Illinois Sales Tax Payment Plan & Resolution Checklist
Understanding Your Sales Tax Payment Obligation
Illinois sales tax applies to most retail goods and certain services sold within the state. A sales tax payment obligation occurs when the Illinois Department of Revenue determines that sales tax revenue owed to Illinois has not been paid in full. This situation arises when sales tax returns were not filed, returns were filed, but payment was not made, or a discrepancy was discovered during an audit.
The obligation represents a debt owed to the state, separate from any federal tax liability. The amount owed includes the original tax, plus interest calculated from the original due date at 7% annually as of January 1, 2025, through June 30, 2026. It may include penalties if the underpayment resulted from negligence, fraud, or non-filing.
Why the State Issues Payment Notices
The Illinois Department of Revenue issues sales tax payment notices or initiates collection action for several reasons. A business may have collected sales tax from customers but failed to remit it to the state. A return may have been filed late or not at all, leaving the tax unpaid. An audit or review of records may have revealed unreported or underreported sales that triggered a sales tax liability.
The state is required by law to pursue the collection of unpaid tax revenue. When the state determines that tax is owed, it sends a notice of tax liability or demand for payment. If payment is not received, the state may offer a payment plan or pursue formal collection procedures.
Consequences of Ignoring Payment Notices
Failing to pay a sales tax notice results in the Illinois Department of Revenue escalating collection efforts. Interest continues to accrue on the unpaid balance at the rate set by state law.
Penalties may be added or increased if the state determines the non-payment was willful. The state may issue a Notice of Tax Lien, which creates a claim against the taxpayer’s property and is recorded with the county.
The Illinois Department of Revenue explicitly states that filing a lien will hurt your credit rating.
While tax liens no longer appear on consumer credit reports from the three major credit bureaus as of April 2018, they remain public records that lenders and creditors can discover.
The state may pursue wage garnishment, bank levy, or seizure of property to satisfy the debt.
Business licenses and permits may be revoked or suspended if sales tax remains unpaid. The state may refer the matter to the Illinois Attorney General for further collection action. The longer the debt remains unpaid, the larger the total amount owed becomes due to accumulating interest and penalties.
What a Payment Notice Does Not Mean
Receiving a sales tax notice does not mean criminal charges have been filed or are imminent.
The notice represents an administrative collection action, not a criminal prosecution. The notice does not mean the state has yet seized your bank accounts or property. The notice serves as a formal demand or offer, not an enforcement action that has already occurred.
The notice allows you to operate your business and conduct normal financial transactions, but enforcement measures may be taken if the debt is not addressed. Having a sales tax debt does not mean the state has automatically approved or denied any payment plan or settlement offer.
Action Steps After Receiving a Payment Notice
Step 1: Gather and Review All Documentation
Locate the original notice or demand letter from the Illinois Department of Revenue. Gather copies of all sales tax returns filed for the relevant periods, if available. Collect records showing any payments made toward this obligation. Note the tax period or periods involved, the amount claimed due, and any stated deadline. If you have not received notice but know sales tax is unpaid, contact IDOR to request a statement of account.
Step 2: Verify the Calculation
Review the notice to confirm the tax period, the assessed tax amount, interest, and any penalties. Compare the amount on the notice to your records of sales and tax collected. Identify any discrepancies between what you believe is owed and what the state claims is owed. Verify that the interest rate applied matches current state law, which is 7% as of January 1, 2025, through June 30, 2026. Note the date from which interest began accruing, typically the original due date of the return.
Step 3: Assess Your Payment Capacity
Calculate your current cash availability to pay the full amount, if applicable. Determine how much you could pay immediately without disrupting business operations. Estimate how much you could pay monthly if a payment plan is needed. Consider whether you have access to a
loan, line of credit, or other funding source. Base this assessment on actual financial records, not estimates.
Step 4: Understand Available Payment Options
Review the notice to see if a payment plan or installment agreement is offered. Note any deadline for accepting a proposed payment plan. Contact the Illinois Department of Revenue if the notice does not specify payment options for you. Ask IDOR which payment methods are accepted, such as checks, electronic transfers, or credit cards. Inquire whether a payment plan can be modified if your circumstances change during the agreement period. For payment plans exceeding $15,000, you must complete Form EG-13-I for individuals or Form EG-13-B for businesses to document your financial condition.
Step 5: Respond to the Notice
Prepare to reply by the stated deadline if the notice requests a response or acknowledgment.
Submit a written explanation or request for review if you dispute the amount owed or the calculation. Do not assume the deadline will be extended without requesting an extension in writing. Keep a copy of any response you send and note the date it was sent. Consider sending correspondence by certified mail to obtain proof of delivery.
Step 6: Establish a Payment Plan
Contact the Illinois Department of Revenue to request a payment plan if you cannot pay the full amount immediately. The department offers pre-approved payment plans through MyTax Illinois for qualifying taxpayers. Provide IDOR with information about your financial situation if requested. Propose a monthly payment amount you can realistically afford. Request written confirmation of the plan, including the payment amount, due date, and total number of payments. Ensure the written agreement specifies what happens if you miss a payment.
Step 7: Make Timely Payments
Set up a system to ensure payments are made on time each month. Pay by the method specified in your payment plan agreement. Include your account number or tax identification number with each payment. Keep receipts or confirmation for each payment. Track the remaining balance after each payment to verify it is declining correctly.
Step 8: Monitor Correspondence
Watch for follow-up correspondence from IDOR confirming receipt of payments. Contact IDOR to verify the payment was applied if you do not receive confirmation after 30 days. Report any change in your address to IDOR immediately so you do not miss notices. Contact IDOR before the due date if your financial situation changes and you cannot make a scheduled payment. Ask
IDOR whether you can modify the payment plan if circumstances warrant.
Step 9: Organize Supporting Records
Organize all sales records, tax returns, and payment records related to the unpaid tax period.
Document any payments made toward this liability, even if made outside of a formal plan.
Gather evidence supporting your position if you dispute the assessed amount, including sales records, receipts, and accounting records. Keep these documents organized and accessible in case IDOR requests them. Maintain these records for at least the period required by state law.
- Not responding to the notice can result in escalated enforcement action, liens, or levies.
- Failing to verify the calculation may mean overpaying or acknowledging an incorrect
- Missing a payment plan deadline can result in losing the option to pay over time.
- Making informal or cash payments without documentation creates problems because
- Not contacting IDOR when circumstances change can cause default on your payment
- Sending payment to the wrong address delays processing and may result in additional
- Assuming the debt is resolved without written confirmation can lead to continued
- Not keeping records of payments eliminates your proof that you have paid what was
- Ignoring follow-up notices prevents you from addressing important account information.
- Neglecting to address related issues, such as a suspended business license, requires
- 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 10: Confirm Final Resolution
Request written confirmation from IDOR that the obligation is satisfied once the final payment is made. Ask IDOR to provide a final accounting showing the tax, interest, penalties, and total amount paid. Request that IDOR release any lien filed as security for the unpaid tax, and note that you must pay applicable filing and release fees before the department will release the lien.
Retain the confirmation letter for your records. Request a copy of the final settlement terms if the issue is resolved through a settlement or other agreement.
After Completing Your Payment Plan
The Illinois Department of Revenue processes payments and applies them to your account once a payment plan is established or the full amount is paid. The department must provide at least 10 days' notice before sending a wage levy or asset seizure action.
The state sends a confirmation once payment is received and applies the funds to your balance.
IDOR issues a notice indicating that the account is satisfied if you have completed a payment plan. The state must release a lien after the full amount is paid and applicable filing and release fees are paid, though you must request its release formally and obtain documentation.
Interest at 7% and penalties continue to be assessed on any remaining balance until it reaches zero. No additional collection action occurs once a payment plan is in place and payments are being made on time. IDOR may contact you about the overdue amount or resume other collection efforts if a payment is missed.
Common Mistakes to Avoid calculation. you cannot track official payment history. plan. penalties. collection action. owed. separate action with the appropriate state agency.
Frequently Asked Questions
Can I negotiate or reduce the amount of sales tax owed?
The sales tax amount itself is determined by state law and cannot be negotiated. Penalties may be subject to abatement or reduction if you can demonstrate reasonable cause for the non-payment or non-filing. Interest at the statutory rate of 7% as of January 1, 2025, through
June 30, 2026, continues to accrue and can be waived only under very limited circumstances specified by statute, such as during amnesty programs. Contact IDOR to ask whether your specific situation qualifies for penalty relief.
What happens if I sell my business while I still owe sales tax?
The sales tax obligation remains your responsibility unless it is resolved before the sale. A buyer or successor business cannot assume your personal tax liability. You must notify IDOR of any changes in business ownership. Consult with an accountant or tax professional about how this affects the sale structure.
Can IDOR take my personal bank account or wages to pay unpaid sales tax?
IDOR may pursue a bank levy requiring the bank to hold all monies in your account up to the total past due tax, penalty, and interest for 20 days before forwarding these monies. IDOR must notify you of the amount you owe at least 10 days before sending a levy. IDOR may levy against
your wages, salaries, bonuses, and commissions, with your employer required to deduct up to
15 percent of the gross amount. IDOR must notify you of the amount you owe at least 10 days before sending a wage levy to your employer. A wage levy can remain effective until your tax liability is paid.
Does unpaid Illinois sales tax affect my federal tax return or IRS liability?
Unpaid Illinois sales tax is a state matter and does not directly affect your federal income tax return or create a federal tax liability. If you failed to report business income related to unreported sales, that could affect your federal return. Consult a tax professional about the connection between your Illinois and federal tax situations.
What if I believe the sales tax assessment is wrong?
Contact the Illinois Department of Revenue and request a review or appeal. Explain the basis for your dispute in writing and provide supporting documentation such as sales records, tax returns, accounting records, or audit workpapers. IDOR provides guidance on dispute procedures through its website or by phone.
How can I find out the exact amount I owe?
Request a Statement of Account from the Illinois Department of Revenue. IDOR can provide a detailed breakdown of the tax assessed, interest accrued to date at the current rate of 7%, and any penalties. This statement shows exactly what you owe and the period for which it is due.
Will a payment plan prevent IDOR from placing a lien on my property?
A lien may already have been filed before a payment plan is offered. IDOR does not pursue additional enforcement actions once a payment plan is in place and payments are being made on time. A lien must be released after the account is satisfied and applicable filing and release fees are paid, but you must request this formally.
How do I make a payment toward my sales tax obligation?
Payment methods are specified on the notice or can be obtained by contacting IDOR directly. Methods include check, electronic payment, or credit card. Always include your account number or tax identification number with the payment. Send payments to the address specified on the notice or provided by IDOR.
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.
We help with:
20+ years experience • Same-day reviews available
