Small business owners who ignore notices from the Bureau of Internal Revenue (BIR) risk facing larger tax liabilities and losing opportunities to defend themselves during an audit, a tax expert warned on Wednesday, July 8, 2026.
Common mistakes during BIR audits
Rizaldy Menor, certified public accountant and founder of Tax Help Philippines, said one of the most common mistakes business owners commit is disregarding the Letter of Authority (LOA), which officially starts the BIR audit process.
"The most common mistake is ignoring the Letter of Authority. Once you ignore it, the audit continues and you will have less defense against the assessment, which could result in huge penalties," Menor said during the Habi at Kape Business Forum at Ayala Malls, Abreeza.
He explained that the BIR tax assessment is part of the government's tax collection program and should not be feared if taxpayers keep accurate records and comply with tax laws.
"We should not be afraid of the BIR audit process as long as we are properly prepared, maintain complete books, and comply with tax laws," he said.
Taxpayer rights and due process
Menor noted that many entrepreneurs struggle during audits because they are unfamiliar with tax regulations and filing requirements. He stressed that taxpayers have constitutional rights to due process during tax assessments, including the right to question or protest BIR findings.
"The taxpayer has the right to due process. If taxpayers understand their rights, they should not worry because they always have the opportunity to defend their records," he said.
According to Menor, one of the most overlooked rights is the right to protest under Section 228 of the National Internal Revenue Code. Filing a protest allows taxpayers to require the BIR to explain and justify its assessment before any final decision is made.
"The word 'protest' sounds negative, but in tax practice it is actually a legal right that gives taxpayers the chance to understand and question the assessment," he said.
Tax obligations for online businesses
With more businesses operating online, Menor also reminded online sellers, freelancers, influencers, and digital entrepreneurs that income earned through digital platforms has always been subject to taxation.
"The taxation of online businesses is not new. The challenge is that many online sellers are not aware that they need to register with the BIR and comply with tax requirements," he said.
For entrepreneurs starting a business, Menor advised conducting tax planning before registering to avoid unnecessary penalties and choose the most appropriate business structure. He also encouraged small businesses to seek professional guidance, saying tax laws involve both accounting and legal requirements that can be confusing for first-time entrepreneurs.
"I think the best way is to hire someone who understands taxation, at least to guide you at the beginning so you can avoid mistakes that may become costly later," he said.
Menor said understanding tax obligations and taxpayer rights can help entrepreneurs avoid unnecessary penalties and allow them to focus on growing their businesses with confidence.
