Once an Illinois company is audited by the Illinois Department of Employment Security (IDES), the IDES auditor will send his/her findings to another division of the IDES that is in charge of putting together the tax bill from the audit. The tax bill is known as the Notice of Determination & Assessment (commonly referred to as "D&A").
If the audited company had a "clean audit" and therefore owes no additional money to the IDES, then there will be no Notice of Determination & Assessment.
The Notice of Determination & Assessment arrives in the mail several weeks after the audit is completed. From over the many years in which I have represented clients in IDES audits, below are the five top questions that I receive from clients about the Notice of Determination & Assessment:
1. QUESTION: What exactly is the Notice of Determination & Assessment?
ANSWER: It is essentially a tax bill. It contains the contributions owed as a result of the audit. "Contributions" is a fancy word for monies that should have been paid to the IDES (usually because the Company misclassified workers as independent contractors when they should have been, at least in the mind of the IDES auditor, employees).
2. QUESTION: Why doesn't the IDES auditor tell the Company after the audit is completed the exact amount that the Company will owe as a result of the audit?
ANSWER: The IDES auditor never tells the Company what they will owe as a result of the audit. One reason is because often the auditor does not know what the exact dollar amount will be. There is another division within the IDES who actually calculates the amount owed based on the Company's unemployment insurance rate for the audit year in question and interest accumulated.
3. QUESTION: How can the Company protest the Notice of Determination & Assessment?
ANSWER: The Notice of Determination & Assessment includes instructions for how to protest that document. There is a strict deadline -- the protest must be submitted to the IDES within 20 days of the date printed on the Notice of Determination & Assessment. If the protest is even one day late, the Company loses all rights to appeal and the Determination & Assessment becomes final, due and owing.
4. QUESTION: How much is the interest on the Notice of Determination & Assessment?
ANSWER: The interest is 2% per month, basically 24% per year. This sky high interest rate is not subject to negotiations with the auditor or the Hearing Officer. If the auditor audits a year that is three years back from the current year, the interest will be significant. I see many IDES Notices of Determination & Assessment where the interest is close to equaling the amount owed in contributions!
5. QUESTION: If I decided to pay the Determination & Assessment in order to stop the 24% interest per year from piling up, can I still protest?
ANSWER: Yes, the Company can pay the Determination & Assessment and protest. It is very common for an audited company to protest the Determination & Assessment in order to stop the interest from piling up. Note: At a certain point in time, the interest caps.
For a free worksheet on how the interest "caps", or for assistance with an IDES audit and/or Hearing or evaluating your use of Independent Contractors, contact Nancy Joerg at Wessels Sherman's St. Charles, Illinois office: 630-377-1554 or email her at [email protected]wesselssherman.com.