Tax Law in Illinois

Tax law refers to the regulations governing the calculating, filing, and paying of taxes. When handling tax law cases, attorneys may manage taxes at various levels, such as local, state, and federal. The practice of this type of law involves understanding, defending, and resolving issues related to payment or non-payment.

If you hire a qualified Illinois professional to handle your business or personal taxes, you may feel protected from disputes. However, even a misplaced comma or added zero can cause the IRS to believe you owe more than you do. In some instances, accountants might also take deliberate actions that result in legal and financial repercussions.

The Illinois Income Tax Act imposes a tax on every individual, corporation, trust, and estate for the privilege of earning income as a resident of Illinois.  Unlike some states, Illinois imposes a flat income tax rate, regardless of how much income you earn. The Tax Foundation reports that the current state income tax rate remains at 4.95% of net income.

Tax Law Topics to Understand

If you find yourself facing Illinois taxation issues, understanding tax law and how it works can help. Most Americans have only basic knowledge of how the tax systems work, and with good reason. They are complex. Small business owners need to understand tax law and how it impacts their business. Here are some essential tax law topics to get you started.

IRS Audits

An IRS audit is a review of an experienced Illinois individual’s or an organization’s finances and accounts to ensure accuracy. The audit may also uncover discrepancies business owners were not aware existed.

These are just a few of the things the IRS looks for when conducting an audit:

  • Does your lifestyle match your income?
  • Are you passing off personal expenses as business expenses?
  • Are you overstating any of your business expenses?
  • Did you fail to report any business income or did you inflate that income?
  • Do your payroll taxes match that of your employees?
  • If your business handles a lot of cash,  are you diverting any of this into your own pocket?

If you are about to have your business audited, consider hiring a qualified Illinois tax law attorney. They can help you to navigate the complex process ahead and offer advice as issues arise.

Tax Evasion

Tax evasion refers to any activity an individual or business in Illinois engages in to reduce or avoid their tax liabilities. There are two types of tax evasion: evasion of assessment and evasion of payment.

Evasion of assessment means the taxpayer performed an action with the goal of defeating the assessment of a tax. The under-reporting of taxes is a common example of this. Evasion of payment means that you avoid paying the IRS by hiding money or assets that should become taxed.

Here are some examples of tax evasion:

  • Keeping a double set of books
  • Overstating deductions
  • Destroying financial records
  • Concealing sources of income
  • Filing a false return
  • Making false invoices
  • Holding property in another person’s name to avoid taxation

If you are found guilty of tax evasion in Illinois, you can face hefty fines, prison time, or both.

Income Tax Fraud

Income tax fraud is the willful attempt to evade or defraud the IRS and Illinois tax laws. Tax fraud occurs when an individual or business does any of the following:

  • Prepares and files a false tax return
  • Willfully fails to pay taxes
  • Intentionally fails to file an income tax return
  • Intentionally fails to report income received
  • Makes fraudulent or false claims on the tax return

Under Illinois law, it is a crime to willfully fail to file a return or file a fraudulent return. A first-time violation is a Class 4 felony, and each subsequent offense is a Class 3 felony. For a first offense, the guilty party can face up to 3 years in jail and up to $25,000 in fines. You can report tax fraud by phone, by mail, or online to the Illinois Department of Revenue.

When Would You Need an Experienced Illinois Tax Law Attorney?

Facing Legal Issues Regarding Taxes

If you’re under investigation from the IRS or planning a lawsuit against you, you will need a Illinois attorney who practices tax law. To illustrate, counsel can help collect the information you need and create a viable defense.

When Starting a Business

There’s more to starting a business in Illinois than selling products or services. You also need to determine the business type and structure. This status, in turn, determines how the business and your earnings get taxed. Choosing the wrong business structure can cost you.

Illinois imposes an income tax on every corporation earning or receiving income in Illinois. Corporations that can reasonably expect their income and replacement tax liability to be more than $400 must make quarterly estimated payments. Estimated payments are due on the 15th day of the 4th, 6th, 9th, and 12th months of the tax year. According to the The Tax Foundation, the current business income tax on corporations is 9.5%. Additionally, the personal property replacement tax for corporations is currently 2.5% of net income.

If You Have a Taxable Estate

If your estate is worth more than $11.58 million, or $23.16 million if you’re married, your estate might get taxed up to 40% for surpassing that threshold. No one wants a huge portion of their estate going to the IRS instead of their heirs. This is why wealthy people involve tax lawyers in their estate planning process.

According to Illinois Policy, Illinois imposes an estate tax on estates worth over $4 million. The current estate tax ranges from .8% to 16%, depending on the estate value. As of July 1, 2012, you must pay all Illinois estate tax to the Illinois State Treasurer. You can no longer pay the estate tax to the County Treasurer of the county in which the decedent lived.

Work with an Experienced Tax Law Lawyer in Illinois

Facing issues related to tax law can feel overwhelming. No one wants to go head-to-head with the IRS. Experienced Illinois tax law lawyers have the expertise you need, from conducting audits to defending you in court.  We can even help you connect with an attorney across Illinois state lines.

Submit a request online or call us today at (866) 345-6784 to get in touch with an experienced lawyer in your area!

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