Challenging an Illinois Proposed Assessment Through ICB
Introduction: When the Draft Bill Arrives
It rarely arrives out of the blue. For months, an Illinois Department of Revenue (IDOR) auditor has been in your books. They’ve pulled sales invoices, questioned exemption certificates, and hinted that “some adjustments” may be necessary. Then, one morning, your controller hands you a thick envelope. Inside are pages of notice of proposed liability - the Department’s draft calculation of what you owe.
The numbers can be staggering. A handful of missing CRT-61 resale certificates becomes millions of dollars in “taxable sales.” A three-month sample, pulled during your busiest season, is projected across three years. Suddenly, a $20,000 discrepancy mushrooms into a $400,000 draft bill, complete with penalties and interest.
Most business owners panic. Many assume the case is already over. But here’s the truth: the proposed assessment is not final. It is the Department’s opening move and your best chance to push back. Before it turns into a binding Notice of Tax Liability (NTL), you can challenge it through the Department’s Informal Conference Board (ICB).
Handled correctly, this is where six-figure liabilities can be cut in half, penalties removed, and errors corrected before they calcify into a judgment-like NTL.
Understanding the Proposed Assessment
A proposed assessment is the Department of Revenue’s way of saying, “Here’s what we think you owe. Prove us wrong.” It is not yet enforceable, but it is dangerous precisely because so many taxpayers misread it.
Think of it as the auditor’s draft bill, wrapped in official letterhead. It comes after fieldwork is done and before a formal Notice of Tax Liability (NTL) is issued. The document usually includes schedules, sample calculations, disallowed exemptions, and projected figures for tax, penalties, and interest.
For business owners, the proposed assessment is unsettling because the numbers are already inflated. Auditors rarely take a conservative view; their job is to protect the state’s revenue. If they found three bad transactions in a three-month sample, they may project that error rate across three years. Suddenly, $5,000 of disputed sales turns into a $250,000 “liability.” Add 15–30% penalties and statutory interest, and the draft bill can look catastrophic.
The proposed stage is valuable for another reason: the ICB process. By filing with the Informal Conference Board, you can have a panel, which is separate from the audit division, review your arguments, examine the auditor’s math, and correct obvious errors. It is not a courtroom, but it is often the most taxpayer-friendly venue in the Illinois audit process.
Why It Matters to Push Back Now
When you receive a proposed liability in Illinois, your next move is not to wait. Rather, it is to protest the proposed assessment through the Informal Conference Board (ICB).
The ICB is the Department’s formal review forum for proposed liabilities. It is not just an “optional meeting.” If you want to dispute the draft bill before it becomes final, you must file a protest with the ICB in writing, within the timeframe stated (typically 60 days). The Board then reviews your arguments, examines the auditor’s work, and has the authority to reduce or eliminate the proposed liability before it is finalized.
In short, if you disagree with the proposed liability, you must protest through ICB. Failing to do so means the auditor’s workpapers roll forward unchanged into a binding.
Common Errors in Proposed Assessments
We review dozens of Illinois proposed assessments every year, and the same flaws repeat like clockwork. Understanding these errors is the first step in challenging them.
Flawed Sampling and Projections
Sampling is the Department’s favorite weapon. Rather than audit every transaction, auditors test a small period, calculate an “error rate,” and extrapolate it across the audit years. The danger is obvious: a bad quarter becomes a bad three years. We’ve seen summer-heavy restaurants audited in July, or construction companies sampled only during their busiest season. The result is an error rate that bears no resemblance to annual reality. Unless challenged, that bad math becomes law.
Disallowed Exempt Sales
Illinois requires a CRT-61 resale certificate or other exemption form to validate exempt sales. If you can’t produce one during an audit, auditors often treat the entire transaction as taxable. That means millions in legitimate wholesale or manufacturing sales can suddenly be taxed in full. What auditors don’t highlight is that Illinois law permits retro-collection and substitute documentation. You can cure the deficiency, but only if you act before the liability is finalized.
Contractor End-User Misclassification
Construction contractors are treated as end-users of materials under Illinois ROT/UT rules. Auditors frequently misapply this “end-user” rule, taxing both the materials and the contract revenue. We’ve seen six-figure errors where IDOR double-counted, simply because the rules are complex. If you don’t correct it at the proposed stage, you may spend years unwinding it later.
Penalties Applied Automatically
Negligence penalties are the Department’s favorite add-on. They often appear in the workpapers with no explanation, stacked on top of tax and interest. Yet Illinois law allows for abatement when the taxpayer acted with reasonable cause — reliance on a CPA, clean filing history, or system errors. If you make the case early, penalties can disappear before they ever attach.
Strategies to Challenge a Proposed Assessment
Challenging a proposed assessment is not about arguing loudly; it’s about building credibility and forcing the Department to confront its own weaknesses. The best strategies combine legal rights, factual evidence, and persuasive presentation.
Review and Reconcile Every Line Item
Start with the workpapers. Check every invoice, exemption, and sample. In almost every case, we find errors, such as double-counted transactions, refunds ignored, sales coded incorrectly. These details may seem small, but in sample-based audits, they multiply into six-figure swings.
Present Missing Documentation Promptly
If exemption certificates or records were missing during fieldwork, gather them now. Retro-collect CRT-61s from customers, organize them into a binder, and submit cleanly. If customers refuse, provide substitute proof, like resale licenses, purchase orders, or shipping records. The proposed stage is the Department’s most receptive moment to accept late documentation.
Attack Sampling Methodology
If the sample is unrepresentative, say so and back it up. Provide evidence of seasonality, one-off events, or business changes. Suggest stratified sampling, where busy and slow periods are weighted properly. In some cases, present statistical margin-of-error calculations to show the projection is unreliable. Auditors hate defending shaky math, especially if you arm them with alternatives.
Request a Supervisor Conference
Do not stop with the field auditor. Ask for a conference with the auditor’s supervisor or the Department’s review section. These meetings are less formal but highly effective. Supervisors have discretion to adjust liabilities, and they prefer fixing problems here rather than defending them before a Tribunal judge later.
Argue Penalty Defenses Early
Frame your reasonable-cause arguments now. Show a spotless filing history, reliance on a CPA, or evidence of IT or POS system errors. Early abatement of penalties not only reduces the bill but also strengthens your negotiating posture if litigation follows.
Frequently Asked Questions
Is a proposed assessment legally binding?
- Not yet. It is the Department’s draft view of what you owe. But if you ignore it, those numbers will roll into a Notice of Tax Liability, which is final unless protested within 60 days.
How much time do I have to respond?
- Auditors typically give 60 days, but this is flexible. The key is not waiting. Every day you delay is one day closer to the liability becoming final.
Can I submit exemption certificates after the audit closes?
- Yes. Illinois law allows retro-collection, and IDOR often accepts substitute documentation at the proposed stage. Waiting until the protest makes it harder.
What if I disagree with the sample method?
- Challenge it now. Provide evidence that the sample was unrepresentative and propose an alternative. Once the NTL issues, IDOR will defend the sample aggressively.
Do penalties always stick?
- No. Penalties are often negotiable. Showing a clean history, reliance on professionals, or extraordinary circumstances can result in early abatement.
Do I need a lawyer or CPA to respond?
- Technically no. But auditors take represented taxpayers more seriously. A professional can reframe issues, narrow the scope, and preserve defenses for protest if needed.
Conclusion: The Window That Matters Most
For Illinois business owners, the proposed assessment is more than a draft bill. It is the Department’s opening position — and your best chance to reshape the narrative. Handle it passively, and you’ll inherit a liability inflated by projections, missing paperwork, and automatic penalties. Handle it strategically, and you can cut that liability before it calcifies into a binding Notice of Tax Liability.
The businesses that act quickly — reviewing every line, gathering missing certificates, challenging samples, and pressing supervisors — routinely save hundreds of thousands of dollars. Those who wait until protest face steeper battles under harsher rules.
If a proposed assessment is sitting on your desk, treat it as urgent. Upload it to us today. Within 48 hours, we will review the workpapers, identify weaknesses, and map a strategy to shrink the bill before it becomes final. In Illinois, timing is leverage — and leverage at this stage is everything.