Notice of Proposed Tax Due in Illinois: What You Need to Know

Receiving a Notice of Proposed Tax Due from the Illinois Department of Revenue can be unsettling, especially if unexpected. This notice signals that the state believes you owe additional taxes, and addressing it promptly can help avoid penalties and further complications.

Reasons You May Receive This Notice

The Illinois Department of Revenue (IDOR) issues this notice when discrepancies arise between your reported tax information and state records. A common reason is unreported or underreported income. If IDOR receives W-2s or 1099s showing higher earnings than you reported, they may adjust your taxable income and calculate additional tax owed. This often happens when taxpayers forget to include freelance income, investment earnings, or retirement account distributions.

Errors in tax credits or deductions can also trigger this notice. If you claimed the Illinois Earned Income Credit (EIC) or property tax credit without meeting eligibility requirements, IDOR may disallow them and recalculate your tax liability. Similarly, deductions for student loan interest or business expenses must comply with state guidelines. If documentation doesn’t support the amounts claimed, the state may adjust your return.

Filing mistakes, such as miscalculations or incorrect tax rates, are another common cause. Illinois has a flat income tax rate of 4.95%, and any misapplication could result in an underpayment. Additionally, failing to include local sales or use tax on out-of-state purchases may lead to an assessment of unpaid amounts.

Reviewing the Proposed Amount

Reviewing the amount listed on the notice ensures accuracy. IDOR calculates this figure based on available records, but errors can occur if data is misinterpreted or prior payments weren’t credited. The notice typically includes a breakdown of adjustments, such as recalculations of taxable income, disallowed deductions, or late filing penalties.

Interest charges may also be applied, calculated from the original due date of the return to the date of the notice. Illinois imposes interest on unpaid taxes at a rate that fluctuates quarterly based on federal short-term rates. Checking these calculations can help identify mistakes.

Comparing the proposed amount with your tax return and supporting documents can determine whether the assessment is justified. If you made estimated tax payments or had withholdings that weren’t accounted for, providing proof could reduce the balance. If a tax credit was removed, verifying eligibility and supplying documentation may help reinstate it.

How to Settle or Make Payments

Once you verify the proposed amount, the next step is determining how to pay. Illinois offers several payment methods. The fastest option is the MyTax Illinois portal, which allows direct payments from a checking or savings account without additional fees. Credit and debit card payments are accepted but include processing fees.

If you can’t pay in full, Illinois provides installment agreements that spread the balance over multiple months. These agreements require a formal request and approval, with interest continuing to accrue. Missing a scheduled payment can result in default, potentially leading to wage garnishment or bank levies.

Taxpayers facing financial hardship may qualify for penalty abatement or an offer in compromise, allowing partial settlement of the debt. Approval requires detailed financial disclosures, including income, expenses, and assets. If granted, penalty relief can reduce the overall amount owed, though the state rarely forgives the principal tax liability.

What Happens If You Ignore the Notice

Ignoring a Notice of Proposed Tax Due can lead to serious consequences. Once the response deadline passes, the proposed amount transitions from an estimate to an official tax assessment. At that point, the balance is no longer negotiable, and additional penalties may apply. Illinois law allows the state to impose a late payment penalty of up to 15% of the unpaid tax.

If the balance remains unpaid, IDOR can take collection actions, including issuing a tax lien. Tax liens attach to real estate, vehicles, and other assets, appearing on public records and negatively impacting credit scores. This can create difficulties when applying for loans, refinancing a mortgage, or selling property. Unlike other debts, state tax liens do not automatically expire and can remain enforceable for up to 20 years unless resolved.

In severe cases, the state may initiate wage garnishment or levy bank accounts to recover unpaid taxes. Illinois statutes allow garnishment of up to 15% of disposable earnings without requiring a court order. Banks may also be directed to freeze accounts and remit funds to IDOR. Businesses with delinquent taxes risk license revocation, preventing them from operating legally.

Disputing the Assessment

If you believe the Notice of Proposed Tax Due is incorrect, you can dispute the assessment. The notice includes a deadline, typically 30 days from issuance, by which you must respond. Failing to act by this date can result in the assessment becoming final, limiting your ability to contest the amount owed.

To file a protest, submit a written explanation with supporting documentation, such as copies of tax returns, W-2s, 1099s, or receipts. The Illinois Department of Revenue reviews disputes through its Audit Bureau or Informal Conference Board, depending on the case’s complexity. If IDOR does not resolve the issue in your favor, you may appeal to the Illinois Independent Tax Tribunal, which hears disputes exceeding $15,000. Smaller disputes can be addressed through an administrative hearing within IDOR.

During the dispute process, penalties and interest may continue to accrue. However, if the appeal is successful, adjustments will be made, and any overpayments will be refunded or credited toward future tax liabilities. If IDOR upholds the assessment, you still have the option to escalate the case to the Illinois Circuit Court, though this requires legal representation and additional costs.

Contacting the Illinois Department of Revenue

If you have questions about your tax notice, contacting the Illinois Department of Revenue can provide clarification. IDOR offers multiple contact methods, including phone, mail, and online messaging through MyTax Illinois. Calling the taxpayer assistance line allows you to speak with a representative who can explain the notice, verify payments, or guide you through dispute procedures. Wait times can vary, especially around tax deadlines.

For complex issues, written correspondence may be necessary. When sending documents by mail, using certified mail with return receipt requested ensures proof of submission. If your case involves an audit or legal dispute, consulting a tax professional or attorney may be beneficial. Taxpayer advocates within IDOR can also assist in cases where administrative errors or delays have caused undue hardship. Keeping records of all communications, including dates, names of representatives spoken to, and copies of submitted documents, can help prevent misunderstandings and provide a clear history of your interactions.