Protecting Employers Since 1985
Help for Employers and Their Advisors in Protesting the IDES Determination and Assessment (Tax Bill)
By: Nancy E. Joerg, Esq.
Many clients contact me once they have received the Notice of Determination & Assessment resulting from an Illinois Department of Employment Security (IDES) audit of their company. They are seeking guidance about their legal options. This article will address some of the common questions that I am asked:
1. How long do I have to pay the money demanded in the Notice of Determination & Assessment?
Answer: If you protest the Assessment (i.e., the tax owed, also called contributions, to the IDES as a result of an IDES audit), you do not have to also pay the Assessment. The Assessment doesn’t become final, due and owing until all of your protest and appeal rights have been exhausted.
2. How long do I have to protest the Notice of Determination & Assessment?
Answer: You have 20 days from the date of mailing of the Notice of Determination & Assessment. If you are even one day late in protesting, you will lose all rights of appeal.
3. Once I protest the Notice of Determination & Assessment, how long will it take to receive a Notice of Hearing?
Answer: There is no set time by which you will receive a Notice of Hearing from the IDES after you have protested the Notice of Determination & Assessment. Usually, it is anywhere from two months to a year before you receive the Notice of Hearing from the IDES.
4. Are the IDES Administrative Hearings in person or over the phone, and do I have a choice?
Answer: The Administrative Hearings can be either a telephone Hearing or an in-person Hearing. Usually, it is the Company’s choice. If the Company doesn’t indicate a preference on its protest of the Notice of Determination & Assessment, then the IDES will normally schedule a telephone Hearing.
Even when you receive a Notice of Hearing telling you that you will have an Administrative Hearing via telephone, you can contact the Administrative Law Judge (Hearing Officer) and request an in-person Hearing. I have never known that type of a request to be denied.
Some clients prefer telephone Hearings for various reasons. For example, they feel they can obtain more witnesses by doing the Hearing by phone; some clients prefer to communicate with the Administrative Law Judge in person and it is in fact easier to point out certain documents and evidence when sitting across the table from the Administrative Law Judge.
5. Once there is a Hearing date and time set, how should I best use the time leading up to the Hearing?
Answer: The best of use of the time period prior to the Administrative Hearing is to carefully select and prepare your witnesses. The Administrative Hearing is a whole new day in court. The Administrative Law Judge is not duty bound to back up the findings of the IDES Auditor who audited your company. Therefore, attack all of the issues with renewed vigor and think about which of your independent contractors would make the best witnesses to explain how they are truly self employed, have their own businesses, hold themselves out to the public and are entrepreneurial and well established as business owners.
You should gather promotional materials, advertisements from the disputed independent contractors, tax returns from the independent contractors, and any other documents which show that the independent contractors are self employed and not misclassified employees of your company. Do a Google search on each independent contractor.
6. How do I find out whether we won or lost at the Administrative Hearing?
Answer: You will not find out on the day of the Hearing. The Administrative Law Judge deliberates for several weeks and sometimes several months. After awhile, you will receive a written decision in the mail from the Administrative Law Judge telling you whether he modified the Determination & Assessment in any way, and what his reasoning was. These decisions are long and detailed usually.
Sometimes the Determination & Assessment is not reduced as a result of the Administrative Hearing.
Other times, the Company is successful in proving to the Administrative Law Judge that all the workers in question are really independent contractors and not employees for IDES purposes, and the Administrative Law Judge writes in his decision that the entire Determination & Assessment is cancelled.
Sometimes the Administrative Law Judge decides that the Determination & Assessment should be modified because some (not all) of the independent contractors at issue really are employees and some are independent contractors.
The Administrative Law Judge may consider other issues such as whether the services being audited are actually for mere referral fees and are not wages and therefore they should not be part of the Determination & Assessment.
There are many issues that an Administrative Law Judge considers (even such matters as the proper unemployment insurance rate to be applied, whether the math is correct, and whether the workers are under the jurisdiction of the IDES). For example, out of state workers who reside and work out of state should not be part of an IDES Administrative Hearing, even if they have performed services for an Illinois company.
The audit, protest and Administrative Hearing process is a complicated one. Clients and companies being audited can become very discouraged and confused. It is important to have accurate information and work out an effective strategy-both to increase the Company’s chances of successfully appealing the Determination & Assessment and also lowering the Company’s future liability.
Questions? Call Attorney Nancy E. Joerg of Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at firstname.lastname@example.org.
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