial underdeclaration;
certain one-time transactions, including real property transactions with eCAR findings;
tax exemptions or incentives, where risk-based evaluation indicates possible non-compliance;
non-compliance arising from the Spontaneous Exchange of Information;
certain tax clearance applications involving death, business retirement, or corporate reorganizations;
failure to respond to requests for confirmation of Third-Party Information;
validated discrepancies or material inconsistencies identified through BIR analytics or pre-audit validation; and
certain tax refund or tax credit claims, including income tax, VAT, excise tax, and erroneous or double payments.
Priority Cases, on the other hand, are electronically selected using risk-based criteria and information available in BIR systems. These include taxpayers with:
drastic decreases in reported sales or VAT payments;
significant increases in exempt or zero-rated sales;
Discrepancy Notices;
inconsistencies in excess input VAT carried forward;
input VAT exceeding 75% of output VAT;
income tax due of less than 2% of gross sales or revenues;
percentage tax returns despite sales exceeding the VAT threshold;
substantial sales but reported net losses;
more than five years of operations without having been audited;
increases in assets of more than 50% while reporting a net loss;
calamity losses or inventory obsolescence claims;
substantial income from related companies;
write-offs of input tax as deductions; or
shared expenses and intercompany charges within a group of companies.
For businesses, the practical point is straightforward: audit risk may already be visible from the returns and information submitted to the BIR even before an eLA is issued. Unusual movements in sales, VAT, losses, assets, or related-party transactions may be legitimate, but they are now among the circumstances expressly identified by the BIR for possible audit.
2. One taxable year should generally mean one Letter of Authority
One of the central reforms carried over into RMO No. 22-2026 is the Single-Instance Audit Framework.
As a general rule, a taxpayer should be subject to only one eLA for a particular taxable year, covering all applicable internal revenue taxes. The policy is intended to avoid fragmented or overlapping audits for the same year.
This does not mean that an audit can never be reassigned or that another document can never be issued. The RMO recognizes Replacement eLAs, which allow an existing audit to continue when circumstances affecting the assigned Revenue Officer or Group Supervisor require a change, and Consolidated eLAs, which combine multiple audit authorities involving the same taxpayer and taxable year into a single authority.
For taxpayers, the practical lesson is simple: always identify the audit authority currently in force.
If you receive a replacement or consolidated eLA, check what happened to the previous one, who is now authorized to conduct the examination, which taxable year is covered, and whether the scope of the audit has changed.
3. The BIR still needs proper authority to audit you
RMO No. 22-2026 expressly states that an audit or verification must be supported by a valid eLA, Tax Verification Notice (“TVN”), or Mission Order (“MO”), as applicable. An audit undertaken without the proper authority is considered unauthorized.
Just as importantly, the BIR's examination is limited to the tax types and taxable periods stated in the relevant authority. An expansion of the scope requires the appropriate additional audit or verification authority.
Accordingly, when an eLA or other audit notice is received, taxpayers should not treat it as a mere formality.
Before turning over records, it is important to check:
the taxable year or period covered;
the tax types covered;
the Revenue Officers and Group Supervisor identified in the eLA;
whether any subsequent reassignment is properly documented; and
whether the documents being requested actually relate to the authorized scope of the examination.
These details can become important later if an assessment is questioned.
4. Once an eLA is served, the deadlines can move quickly
Another important feature of the new audit program is the standardized process for requesting documents.
The eLA is to be served together with the BIR's Standard Checklist of Requirements and a Taxpayer's Consent on Audit Venue/Authorized Representative.
If the taxpayer does not submit the required documents within 10 calendar days, the BIR may issue a First Notice for Presentation or Submission of Documents or Records. Failure to comply within another 10 calendar days from receipt of the First Notice may result in a Second and Final Notice. Continued failure or refusal to produce the required records may eventually lead to the issuance of a Subpoena Duces Tecum (“SDT”).
Failure to comply with a valid SDT may, in turn, result in the initiation of criminal proceedings under Section 266 of the Tax Code.
This makes proper recordkeeping more than an administrative concern. Businesses should know where their tax records are, who is responsible for retrieving them, and who will coordinate with the BIR before an audit begins.
5. You may have a say in where your records are examined
RMO No. 22-2026 also addresses a common practical concern during audits: where the taxpayer's books and records will actually be examined.
Examination may generally be conducted either at the taxpayer's registered place of business or at the appropriate BIR office. Where the records are voluminous or transporting them would be impractical, burdensome, or disruptive to business operations, taxpayers are given reasonable options as to the manner and venue of examination.
A taxpayer may choose to submit the records to the BIR or arrange for their examination at its principal place of business, subject to coordination with the handling Revenue Officer. Certified photocopies may likewise be accepted, although originals may be required for verification.
There is an important exception: once a valid SDT has been issued, the taxpayer's option to choose the venue no longer applies, and the records must be produced at the BIR office stated in the subpoena.
6. BIR audits now have clearer timelines, but a late audit does not automatically disappear
RMO No. 22-2026 sets specific periods for Revenue Officers to submit their Reports of Investigation.
For ordinary eLA cases, the prescribed period is generally:
180 days for Regional Office cases, including Office Audit Section cases; and
240 days for Large Taxpayer Service cases,
counted from the date of the eLA.
Different periods apply to reinvestigations and returned audit cases.
However, taxpayers should be careful about assuming that the expiration of these internal periods automatically invalidates an assessment.
The RMO itself provides that failure to submit the audit report within the prescribed period does not by itself affect the validity of the assessment, although the responsible BIR personnel may be administratively accountable.
The separate statutory periods within which the BIR may legally assess taxes and the taxpayer's rights to due process therefore remain important.
7. An audit should have a definite ending
Another taxpayer-facing development is the use of a standardized Termination Letter.
A Termination Letter is to be prepared for audit cases where the assessed amounts have already been paid or where the examination results in no findings or discrepancies.
This is significant from a practical standpoint.
Businesses sometimes retain years of correspondence without a clear document showing whether a particular audit has actually been closed. Under the new framework, taxpayers should make sure that a Termination Letter, where applicable, is received and retained as part of the company's permanent tax records.
8. Even the auditors may now be audited
RMO No. 22-2026 also introduces what it calls a “Revalida” or “Audit of Auditors.”
Under this mechanism, audit investigation reports and assessment issuances may themselves undergo technical review by the BIR's Tax Audit Review Division. The review is intended to determine whether findings and computations are properly supported, whether prescribed procedures were followed, and whether due process requirements were observed.
The RMO further allows administrative sanctions against BIR personnel for violations such as unauthorized audits, improper case selection, misclassification of cases, delays, failure to update case records, and non-observance of audit procedures.
Detailed guidelines for the Revalida are still to be issued separately.
While its implementation remains to be seen, the mechanism reflects an important part of the new audit framework: the rules are not only directed at taxpayers. They also prescribe how BIR officers themselves must conduct and document an audit.
What should taxpayers do now?
The biggest takeaway from RMO No. 22-2026 is that taxpayers should think about audit readiness before an audit begins.
Businesses would be well advised to periodically reconcile their tax returns with their financial statements and accounting records, review unusual movements or discrepancies that may appear as risk indicators, maintain organized supporting documents, and ensure that persons authorized to deal with the BIR have proper authority.
And when an eLA or other audit notice is received, do not simply begin submitting everything requested.
First verify the authority, scope, taxable period, assigned officers, and applicable deadlines. Then respond deliberately and with a clear record of what was submitted and when.
The BIR may now be using increasingly data-driven tools to determine whom to audit, but RMO No. 22-2026 likewise gives taxpayers a clearer picture of the rules the Bureau is expected to follow.
Facing a BIR audit?
A tax audit does not necessarily mean that a deficiency assessment is inevitable. What matters is how the taxpayer's filings, records, supporting documents, and responses are handled from the beginning of the examination.
If your business has received an eLA, Notice of Discrepancy, Preliminary Assessment Notice, Formal Letter of Demand/Final Assessment Notice, or another BIR audit notice, Dulay Law Co. can assist in reviewing the authority and scope of the examination, preparing responses and supporting documents, and advising on the appropriate course of action throughout the audit and assessment process.
For assistance, you may contact us at contact@dulaylaw.com or visit our Contact Us page.
Disclaimer: This article is intended for general informational and educational purposes only. It does not constitute legal advice and does not create an attorney-client relationship. The appropriate response to a BIR audit will depend on the particular facts, documents, and notices involved.
