Over the many years in which I have represented Illinois companies before the Illinois Department of Employment Security (IDES), I have seen the activity level of the IDES ebb and flow.
In some years, the IDES is very energetic and active, sending out its army of IDES auditors to audit Illinois businesses (making sure these businesses are paying the proper amount in taxes called contributions). In other years, especially recently, the IDES has been much less active, with audits and hearings scheduled at a much slower pace. But currently the IDES has done much hiring of auditors and hearing officers, with a resulting burst of audits and hearings!
It is of course important to the financial health of the State of Illinois that the IDES auditors collect all contributions that Illinois employers should have paid. Auditors fulfill a very important political and economic function in Illinois. Hearing officers serve a crucial role in the protest process.
AUDIT PROCESS CAN BE COMPLICATED: When an Illinois company finds out that it is going to be audited by the IDES, much anxiety often results, and many companies wisely seek legal counsel prior to participating in an IDES audit. The audit process can be complicated. There can be many legal issues.
A common legal issue that arises during an IDES audit is whether the company properly classified its workers as independent contractors during the designated audit year.
PROTESTING THE TAX BILL: If the auditor finds the company liable (for example, because the company misclassified workers as independent contractors), the company will receive a Notice of Determination & Assessment (which is the tax bill that arises out of the audit). If the company disagrees with the Determination & Assessment, the company has only 20 days in which to protest the Determination & Assessment and request a Hearing.
IT CAN TAKE YEARS TO GET A HEARING: Sometimes companies who protest have to wait a surprisingly long period of time to get a Hearing about its protest. It can take many years! I had a client who (after three years of waiting) thought the IDES had lost the file and thought they would never receive a Notice of Hearing. But the client eventually received a Notice of Hearing. Fortunately for that client, they won at the Hearing and their entire assessment from the audit was cancelled.
In recent years, waiting three years for a Hearing (amazingly) seems like a short period of time. Several of my clients have been waiting five years or more for a Hearing! This means that now, in 2019, there are audits from 2011 and 2012 that are just now coming up for a Hearing.
With the IDES springing back to life very recently, I am seeing more and more companies finally receiving their Notice of Hearing. I am also seeing more companies being audited by the IDES.
INCREASED ACTIVITY OF THE IDES: This new level of increased activity by the IDES should be noted by any company that has protested a Determination & Assessment and is awaiting a Notice of Hearing.
Also, Illinois companies who use independent contractors should be aware that their chances of being audited have now increased. Therefore, they should take all reasonable steps to protect themselves in their use of independent contractors.
Any readers who want to review the basic IDES test for independent contractor status and the IDES questionnaire that IDES auditors use to question companies about their use of independent contractors can receive free copies by contacting Legal Assistant Tammy Nelson at Wessels Sherman's St. Charles, Illinois office: 630-377-1554 or email her at [email protected].
For assistance with IDES audits, hearings, and independent contractor agreements (or for consultations on limiting your liability in the use of independent contractors), contact Attorney Nancy E. Joerg, who enjoys a nationwide reputation in working with companies who use Independent Contractors of all types. Nancy Joerg can be reached at Wessels Sherman's St. Charles, Illinois office: 630-377-1554 or email her at [email protected].