Why did IDOR request Forms W-2 after electronically accepting an Illinois individual return?

Plain-English summary

An “accepted” electronic return had only passed transmission-level checks; IDOR could still verify the withholding and request Forms W-2. Acceptance meant no fatal electronic error was found and the return entered normal processing, much like a mailed return. It did not establish that every reported amount was correct.

Paper and electronic returns remained subject to verification and editing. When IDOR issued a tax-due notice requesting W-2 support, the liability could not be resolved until the taxpayer submitted the documentation.

The cited electronic-filer rule required retention of transmitted source documents, including Forms W-2, W-2G, and 1099-R, until December 31 of the filing year for verification.

What this means for you

Treat an e-file acceptance as delivery confirmation, not substantive approval. Retain wage and withholding documents and respond promptly when IDOR requests them.

Common questions

Q: Did electronic acceptance verify the reported Illinois withholding?
A: No. It only meant the transmission had no fatal error and moved into processing.

Q: How were the withholding notices resolved?
A: By supplying the Forms W-2 and other requested supporting documents.

Citations and references

• 86 Ill. Adm. Code 105.230
• Forms W-2, W-2G, and 1099-R

Subject

Withholding – Other Rulings

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2010/ig100017.pdf

Original ruling text

IT 10-0017-GIL 07/16/2010 WITHHOLDING – OTHER RULINGS
General Information Letter: Reasons the Department requests copies of Forms W-2
from some electronic filers explained.
July 16, 2010
Dear:
This is in response to your letter dated May 5, 2010 in which you state the following:
We were instructed to prepare a correspondence to address an outstanding issue that did not
get resolved by an Illinois Department of Revenue agent. What we would like is an
explanation to the following issue which has caused problems with our current clients the past
few years:
Our clients have been receiving recurring notices for tax due liabilities and requesting copies of
W-2’s to support their Illinois withholding. Our knowledge is that if the tax returns are filed
electronically, the W-2s are confirmed electronically by the State of Illinois.
When notices are received by our clients, they direct their questions to us wanting an
explanation of why this is occurring. Unfortunately, we do not have an explanation because
we cannot get an explanation or reason from the Illinois Department of Revenue agents as to
why these notices keep recurring.
Electronically filed tax returns are supposed to save time for us, clients, and the State of
Illinois. However, receiving these unnecessary notices is wasting more time and energy for
everyone.
We would like someone at the State of Illinois to address this matter and respond to us in
writing.
According to the Department of Revenue (“Department”) regulations, the Department may issue only
two types of letter rulings: Private Letter Rulings (“PLR”) and General Information Letters (“GIL”).
The regulations explaining these two types of rulings issued by the Department can be found in 2
Ill.Adm.Code §1200, or on the website http://www.tax.illinois.gov/LegalInformation/regs/part1200.
Due to the nature of your inquiry and the information presented in your letter, we are required to
respond with a GIL. GILs are designed to provide background information on specific topics. GILs,
however, are not binding on the Department.
When taxpayers file electronic returns, each electronic IL-1040 return is checked for completeness
and accuracy before an electronic acknowledgment is generated either accepting or rejecting the
return. The situation you describe in your letter seems to involve returns that have been
acknowledged by the Illinois Department of Revenue as “accepted.” An acknowledgement that a
return has been “accepted” simply means that the return has been sent into the regular processing
channels and that no “fatal errors” were found in the electronic transmission of information. Perhaps
an easier example would be to view the electronic transmission similar to that of putting the return in
the mail: both methods of delivery are still subject to processing. This means the information on both
paper and electronic returns must be verified and may be edited if necessary.
Illinois regulations address the responsibilities of electronic filers in 86 Illinois Administrative Code

IT 10-0017-GIL
July 16, 2010
Page 2
105, specifically Section 105.230. One of many responsibilities of electronic filers is to retain copies
of the electronically transmitted material such as Forms W-2, W-2G, and 1099-R until December 31
of the filing year for verification purposes.
Your letter indicates that your clients have been receiving recurring notices for tax due liabilities along
with requests for copies of W-2’s to support their Illinois withholding. The liability notices cannot be
resolved until your clients submit the necessary documentation supporting their Illinois withholding.
Please keep in mind that the issues could be as simple as data entry errors when submitting
electronic returns. We encourage you to instruct your clients to comply with the notice requests for
information as diligently as possible.
As stated above, this is a general information letter which does not constitute a statement of policy
that either applies, interprets or prescribes tax law. It is not binding on the Department. Should you
have additional questions, please do not hesitate to contact our office.
Sincerely,

Heidi Scott
Staff Attorney -- Income Tax