Illinois Sales Tax Nonpayment Risk Checklist
Introduction
Illinois sales tax is a tax collected by retailers and sellers on goods and services sold to customers in the state. When a business or individual is supposed to collect this tax but fails to do so—or collects it but does not send it to the Illinois Department of Revenue—the state considers this a serious compliance issue.
Sales tax nonpayment affects the state’s revenue and creates legal exposure for the person responsible for collecting and remitting the funds. The Illinois Department of Revenue monitors sales tax accounts through regular filings and payment records. When nonpayment is identified, the state follows a documented collection process that may include notices, penalties, interest, and, eventually, enforcement actions.
What This Issue Means
Sales tax nonpayment occurs when a business owner, seller, or responsible party fails to remit collected sales tax to the Illinois Department of Revenue by the required deadline. This can happen if sales tax is collected from customers but not paid to the state, or if it was supposed to be collected but wasn't.
The issue also includes situations in which a sales tax return was filed, but the payment was not sent with it, or the return was returned unpaid. Nonpayment is treated differently from unfiled returns—it means a filing may have occurred, but the actual dollars owed were not transferred to the state.
Why the State Monitors This
The Illinois Department of Revenue monitors accounts through several methods. The state matches filed sales tax returns against actual payments received in its banking system. When a return shows tax due but no corresponding payment posts to the account, the state’s system flags this as nonpayment.
Additionally, if a check or electronic payment is returned for insufficient funds or other banking errors, the state treats this incident as nonpayment. The state also reviews accounts for which no return has been filed, and no payment has been received.
What Happens If This Is Ignored
If nonpayment of sales tax is not addressed, the Illinois Department of Revenue sends formal notices requesting payment. These notices include the amount owed, applicable penalties, and interest charged from the original due date. The state may escalate collection efforts if it receives no response or payment within the specified timeframe. This can include issuing a
Final Notice of Intent to Levy, which warns that the state may seize business bank accounts, equipment, or other assets.
The state may also file a lien against business or personal property, which becomes a public record. Without resolution, the state can pursue wage garnishment, asset seizure, or other enforcement tools available under Illinois tax law.
What This Does NOT Mean
Receiving a notice about sales tax nonpayment does not mean the state has already seized your bank account or filed a lawsuit against you. It does not automatically mean your business license will be revoked or that criminal charges will be filed. Nonpayment notices are the beginning of the collection process, not the end. A notice also does not mean the amount owed cannot be negotiated, reduced, or resolved through a payment arrangement. Being notified of nonpayment is a warning and an opportunity to act before more serious enforcement steps are taken.
Steps to Address Sales Tax Nonpayment
Step 1: Locate All Notices and Records
Gather every notice from the Illinois Department of Revenue related to sales tax. Find bank statements, credit card processing records, and payment confirmation documents. Locate any returned checks or failed electronic payment notices. Keep these documents organized and in one place for reference.
Step 2: Determine Affected Tax Periods
Review the notices to identify which months or quarters the nonpayment covers. Note the specific dates the payments were due. Check if the issue involves a single or multiple periods.
Write down each affected tax period and the amount listed as due.
Step 3: Calculate Total Amount Owed
Add up all amounts listed as due in the notices. Note separately any penalties and interest that have been added. Understand that interest and penalties continue to accrue from the original
due date until the debt is paid in full. Do not assume the amounts in the most recent notice are final.
Step 4: Contact the Department
Call the Department at 1-800-732-8866 or 217-782-3336 to request a current account statement. Provide your sales tax number or federal employer identification number. Ask for a written statement showing the exact amount owed as of today’s date, including all penalties and interest. You can also access your account information through MyTax Illinois at mytax.illinois.gov or submit questions through the online form.
Step 5: Review the Reason for Nonpayment
Determine whether the nonpayment was accidental, intentional, or administrative.
Understanding the cause will help when communicating with the state about next steps. This information is for your own understanding and planning.
Step 6: Organize Financial Documents
Gather bank statements for the months when the tax was due. Collect business income records and sales documentation for the relevant periods. If you used a payroll service or an accountant, request their records related to sales tax filings and payments. Having complete financial documentation helps clarify what happened and supports any discussions with the state.
Step 7: Document Extenuating Circumstances
If nonpayment occurred due to business hardship, accounting errors, or other circumstances, create a written summary of what happened. Include dates and specific events that led to the nonpayment. This documentation can be useful if you need to discuss the situation with the
Department or if you later request penalty abatement.
Step 8: Request Account Transcript
Contact the Illinois Department of Revenue and request an official account transcript showing all filed returns, all payments received, and all outstanding balances. This document shows the state’s records and can be compared against your own records to identify discrepancies. Ask how long it will take to receive the transcript and whether it can be provided electronically.
Step 9: Verify Returns Were Filed
Review your records to confirm whether sales tax returns were filed for all periods when nonpayment is claimed. If a return was filed but payment was not sent, the situation is different
than if no return was filed at all. Contact the Department to confirm which periods show filed returns in their system.
Step 10: Confirm Registration Status
Verify whether your sales tax account is currently active or has been suspended or revoked.
Contact the Department to verify the status. Ask what conditions must be met to restore the account to active status. Understanding the current status is essential before pursuing payment or arrangement options.
Step 11: Gather Payment Documentation
If you have records showing that payments were made but not posted to the account, collect copies of cancelled checks, electronic fund transfer confirmations, or payment receipts. Include the date, amount, and payment method for each transaction. These documents can help resolve discrepancies between what you sent and what the state received.
- 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 12: Document All Communications
Keep a record of every phone call, email, or written correspondence with the state. Keep a record of the date, time, the name of the person you spoke with, and a summary of the topics discussed. Save copies of all emails and written responses from the state. This documentation protects you and creates a clear record of your efforts to resolve the issue.
What Happens After You Respond
After you have gathered your documents and contacted the Illinois Department of Revenue, the state will provide you with an updated account balance and information about the next steps.
The Department may send you written correspondence confirming the amount owed and any payment or response deadlines. The state will review your request for a payment plan or other arrangement and inform you of its approval status. Processing times vary depending on the complexity of your account and the Department's current workload.
Common Mistakes to Avoid
Always note the deadline listed in any notice from the Illinois Department of Revenue, as missing these deadlines can result in escalated enforcement action. The state may attempt to contact you by phone, email, or mail multiple times, and ignoring these attempts triggers more serious collection steps. Ensure you confirm in writing the exact payee name, address, and payment amount before sending any money.
Interest and penalties continue to accrue after a notice is issued, so the amount you owe today is likely higher than the amount shown in an old notice. If you make a payment, save all documentation showing what was paid, when, and to whom. If you are working to repay overdue taxes, make sure to continue filing your current sales tax returns on time.
Frequently Asked Questions
How much interest and penalties are added to unpaid sales tax?
Unpaid sales tax accrues interest from the original due date. The interest rate is based on the federal underpayment rate, reviewed semi-annually on January 1 and July 1. Penalties are calculated using statutory formulas. Contact the Department for the current interest rate and penalty calculation for your specific situation.
Can the amount owed be reduced or negotiated?
The Illinois Department of Revenue provides detailed guidance on penalty abatement in
Publication 103. Taxpayers who filed or paid late but tried their best to follow the rules can ask to have the late-filing or late-payment penalty removed by explaining why they were late and providing proof.
For returns filed more frequently than annually, if the failure is non-fraudulent and no other failure occurred in the prior two years, the late-filing penalty is abated. Interest generally cannot be abated except in very limited circumstances.
What is a payment plan, and how does it work?
A payment plan lets you pay the amount owed over several months or more, rather than in a lump sum. Standard terms include a default plan length of 12 months, with a possible extension to 24 months. For amounts over $15,000, additional financial documentation (Form EG-13-I for individuals or Form EG-13-B for businesses) is required.
All outstanding liabilities are included in the same plan. All returns must be filed current to qualify. Taxpayers can apply through MyTax Illinois for instant pre-approval or submit Form
CPP-1 by mail.
Will my business license be suspended if I have unpaid sales tax?
Illinois law allows the state to suspend or revoke a sales tax permit under certain conditions.
This is a later step in the collection process, not an immediate consequence of nonpayment.
The state usually sends multiple notices and attempts to collect before taking action against your permit.
Can I be criminally prosecuted for unpaid sales tax?
Illinois law provides for criminal prosecution for willful tax evasion or fraud, but this is rare and typically reserved for intentional, repeated violations involving large amounts. Simple nonpayment alone does not automatically result in criminal charges.
What happens if I cannot afford to pay the full amount?
Contact the Illinois Department of Revenue to discuss your options. A payment plan may allow you to pay over time. Do not assume you have no options—communicating with the state about your financial situation is the first step.
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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