Current through Register Vol. 48, No. 38, September 20, 2024
a) In General. The Department, within the
applicable period of limitations for a claim for refund, shall credit the
amount of any overpayment, including interest allowed on the overpayment,
against any liability for tax imposed under the IITA or any other Act
administered by the Department on the person who made the overpayment, and it
shall refund the balance to that person. (See IITA Section 909(a) and Section
2505-275 of the Department of Revenue Law [
20 ILCS
2505/2505-275] .)
b) Credit Against the Estimated Tax. A
taxpayer may elect to have any portion of any overpayment shown on an original
or amended return for a taxable year applied against the taxpayer's estimated
tax liability for a subsequent taxable year. (See IITA Section 909(b).) The
election shall be made on the form and in the manner prescribed by the
Department, must be made before the overpayment is refunded, and, once an
election is made, the election may not be altered to reduce the amount credited
or to change the taxable year to which the credit will be applied. After an
election is properly made, the Department shall apply the amount of the
overpayment against other liabilities of the taxpayer and apply only the
balance (if any) of the overpayment against the taxpayer's estimated tax
liability. (See IITA Section 909(a) and (b) and Section 2505-275 of the
Department of Revenue Law .) If the Department applies a portion of an
overpayment against a liability other than the estimated tax liability to which
the taxpayer elected to apply the overpayment or refunds some or all of the
amount that the taxpayer had elected to apply against its estimated tax
liability, the Department shall issue a notice to the taxpayer stating the
amount so applied and the liability against which the application was made, or
the amount so refunded, and no penalty for late payment of estimated taxes
under IITA Section 804(a) or for underpayment of tax under IITA Section 1005(a)
shall accrue with respect to the amount so applied or refunded, if the full
amount of the liability that was due as of the date the notice was issued is
paid prior to the later of:
1) 30 days after
the date the notice is issued; or
2) the unextended due date of the return for
the year for which the estimated tax credit was requested or, in the case of
the penalty for late payment of estimated taxes, the due date of the next
estimated tax installment (if any) due after the date of the notice.
c) Interest on Overpayments
1) General Rule. Subject to the provisions of
this subsection (c), interest shall be allowed and paid upon any overpayment in
respect of the tax imposed by the Act at a rate determined by reference to IITA
Section 909(c). When there is a dispute between a taxpayer and the Department
regarding the amount of interest that is due, see subsection (f)(6).
2) Overpayments. The overpayment in respect
of any tax imposed by the Act includes any penalties assessed under IITA
Section 1002(e) and any interest assessed on the tax or on a penalty under IITA
Section 1003. For this purpose, an overpayment is any creditable or refundable
portion of taxes, penalty, or interest that was previously paid.
3) Date of Overpayment
A) The date of overpayment is the date of
payment of any tax that thereafter becomes or is determined to be refundable or
creditable for the taxable year, except as provided in subsection (c)(3)(B).
There can be no overpayment of tax prior to the last day prescribed for filing
the return, nor until the entire tax liability for the taxable year is
satisfied, nor until the return is filed for the taxable year. Therefore, the
date or dates of overpayment are the date of payment of the first amount that
(when added to previous payments) exceeds the tax liability (including any
interest or penalties) for the taxable year and the date or dates of any
subsequent payments made with respect to the tax liability, which in any event
cannot be earlier than the last day prescribed for filing the return for the
year, nor earlier than the date the return is filed. The "last day prescribed
for filing the return", for purposes of this subsection (c)(3)(A) and
subsection (d) is the original due date, not the extended due date, if
any.
B) In the case of a federal
change due to the final allowance of a carryback from a loss year ending prior
to December 31, 1986, under the provisions of the federal Internal Revenue
Code, the date of overpayment shall be as of the close of the taxable year in
which the deduction, losses, or other item or event occurred that created the
federal carryback, or the date when the return for the carryback year is filed,
whichever is later.
C) In the case
of a federal change due to the final allowance of a carryback or carryforward
from a loss year ending on or after December 31, 1986, and in the case of an
Illinois change due to the carryforward or carryback of an Illinois net loss,
Illinois investment credit, jobs credit, replacement tax credit, or other
credit (other than estimated or tentative tax credit) from a loss or credit
year ending on or after December 31, 1986, the date of overpayment shall be the
date the claim for refund is filed, except that, if any overpayment is refunded
within 3 months after the date the claim for refund is filed, determined
without regard to processing by the Comptroller, no interest shall be allowed
on the overpayment.
D) Beginning
January 1, 1994, if a claim for refund relates to an overpayment
attributable to a net loss carryback as provided by Section 207 of the Illinois
Income Tax Act, the date of overpayment shall be the last day of the taxable
year in which the loss was incurred. [
35 ILCS
735/3-2(d)]
d) Period for Which Interest is
Allowable
1) In General
A) Prior to January 1, 1994, interest shall
be allowed and paid from the date of overpayment to a date determined by the
Director or his or her designee, which shall be not more than 30 days prior to
the date of any refund or credit. However, no interest shall be allowed on the
amount of tax overpaid if that amount is refunded or credited within the later
of 3 months after the last date prescribed for filing the return of the tax or
within 3 months after the return was filed, determined without regard to
processing by the Comptroller.
B)
On and after January 1, 1994, interest shall be allowed and paid in the manner
prescribed under the Uniform Penalty and Interest Act [ 35 ILCS 735 ]
(UPIA).
2) Estimated Tax
for Succeeding Year. Notwithstanding any other provision of this Section, if a
taxpayer elects, under subsection (b):
A) on
a timely filed original return, to have all or part of an overpayment shown on
the return applied as an estimated tax payment for the succeeding taxable year,
no interest shall be allowed on that portion of the overpayment so
credited;
B) on an original return
that is filed after the due date for filing that return (including extensions),
or on an amended return, to have all or part of an overpayment shown on the
return applied as an estimated tax payment for any subsequent taxable year, no
interest shall be allowed on that portion of the overpayment so credited for
any period after the date on which the election is made;
C) by the filing of any other form or
statement prescribed by the Department requesting to have all or part of a
refund requested on a previously filed original or amended return applied
against an estimated tax obligation, no interest shall be allowed on that
portion of the overpayment so credited for any period after the date on which
the election is made.
e) Examples. This Section may be illustrated
by the following examples:
EXAMPLE 1
T, a calendar year taxpayer, receives an extension to June
30, 1972 to file a 1971 return. On April 15, 1972, T files a tentative return
pursuant to IITA Section 602(a) showing an estimated liability of $500 that has
been paid through withholding, estimated tax payments, or as a payment with the
tentative return of the tax properly estimated to be due. On June 15, 1972, T
files a 1971 return showing a tax liability of $3,000 including interest for
late payment and remits $2,500 that in addition to the $500 paid as indicated,
satisfies the liability shown on the return. On August 15, 1972, T files a
claim for refund for $1,500 as an overpayment of 1971 tax. The date of
overpayment for the computation of any interest would be June 15, which is the
date when payments first exceeded liability, as now shown as a result of the
claim for refund, and that is the date when the return for the taxable year was
first filed. See Example 2 for application of the 3-month rule.
EXAMPLE 2
Assume the same facts as in Example 1 and that T's refund
claim of $1,500 was allowed and paid on September l. No interest would be
allowed because the refund was made within 3 months after June 15, the date the
return for the taxable year was filed. If the refund was made on October 1,
interest would be allowed from June 15 to a date that would be not more than 30
days prior to October 1.
EXAMPLE 3
W, a calendar year taxpayer, files a return on March 7 and
claims a refund as a result of excess withholding. The refund is made July l.
No interest would be allowed because the refund was made within 3 months after
April 15, which is the later of the last day prescribed for filing the return
or the date the return was filed. If, with the same facts, the refund is made
July 28, interest would be allowed from April 15 (the date of
overpayment).
EXAMPLE 4
X, a calendar year corporation, sustains a federal net
operating loss in 1973. X files a federal claim for refund, carrying the loss
back to 1970 and receives a refund of federal taxes for 1970 based on the net
operating loss carryback. (Refer to subsection (f)(4) respecting a federal
application for tentative carryback adjustment.) X then files Form IL-1120-X
claiming an overpayment of 1970 Illinois tax as a result of a federal change in
its reported taxable income for 1970. The date of overpayment would be December
31, 1973, the close of the taxable year in which the federal net operating loss
occurred (provided an original 1970 IL-1120 had been filed by this
date).
f) Refund Claim
1) In General. A claim for refund of an
overpayment of income tax may be filed with the Department only if a return for
the taxable year for which the refund is claimed has been filed. An original
return does not constitute a claim for refund under IITA Section 909(d) and (e)
of the Act calling for consideration, but may qualify as an extension of the
limitations period for filing a claim for refund under Section
100.9410(c)(2).
A separate claim shall be filed for each taxable year for which an income tax
overpayment was made. Every claim for refund shall be in writing, shall be on
the appropriate form prescribed by the Department, and (using attachments if
necessary) shall state the specific grounds upon which it is founded.
2) Evidence of Claim Filing. In preparing and
filing a claim on either an amended return before the return due date, or after
that date has passed on Form IL-843, Form IL-1040-X, or Form IL-1120-X, a
taxpayer may attach two photocopies of page l of the original executed claim
being filed as a pro forma claim receipt form identifying the claim with a
written request that one photocopy be returned to the claimant as a receipt.
Upon the Department's receiving the claim and the two photocopies of page l of
the claim if attached, the Director's designee shall place on the claim the
Department's Date Received Stamp and initial the stamp in ink, after which one
photocopy shall be removed and mailed to the claimant for use as a receipt. In
absence of a photocopy of the claim form (so stamped and initialed) being
attached to the original claim or being produced by the claimant, copies of the
Department's records certified true by the Director or his or her designee
shall be deemed prima facie correct to show whether or not a claim was filed
and, if so, the date upon which it was received by the Department. Furthermore,
the Department's records as to the date that the claim was received in the
Department's mail room shall be prima facie evidence that the postmark date on
the claim was 10 days prior to that date.
3) Amended Return as Claim; Limited Use. In
an instance in which a return for the taxable year is filed early, the latest
received by the Department of any further return or amended return filed by the
taxpayer on or before the last day prescribed for timely filing shall
constitute and be accepted as the return for the taxable year. Therefore, if a
return showing a tax liability for the taxable year has been filed with the
Department and the tax paid and the due date prescribed for filing that return
has not passed, any claim for refund filed prior to that date shall be made by
the filing of a further return marked "CORRECTED", showing the amount of the
tax overpayment to be refundable. Form IL-1040-X and Form IL-1120-X shall be
used for this purpose by individuals and corporations.
4) Claim Form; Federal Change. If, on the
other hand, the due date for filing a return has passed and under the Act an
overpayment based on a federal change has arisen, in addition to meeting the
requirements of IITA Section 506 a claim for refund based on the federal change
should be made by the filing (following the instructions thereon) of a notice
of the change on Illinois Form IL-843, Form IL-1040-X, or Form IL-1120-X, as
appropriate. To meet the requirements of IITA Section 909(d) for stating
specific grounds, there should be within the form or on an attachment an
explanation in detail sufficient to show the nature of the items of change or
alteration. If helpful or otherwise appropriate to show the grounds and to
compute the amount claimed as refundable, another return marked "AMENDED" may
be attached or filed in connection with the Form IL-843. Further, when a claim
for refund is filed based on a federal change giving rise to an overpayment,
documentation in form of the original federal documents or correspondence
furnished the taxpayer or other satisfactory proof in connection with the
change (or true and correct fully legible photocopies) shall be attached
evidencing that the federal change represents an agreed to or final federal
Internal Revenue Service (or court imposed) acceptance, recomputation,
redetermination, change, tentative carryback adjustment or settlement, and it
shall be stated or shown that no contest is pending. In this connection, the
payment received as the result of the filing of an application for a tentative
carryback adjustment (on Form 1045 or Form 1139) pursuant to IRC section 6411
is a change reportable under IITA Section 506. A claim for refund of an
overpayment of Illinois income tax occasioned by the payment of a tentative
carryback adjustment may be filed on Form IL-1040-X and Form IL-1120-X. A
premature or incomplete claim on Form IL-843, Form IL-1040-X, or Form IL-1120-X
shall not constitute a claim for refund within the meaning of IITA Section
909(d), nor for purposes of commencing the 6-month period in subsection (g).
Upon any claim being received and identified as premature, incomplete, or
otherwise defective under the Act, the Department, as soon as practicable,
shall notify the taxpayer in writing to enable, if possible, the timely
submission of a mature and perfected claim.
5) Claim Form; No Federal Change. If a return
showing tax due for the taxable year has been filed and the tax paid and an
overpayment based on a purely Illinois change has arisen and is not based to
any extent on a change in federal income tax liability, any claim for refund
should be made by the filing (following the instructions thereon) of Illinois
Form IL-843, Form IL-1040-X (individuals), or Form IL-1120-X (corporations), as
appropriate, using, if necessary, an attachment to set forth in detail each
specific ground for refund. If appropriate, another return marked "AMENDED" may
be attached to or filed in connection with the Form IL-843. Pertaining to
purely Illinois changes, Forms IL-843, IL-1040-X and IL-1120-X are designed for
use not only to claim a refund of tax overpayment, but also to report an
increase in the amount of previously reported or determined income tax
liability for the taxable year.
6)
Informal Claim Not Permitted; Disputes Regarding the Amount of Interest Due. In
all cases in which the original return due date has passed, claims for refund
shall be filed using the following forms, as appropriate: Form IL-843, Form
IL-1040-X and Form IL-1120-X. These forms may also be used by taxpayers to
claim additional interest when there is a dispute regarding the amount of
interest that is due from the Department relative to a refund. The claims for
additional interest must be filed either within the 60-day protest period for
claim denials (see IITA Section 910) or within the limitations period for
filing claims for refund for the taxable year for which the interest is due
(see IITA Section 911). See 86 Ill. Adm. Code
200.120
for procedure on protest. An "informal claim", such as a letter from the
taxpayer, is insufficient for the purpose of establishing or extending any of
the limitations in IITA Section 911 or in subsections (g) and (h) of this
Section.
g) Notices of
Refund or Denial
1) In General. The
Department shall examine a claim for refund, in connection, as appropriate,
with the return for the taxable year to which it relates, as soon as
practicable after it is filed to determine the correct amount of tax and the
amount of any refundable overpayment to which the claimant-taxpayer may be
entitled. If, for the taxable year involved, the Department finds the claimant
entitled to a refund in any amount, it shall issue an appropriate notice of
refund, abatement, or credit (see subsection (b)). If the Department has failed
to approve or deny the claim before the expiration of 6 months after the date
the claim was filed, the claimant may nevertheless thereafter file with the
Department a written protest addressed in accordance with the instructions in
the applicable claim form (IL-1040-X, IL-1120-X, or IL-843). If a protest is
filed, the Department shall consider the claim and, if the taxpayer has so
requested, shall grant the taxpayer or the taxpayer's authorized representative
a hearing within 6 months after the date the request is filed.
2) Notice of Denial; Notice of Deficiency as
Denial. However, if the Department finds that the claim for refund is not
allowable and proposes to issue a notice of denial or, if taking into account
the claim, nevertheless finds adjustments that are a basis for proposing an
increase in the amount of tax liability over that shown on the return, or
decreasing it by an amount less than that claimed as refundable, the Department
shall issue a notice of deficiency under IITA Section 904(c) (see Section
100.9300(a)
) or it shall issue a notice of denial or partial denial of the claim. In the
event that a notice of deficiency is issued that indicates that the claim for
refund was considered, the notice of deficiency shall constitute (concurrently)
a notice of denial of the claim. Note that, in the absence of a written protest
of the notice of deficiency or denial (see 86 Ill. Adm. Code
200.120(b)
), the Department's final action is not an administrative decision subject to
judicial review (except as to jurisdictional questions) under the provisions of
the Administrative Review Law [ 735 ILCS 5 /Art. III] (see Section
100.9600
).
h) Effect of Denial.
Denial of a claim becomes final 60 days after the denial is issued
(irrespective of whether the claimant is outside the United States), except to
the extent (in whole or part) that the claimant in the meantime filed a
protest, as provided by IITA Section 910 (see 86 Ill. Adm. Code
200.120(b)
), against the denial of amounts claimed as refundable. In the absence of a
written protest of the denial of the claim for refund, the Department's final
action is not an administrative decision subject to judicial review (except as
to jurisdictional questions) under the provisions of the Administrative Review
Law (see 86 Ill. Adm. Code 100.9600).
i) Time for Protest. If, after a claim for
refund is denied by issuance of a notice of denial (see Section
100.9400(g)(2)
), a written protest against the denial is filed by the taxpayer within 60 days
after the denial is issued (irrespective of whether the taxpayer is outside the
United States), the Department shall reconsider the denial and, if requested,
shall grant the taxpayer or the taxpayer's authorized representative a hearing,
as provided for in IITA Section 914. See 86 Ill. Adm. Code 200 for protest and
hearing procedures.
