Illinois Payroll Tax Payment Plan Options Checklist
Introduction
Illinois payroll tax refers to the state income tax that employers withhold from employee paychecks and remit to the Illinois Department of Revenue. When a business falls behind on payroll tax payments, the state may offer or require a payment plan as an alternative to immediate full payment or enforcement action.
Understanding your payment plan options and the process for establishing one is important because unresolved payroll tax debt can result in liens, wage garnishment of responsible persons, business license suspension, or seizure of assets.
What This Issue Means
A payroll tax payment plan is a formal agreement between your business and the Illinois
Department of Revenue that allows you to pay outstanding payroll tax debt over time rather than in a single lump sum. The plan includes a set monthly payment amount, a payment schedule, and specific terms that both you and the state agree to follow. Establishing a payment plan does not eliminate the debt; it restructures how and when it is paid.
Why the State Offers This Option
The Illinois Department of Revenue offers payment plan options for businesses that owe payroll taxes but cannot pay the full amount immediately. Payment plans serve as an administrative tool to collect unpaid taxes while allowing businesses to remain operational.
The state considers a payment plan when there is clear evidence of liability and an intention to pay, even if full immediate payment is not feasible. In some cases, the state may require a payment plan as a condition of avoiding more serious enforcement actions such as liens or levies.
What Happens If This Is Ignored
If you do not respond to a payment plan offer or do not establish an agreement with the state, the Illinois Department of Revenue may pursue enforcement actions to collect the debt. These actions can include placing a lien on business or personal property, levying business bank accounts, garnishing wages of the business owner or responsible person, suspending your
business license, or pursuing personal liability assessments. The longer the payroll tax debt remains unaddressed, the more aggressive the collection efforts become.
What This Does NOT Mean
Receiving a payment plan offer does not mean you have been charged with tax fraud or criminal activity. It does not mean the state has placed a lien on your property or frozen your accounts. A payment plan offer is a collection tool, not a penalty or judgment. Entering into a payment plan does not prevent the state from assessing interest on the unpaid balance. However, penalties may be subject to abatement under certain conditions if you separately request reasonable cause relief.
Steps to Establish a Payment Plan
Step 1: Gather Your Records
Collect documentation that shows the amount of payroll tax you owe, the time period covered, and any previous payments made. Include quarterly payroll tax returns filed with Illinois, payment receipts and transaction confirmations, correspondence from the Department, bank statements showing payroll tax deposits, and internal payroll records. Keep these organized and accessible for reference during the payment plan process.
Step 2: Determine Your Current Liability
Review any notices received from the Illinois Department of Revenue to confirm the exact amount owed. The notice includes principal amount, accrued interest, penalties and fees, and the calculation date.
If you have not received an official notice, contact the Department at 1-800-732-8866 or
217-782-3336 to request a current account statement. You can also access your account information at mytax.illinois.gov.
Step 3: Review Payment Plan Options
The Illinois Department of Revenue offers payment arrangements with standard terms. The default plan length is 12 months, with an option to extend to 24 months in some cases. For amounts over $15,000, additional financial documentation may be required using Form EG-13-I for individuals or Form EG-13-B for businesses.
All outstanding liabilities are included in the same plan. All returns must be filed current to qualify. The monthly payment amount depends on your financial condition.
Step 4: Calculate Sustainable Payment Amount
Determine the monthly or periodic payment amount your business can realistically sustain without creating additional operational hardship. Consider current monthly business revenue and expenses, payroll obligations, other outstanding debts, and essential operating costs. This calculation helps inform negotiations with the state and demonstrates good faith when proposing payment plan terms.
Step 5: Apply Through MyTax Illinois or Submit Form CPP-1
The fastest approval pathway is through MyTax Illinois, which offers immediate online approval for qualifying taxpayers who meet pre-approval criteria. Access MyTax Illinois at mytax.illinois.gov and select the “Set up a Payment Installment Plan with IDOR” link. If you cannot agree to the terms of a pre-approved option, you can request a plan through your MyTax
Illinois account for review by Collections staff. Alternatively, complete Form CPP-1, Payment
Installment Plan Request, and mail it to the address listed on the form.
Step 6: Contact the Collections Division if Needed
If you need assistance or have questions, contact the Illinois Department of Revenue
Collections Division at 1-800-732-8866 or 217-782-3336. For collection-specific inquiries, email
REV.CollectionNotice@illinois.gov or submit questions through the online form at tax.illinois.gov/questions.html. Have your business tax identification number and notice ready when you call. The state may assign a collection officer to work with you on establishing a plan.
Step 7: Review the Payment Plan Agreement
Once the state proposes or approves a plan, carefully review all terms before accepting. The agreement specifies the total amount to be paid, the monthly or periodic payment amount, payment due dates, the payment method, where to send payments, interest treatment, what happens if you default, whether the plan includes a deadline for filing future returns, and any other conditions. Ask explicitly whether a lien will be filed or suspended under the plan terms.
Ensure you understand every term.
Step 8: Sign and Return the Agreement
If the proposed terms are acceptable, sign the agreement and return it by the specified deadline. Keep a copy for your records. The agreement becomes effective once both you and the state have signed it. Do not assume the plan is in effect until you receive confirmation from the state.
Step 9: Make Your First Payment
Submit your first payment according to the schedule and method specified in the agreement.
Pay careful attention to the exact payment amount, the due date, where to send the payment, any reference numbers or account codes to include, and the accepted payment method. Keep detailed records of every payment made, including confirmation numbers and dates.
Step 10: Maintain Ongoing Compliance
While under a payment plan, your business remains obligated to file all required payroll tax returns on time, pay current payroll taxes when due, and make plan installments on the agreed schedule. Failure to meet these obligations may result in default of the payment plan and escalation to enforcement action. If your business’s financial situation changes significantly, contact the state to discuss modifying the plan before missing a scheduled payment.
- State enforcement notices and responses
- Sales tax audits, assessments, and collections
- Payroll & trust fund tax enforcement issues
- Penalty and interest reduction options
- Payment plans and state tax relief eligibility
- Representation before state tax agencies
Step 11: Document All Transactions
Maintain complete records of each payment made, any correspondence with the Department, notices or statements from the state, changes to the plan or modifications, and confirmation when the plan is satisfied. These records serve as proof that you complied with the agreement and are essential if any disputes arise after the plan is completed.
What Happens After Approval
After you have established a formal payment plan with the Illinois Department of Revenue, you will receive periodic statements or notices confirming your payment schedule and remaining balance. Once all scheduled payments are made, the state will send confirmation that the payroll tax debt has been satisfied.
Interest continues to accrue on the unpaid balance during the payment plan period. Penalties also continue to accrue, but you may separately request penalty abatement for reasonable cause by providing a detailed explanation and documentation.
Common Mistakes to Avoid
Failing to respond to the state’s outreach may result in escalation to enforcement action. Late or missed payments can trigger default of the agreement and may allow the state to pursue liens or levies. The payment plan covers only past debt; current payroll taxes must still be paid when due.
Always include your business tax ID or account number so payments are properly credited. If your business’s financial situation changes significantly, contact the state to discuss adjusting the plan rather than defaulting. Without payment records and agreements, proving compliance
or disputing misapplied payments becomes difficult. Continued tax compliance is a condition of remaining in a payment plan.
Frequently Asked Questions
Does establishing a payment plan prevent the state from placing a lien on my business?
Official Department guidance does not explicitly state that entering a payment plan prevents or suspends lien filing. Individual payment plan agreements may address lien provisions. Ask explicitly during negotiations whether a lien will be filed or suspended under the proposed payment plan terms.
Can the payment plan amount be changed if my business income
decreases?
Taxpayers experiencing financial hardship or changes in circumstances can contact the
Department Collections Division at 1-800-732-8866 to request modifications. Submit a written request with documentation of the change. The state evaluates modifications based on the current financial condition. The state is not required to approve a modification, but it may offer a new plan term.
Will penalties and interest stop accruing once I enter a payment plan?
Interest continues to accrue on unpaid tax balances during payment plan periods and cannot be abated except in very limited circumstances. Penalties also continue to accrue during the payment plan period. You may separately request penalty abatement for reasonable cause by providing a detailed explanation and documentation of the cause of the delay. Penalty abatement is not automatic and must be requested separately from the payment plan.
What happens if I miss a payment?
The specific consequences of a missed payment depend on the terms in your written agreement. A single missed payment may not automatically terminate the plan, but continued non-compliance may result in default. If you miss a payment, contact your assigned collection officer immediately to explain the situation and discuss options. The state may allow you to make up the missed payment without terminating the agreement.
Do I need a lawyer or tax professional to set up a payment plan?
You are not required to hire a representative to negotiate a payment plan. You may work directly with the Department Collections Division or use MyTax Illinois for online approval. Some
businesses choose to work with a tax professional or attorney for guidance. This decision does not affect your eligibility for a payment plan.
Can I pay off the plan early without penalty?
The state does not impose a penalty for early payoff of a payment plan. If you can pay off the remaining balance ahead of schedule, contact your assigned collection officer or follow the payment instructions in your agreement. Early payoff may reduce the total interest accrued.
How long does it take for the state to approve a payment plan?
For taxpayers who meet pre-approval criteria, MyTax Illinois offers immediate online approval.
The system evaluates eligibility automatically and provides instant confirmation if approved. For taxpayers who submit Form CPP-1 by mail or request non-standard terms, the review and approval timeframe varies and may take several weeks, depending on case complexity and
Department workload. Do not assume a plan is approved until you receive written confirmation.
Facing State Tax Enforcement Action?
If you’ve received a notice related to sales tax or payroll tax enforcement and aren’t sure how to respond, our team can help you understand your options and next steps.
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