Dear Attorney,

I am writing to seek your legal advice regarding a serious matter involving our bookkeeper, who we recently discovered has been neglecting their responsibility to file our taxes with the Bureau of Internal Revenue (BIR). This has caused significant concern about the potential financial and legal repercussions that may arise from this negligence. We are considering filing a demand letter to formally address this issue. I would greatly appreciate your guidance on the proper legal steps we should take to resolve this matter.

Thank you for your assistance in this pressing matter.

Sincerely,
A Concerned Business Owner

Comprehensive Legal Guide: Filing a Demand Letter for a Bookkeeper's Negligence in the Philippines

Introduction

The relationship between an employer and a bookkeeper is founded on trust and professionalism. A bookkeeper’s role involves the meticulous handling of financial records, tax filings, and compliance with relevant laws, including those imposed by the Bureau of Internal Revenue (BIR). When a bookkeeper fails in their duties, particularly by not filing taxes, this breach can have serious legal, financial, and reputational consequences for the employer. Addressing this issue requires a strategic and lawful approach, beginning with the issuance of a demand letter.

This article outlines the steps to prepare and file a demand letter, the relevant legal principles, and other remedies under Philippine law.

I. Understanding the Nature of the Violation

A. Fiduciary Duty

Bookkeepers have a fiduciary duty to their employers, obliging them to act in the employer's best interests, exercise diligence, and comply with applicable laws. Failure to file taxes violates this duty and exposes the employer to penalties from the BIR.

B. Breach of Contract

If a formal employment or service contract exists, failure to perform duties as agreed constitutes a breach of contract. Common clauses in such contracts include provisions on diligence, compliance with laws, and indemnification for damages caused by negligence.

C. Legal Implications

Civil Liability: Employers may file a civil case to recover damages incurred due to the negligence of the bookkeeper.
Criminal Liability: If fraud or deliberate misconduct is involved, the bookkeeper may face criminal charges under the Revised Penal Code or tax-related laws.
Administrative Liability: Bookkeepers holding professional certifications (e.g., Certified Public Accountants) may face administrative sanctions from governing bodies like the Professional Regulation Commission (PRC).

II. Steps to Filing a Demand Letter

A. Purpose of the Demand Letter

A demand letter serves as a formal notice to the bookkeeper, outlining:

The nature of the violation.
The resulting damages or liabilities.
The actions required to rectify the situation.
The consequences of failing to comply.

B. Essential Elements of a Demand Letter

Introduction:
- Clearly state the purpose of the letter and identify the parties involved.
- Specify the role of the bookkeeper and the duties they failed to perform.
Statement of Facts:
- Provide a factual account of the bookkeeper’s actions or omissions.
- Highlight evidence, such as correspondence, contracts, or BIR notices of penalties.
Legal Basis:
- Cite relevant provisions of the contract, Civil Code, or tax laws.
- Include a reference to the employer's rights under Philippine law.
Demand:
- Specify the remedial actions required (e.g., settlement of penalties, provision of missing documentation, or immediate compliance with tax obligations).
- Set a reasonable deadline for compliance.
Consequences:
- Warn of potential legal action if the demand is not met.
Signature:
- Include the sender’s designation and contact details.

III. Applicable Legal Principles

A. Civil Code of the Philippines

Article 1170: Holds individuals liable for damages arising from fraud, negligence, or breach of contract.
Article 2201: Specifies the damages recoverable for breaches of contract, including actual, moral, and exemplary damages.

B. Tax Code (National Internal Revenue Code)

Non-compliance with tax filing obligations may result in the employer being subject to penalties, surcharges, and interest.
Bookkeepers may also face liability under Section 255, which penalizes willful non-filing of taxes.

C. Revised Penal Code

If the bookkeeper’s actions involve fraud or falsification, they may be prosecuted for estafa or falsification of public documents.

IV. Filing Legal Remedies

A. Civil Action for Damages

Employers can sue for damages under breach of contract or tort law. The lawsuit may seek reimbursement for penalties paid to the BIR, lost profits, and reputational harm.

B. Criminal Complaints

If fraudulent intent is evident, employers may file criminal complaints with the Department of Justice or local prosecutors.

C. Administrative Complaints

For certified professionals, a complaint may be lodged with the PRC or relevant regulatory body to suspend or revoke their license.

V. Preventive Measures

A. Employment Contracts

Ensure contracts include:

Clear descriptions of duties.
Indemnification clauses.
Penalties for non-compliance.

B. Oversight Mechanisms

Regular audits and reviews of tax filings can prevent undetected negligence.

C. Insurance

Errors and omissions insurance can provide financial protection against professional negligence.

VI. Conclusion

Addressing the non-filing of taxes by a bookkeeper requires a careful and lawful approach. A well-crafted demand letter serves as the first step in resolving the issue and asserting your legal rights. Should the bookkeeper fail to respond satisfactorily, the employer has recourse to civil, criminal, and administrative remedies under Philippine law. Consulting a competent attorney is crucial to navigating the complexities of the case and safeguarding the business from further harm.