When many small business owners first realize that their business has failed to pay Illinois state taxes, they are probably expecting the “common” consequences that they often hear about, such as telephone calls from collection agents, a tax lien being filed against their business assets, or even levies of their business bank accounts. What they fail to comprehend is that the Illinois Department of Revenue has several additional techniques that it employs to collect past due taxes, most of which are much more severe, and all of which demand immediate attention.

In recent years, in an effort to significantly increase the success of its efforts to collect unpaid income, employment, and sales taxes from Illinois businesses, the Illinois Department of Revenue has placed more focus on these collection techniques, many of which are debilitating to small business owners.

Now, any of the following alternatives can and will be used by IDOR to collect a business’s unpaid taxes:

- Intercepting a federal payment, such as a federal income tax refund

- Prohibiting the renewal of a professional or other license that is essential to continued operations, such as accounting, legal, medical, real estate, and other trade licenses, and liquor licenses

- Revoking the Chicago Business License

- Personally assessing owners for certain types of unpaid taxes

- Placing a hold on the business’s charter with the Illinois Secretary of State.

While many small business owners may not realize it, the most devastating of these is the placement of a hold on a business’s charter. If there is a hold on a business’s charter, that business cannot file its Annual Report with the Secretary of State. Initially, this will lead to the business being placed in “not good standing,” and eventually will lead to the business being involuntarily dissolved. In either case, the business’s owners will lose their corporate protection (i.e. their “corporate shield”), which is the main reason for creating corporations or LLCs in the first place. Without this shield, business owners can and will be held personally liable for any debts or claims against their business.

Many business owners are not aware of the possibility of a hold on their corporate charter because in the past, IDOR rarely placed holds on business charters, and only did so as a last-ditch effort to collect substantial debts. However, as part of the State of Illinois’s recent focus on increasing revenue, the Department has begun to issue these holds early in the collection process and often with minimal warning.

For this reason, if your business has unpaid state taxes, it is imperative that you contact an attorney right away to assist in the resolution of these liabilities. Moreover, if you believe that a hold has been placed on your corporate charter, failure to immediately address your company’s tax liability could expose you to substantial liabilities, for which your business would normally be liable.

If you fall into either of these categories, please contact our office for a free consultation.