Current through Register Vol. 48, No. 38, September 20, 2024
a)
Statutory Authority. Section 3-10 of the Uniform Penalty and Interest Act sets
forth limitation periods for the assessment of taxes by the Illinois Department
of Revenue . In the case of a failure to file a return required by law
that is voluntarily disclosed to the Department, in accordance with this
Section, the tax may be assessed no more than 4 years after the original due
date of each return required to have been filed. [35 ILCS
735/3-10(c)]
b) Taxpayers must voluntarily come forward
and disclose. In order for the statute of limitations to be limited to no more
than four years under Illinois law, a taxpayer must voluntarily come forward
and disclose its liability to the Problems Resolution Division (PRD) of the
Taxpayer Services Program. A taxpayer has voluntarily come forward and
disclosed its liability to the PRD when it has done the following:
1) The taxpayer files an application for
voluntary disclosure. The taxpayer must file an application for voluntary
disclosure in a form prescribed by the PRD prior to the date the Department of
Revenue has initiated an audit or investigation of the taxpayer. The
Application is not accepted by the PRD until it has been approved and signed by
a Board of Appeals member. A Board member may not sign the Application until
the Department has notified the PRD that the Department had not initiated an
audit or investigation of the taxpayer, as those terms are explained in
subsection (c)(1), prior to the filing date of the taxpayer's Application with
the PRD. The filing date of the taxpayer's Application with the PRD is the date
the Application is received by the PRD. Once a Board member has signed the
Application, the PRD will furnish the taxpayer with a copy of the executed
Application.
2) The taxpayer files
returns and pays liability. Once the taxpayer has received a copy of the
executed Application, the taxpayer must file Illinois tax returns for the tax
being disclosed for the last four years with the PRD and pay all tax and
interest within 30 days from the Board of Appeals member's Signature Date . The
Board of Appeals member's Signature Date is the date the Board member signs the
Application. The taxpayer's determination of its tax liability, including the
methodology used by the taxpayer, must be documented and in a manner reviewable
by the Department. A taxpayer who maintains that it was not required to file
returns and pay tax for the entire four years shall file returns and pay tax
for the period that it maintains it was required to do so under Illinois law.
In addition, the taxpayer will provide in its Application to the PRD its
reasons why it maintains it does not owe tax for the entire voluntary
disclosure period (immediately preceding four years). The PRD will determine
the number of years (up to the four year maximum) the taxpayer is subject to
Illinois tax under voluntary disclosure. The PRD will notify the taxpayer of
its decision. The taxpayer will file returns and pay tax for the number of
years (up to four years maximum) the PRD has determined the taxpayer is subject
to tax under voluntary disclosure. The taxpayer will file any additional
returns and pay any additional liability owed within 60 days from the date of
notification to the taxpayer. The date of notification is the date shown on the
notification sent to the taxpayer by the PRD.
c) Disqualification from Voluntary
Disclosure. A taxpayer does not qualify for voluntary disclosure if:
1) The Department has initiated an audit or
investigation prior to the date the taxpayer filed its Application with the
PRD.
A) Initiation of an Audit. The
Department has initiated an audit of the taxpayer if, at a minimum:
i) The Audit Bureau of the Department has
contacted the taxpayer to schedule an appointment to audit the taxpayer for the
particular Illinois tax type being disclosed; or
ii) The Audit Bureau of the Department has
contacted the taxpayer in writing regarding a possible tax liability or a
notice of intent to audit for the particular Illinois tax type being
disclosed.
B) Initiation
of an Investigation. The Criminal Investigations Division of the Department has
initiated an investigation of a taxpayer if, at a minimum, the Department has
opened a criminal investigation file on the taxpayer.
C) Partnerships. Once the Department has
initiated an audit or investigation of a partnership or a general partner of
the partnership, the Department is deemed to have initiated an audit or
investigation of the partnership and all partners of that partnership, with
respect to the liability from the partnership, for purposes of qualifying for
voluntary disclosure.
2)
The taxpayer does not file tax returns within 30 days from the Signature
Date.
3) The taxpayer does not pay
all tax and interest within 30 days from the Signature Date.
4) The taxpayer does not begin prospective
compliance. The taxpayer must begin prospective compliance with Illinois tax
law as a part of voluntary disclosure. The taxpayer has begun prospective
compliance when the taxpayer has made a good faith effort to comply with
Illinois tax law. This would include prospectively filing all returns that are
due, paying the tax liability owed, registering with the Department, and
remitting all taxes collected.
5)
The taxpayer has not remitted all taxes collected for the Illinois tax type
being disclosed as part of voluntary disclosure. The taxpayer must remit all
taxes (and interest) previously collected for all periods by the taxpayer for
the Illinois tax type being disclosed as part of the taxpayer's voluntary
disclosure with the Department. This includes periods beyond the four-year
limitation for which the taxes were collected but not remitted. Failure to
remit all taxes (and interest) previously collected for the Illinois tax type
being disclosed will disqualify the taxpayer from the relief provided under
voluntary disclosure.
d)
Extensions. The taxpayer may request in writing, before the expiration of the
30-day period, an automatic 60-day extension in order to file its tax returns
or make payment. The taxpayer may request in writing, before the expiration of
any extension, a further extension in order to file its tax returns or make
payment. The PRD, in its discretion, may grant an additional extension when the
taxpayer's facts warrant a further extension of time in order to comply with
the PRD's filing requirements.
e)
The Department retains the right to audit the taxpayer and verify accurate
reporting. The taxpayer has made a good faith effort to accurately report its
tax liability under voluntary disclosure when the taxpayer has made a
reasonable and honest effort to calculate and report its correct tax liability
due and does not intentionally or purposefully misrepresent its tax liability
to the Department. The Department retains the right to audit the taxpayer for
all open years of the voluntary disclosure period and assess all tax, penalty
and interest that is owed by the taxpayer. The taxpayer will not qualify for
the relief provided under voluntary disclosure when the Department finds that
the taxpayer understated its final tax liability to the PRD by 10% or more and
cannot demonstrate to the Department that a good faith effort was made to
accurately report its liability for the voluntary disclosure period.
