Sales Tax Voluntary Disclosure Attorney

Most business owners are honest, hardworking people that fully intend to make the money back in a few weeks or possibly catch up with next month’s sales tax return. Before long, a taxpayer can find itself several months or even years behind in making tax payments. Other business owners in certain industries intentionally skim sales taxes by using money collected to allow for lower, more competitive prices. Eventually, business picks back up and the business does not feel the need to truthfully file sales tax returns or remit the correct amount of Illinois sales tax to the Illinois Department of Revenue (“IDOR”). In other circumstances, the business would like to faithfully remit the appropriate amount of sales tax to the state, but it does not want to significantly increase its sales reported on the sales tax return for fear of raising the dreaded audit flag. Stuck between the preverbal rock and a hard place, the business usually chooses the route of not doing anything and continues its practice of not reporting sales tax accurately. Eventually, the business is audited which turns into a large civil assessment with penalties and interest or in the extreme case criminal liability, which can equate to jail time.

The Voluntary Disclosure process is completed by providing the IDOR with a detailed explanation that your company made a mistake with specifics about each month’s sales and collections, if any, over the previous three years. Even if the business is unsure as to the exact amount of tax owed, we can file a Voluntary Disclosure and ask for additional time to calculate the exact amount. It is worth noting that unregistered companies are also required to register as a condition to the voluntary disclosure of tax liability.

It is also noteworthy that in exchange for voluntary disclosing and paying past tax liabilities and interest, the IDOR agrees to waive all penalties, unless the taxpayer collected and did not remit tax. If there were taxes collected but not remitted, the IDOR generally imposes a 5% penalty, which is often a much more attractive alternative than having the fear of 50% penalties or jail time weighing on the shoulders of the business owner.Amidst the current state tax climate in Illinois, the Voluntary Disclosure program is an exceptional way for a taxpayer who learns of wrongdoing to come forward to pay the tax, avoid the penalties, and put unneeded stress to bed once and for all. While it doesn’t happen for every client, we have more often than not seen the IDOR was 100% of the penalties even for collected but not remitted cases. Now more than ever, the Department has detailed third-party information that makes it more difficult for a business to avoid its responsibility of accurately calculating, collecting, and remitting state tax. For example, the IDOR now has detailed third party reports for any business that purchases alcohol or tobacco related products. This has made convenience stores, liquor stores, bars, and restaurants prime targets for audit. As they have had for a while, the IDOR also has detailed reports from the DMV which can bury a car dealer or the like who fails to properly charge, collect, and remit tax on its sales. As technology progresses and the information flow becomes closer to limitless with each passing year, the odds of a business escaping its state tax obligations become less and less. The question as to whether a company will be audited and caught from wrongdoing has become more of a question of when rather than if. Therefore, we highly recommend if you have an outstanding tax obligation to put behind you, the Voluntary Disclosure Program may be an extremely viable alternative.