Current through Register Vol. 48, No. 38, September 20, 2024
a) Collection procedure. The Illinois income
tax system basically is one of self-assessment. In general, each person or
taxpayer liable for tax is required to file a prescribed form of return showing
the facts upon which tax liability may be determined and assessed; the taxpayer
is required to compute the tax due on the return and make payment thereof on or
before the due date for filing the return. If the taxpayer fails to pay all or
any part of the tax when due, the Director, after assessment, issues to each
person liable for any unpaid portion thereof, a notice and demand for payment
at the place and time stated in the notice. The income tax is principally
collected through witholding at the source or by payments of estimated tax
required by law to be filed by certain individual and corporate taxpayers.
Neither withholding nor payment of estimated tax relieves a taxpayer from the
duty of filing an income tax return otherwise required.
1) Prior to January 1, 1994, IITA Section
1003(a) provides that interest at the rate of 9% per annum (or at such adjusted
rate as is established under Section 6621(b) of the Internal Revenue Code)
shall be paid on unpaid amounts of tax imposed by the Act from the due date to
the date paid; however, subsection (e) thereunder provides that, if a notice
and demand for payment of an amount due is issued, interest shall not be
imposed for the period after the date of such issuance if such amount is paid
within ten days.
2) On and after
January 1, 1994, IITA Section 1003(a) provides that interest shall be paid in
the manner and at the rate prescribed in Section 3-2 of the UPIA for the period
from such date to the date of payment of such amount. Section 3-2(c) of the
UPIA provides that if notice and demand is made for the payment of any amount
of tax due and if the amount due is paid within 30 days after the date of such
notice and demand, interest on the amount so paid shall not be imposed for the
period after the date of the notice and demand.
b) Examination and determination of tax
liability
1) Filing and examination of
return. After the income tax returns are filed with the Department, they are
sorted, classified, and processed (which includes inspection of the return to
verify the accuracy of the tax and supporting computations therein). Errors
apparent in the return are corrected (see Section
100.9200(a)(2)
below) and notification of the error and the
corrections are sent to the taxpayer. Thereafter, many of these returns are
selected for examination which may be conducted by correspondence, office
audit, or field audit. If, after examination, the return is accepted as filed,
the taxpayer is notified by appropriate "no change" letter or report. If, as a
result of examination, adjustments are proposed increasing the amount of the
tax liability shown on the return or (with or without a claim for refund)
decreasing it, and the taxpayer agrees in whole or in part with such
adjustments, he may be requested to execute Illinois Form IL-870, waiving the
restrictions on assessment and collection, and enabling immediate assessment
upon acceptance by the Department after appropriate review of the examiner's
(Revenue Auditor's) report. If adjustments are proposed with which the taxpayer
does not agree, he ordinarily is afforded certain administrative appeal rights
as described below which, however, do not apply in any case where criminal
prosecution is under consideration or, in the discretion of the Director, the
state's interest thereby would be prejudiced. Nor is appropriate action
otherwise precluded where the assessment or collection of the tax is in
jeopardy (see Section 1102 of the Illinois Income Tax Act).
2) Office conference with Department auditor
and his supervisor. A taxpayer initiates the administrative appeal rights
adverted to in subsection (b)(1) above by requesting, after the Department has
proposed adjustments, an office conference to be attended by either himself or
his representative (or both), the auditor, and the auditor's supervisor or
other designee; the request may be by telephone or in writing. Written
objections to the adjustments proposed are not required. The objectives of the
office conference are to provide taxpayers an opportunity by discussion and
further consideration to reach an early agreement respecting disputed items
arising from the examination and to assure to the extent possible that all
available pertinent facts, contentions, and viewpoints are included in the file
and taken into account in the formulation of recommendations. Further
objectives are to insure that the Act provisions as interpreted by regulations
and rulings are properly applied and that the recommendations are consistent
with any Department positions thereunder, as well as to provide a full
explanation to the taxpayer and to reflect in the case file the findings and
conclusions reached and the reasons therefor. If as a result of the office
conference adjustments are proposed with which the taxpayer agrees in whole or
part, he again ordinarily will be requested to execute the aforementioned Form
IL-870 subject to the Department's review and acceptance; see Section
100.9220(a) for the effect such execution has on the running of
interest.
3) Audit Review; Issuance
of Notice of Deficiency. If, after the office conference, the taxpayer does not
agree with the proposed adjustments, the administrative case file will then be
submitted to the Department's audit review staff for technical and arithmetic
review. After such review, the Audit Review staff will issue a Notice of
Deficiency pursuant to IITA 904(c) for any unagreed or disputed amounts.
Notices of Deficiency, although to be prepared and issued by Audit Review, due
to being in the nature of pleadings, shall be subject to review before issuance
by the Income Tax Legal Division.
c) Protest Procedures. Pursuant to IITA
Sections 904(d) and 908(a) a taxpayer may protest the Notice of Deficiency by
requesting a hearing before the Department. The taxpayer has 60 days (150 days
if the taxpayer is outside the United States) after the issuance of a Notice of
Deficiency to submit a proper protest to the Audit Review Division. Failure to
properly protest the Notice of Deficiency within the 60 (150) day period
results in the automatic assessment of the tax, and penalty shown therein. See
86 Ill. Adm. Code
200.120
for protest requirements. Upon receiving a timely protest to the adjustments
proposed in the examiner's report, the administrative case file will be
forwarded to the Department's Income Tax Legal Division.
d) Hearings. Department Hearings shall be
conducted in accordance with the regulations provided at 86 Ill. Adm. Code 200,
"Practice and Procedure for Hearings Before the Illinois Department of
Revenue".
