If you’ve discovered uncollected or unpaid Illinois sales tax, applying through the Illinois Voluntary Disclosure Program could save your business significant penalties and stress. This program allows eligible taxpayers to come forward, report past liabilities, and limit exposure—without facing a full audit. It’s especially useful for businesses that have unknowingly created nexus in Illinois or missed registration obligations.
In this guide, we’ll walk you through exactly how to apply, who qualifies, and how the process works step by step. If the paperwork feels overwhelming, Hands Off Sales Tax (HOST) offers expert support to manage your entire voluntary disclosure from start to finish.
What Is the Illinois Voluntary Disclosure Program?
The Illinois Voluntary Disclosure Program (VDP) allows businesses to proactively resolve unpaid tax liabilities before the Illinois Department of Revenue (IDOR) initiates an audit. By coming forward voluntarily, eligible taxpayers can significantly reduce exposure and obtain certainty.
Purpose & Eligibility
- Enables taxpayers who haven’t been contacted for an audit or investigation to disclose and resolve unpaid liabilities—before the state takes action.
- Allows businesses to volunteer compliance for taxes owed, including sales tax, withholding, income tax, and others.
Core Benefits
- Limited Look-Back Period: You’re only responsible for the last four years of unfiled returns. Earlier liability cannot be pursued.
- Penalty Waiver: Once accepted into the program and compliant with payment terms, all penalties are waived.
- Interest Only Liability: You pay the outstanding tax plus applicable interest, which limits total cost.
This voluntary path is designed to encourage compliance and minimize consequences.
Why Consider Voluntary Disclosure?
Volunteering to disclose past tax liabilities through Illinois’ VDP isn’t just proactive—it’s smart risk management. Here’s why businesses should consider it:
Avoid a Full Audit
Once the Department of Revenue initiates contact or begins an audit, they can review unlimited past periods, often going back as far as statutes allow. By entering before they come calling, you limit commissions to just four years of tax due.
Save Money Through Penalty Waivers
Once approved, the VDP waives all penalties as long as taxes and fees are paid timely—this can mean substantial savings. Without VDP, penalties for late filing or non-compliance can be steep.
Boost Credibility & Compliance
A successful disclosure shows IDOR you’re serious about compliance. It often reduces scrutiny in future audit selections and strengthens your business reputation.
For example, say your business owes $100,000 in taxes plus 25% penalties ($25,000). Through VDP, penalties are waived, saving $25,000—you’d pay only $100,000 plus interest.
Voluntary disclosure offers clarity, control, and cost-saving—making it a prudent choice for businesses seeking to resolve past liabilities on their terms.
Are You Eligible? Pre‑Application Criteria
Before applying for Illinois’s Voluntary Disclosure Program (VDP) using Form BOA‑2, ensure you meet key eligibility requirements.
No Existing Audits or Investigations
You must voluntarily disclose before the Illinois Department of Revenue (IDOR) initiates an audit, investigation, or sends notices including nexus questionnaires. The law permits a look‑back period of only four years if your application is received before such contact. If IDOR has already opened a case, you are disqualified.
Must Voluntarily Disclose
To be eligible, you must self-initiate the process—meaning don’t wait until IDOR contacts you. Once IDOR has audited or reached out to you, eligibility is void .
Must Owe Back Taxes
You should owe tax types like sales, withholding, or income tax and must be prepared to calculate and report them—up to the four-year limit. Note: any tax collected but unpaid (e.g., late sales tax) must also be remitted.
Summary of Eligibility:
- No prior IDOR contact
- Voluntary application submission
- Back taxes owed (from up to 4 years)
If these conditions are met, you qualify for the VDP.
Step-by-Step Application Guide
Here’s a detailed walkthrough for applying to the Illinois VDP, breaking down Form BOA‑2, power of attorney steps, and registration requirements.
Completing Form BOA‑2
- Download Form BOA‑2, the Voluntary Disclosure Application.
- Fill in business and taxpayer details (legal name, FEIN/SSN, address, tax types to include).
- Declare that you haven’t been notified of an audit or investigation and sign the form. The signature must come directly from the taxpayer or authorized corporate officer.
- Submit BOA‑2 to the IDOR Problems Resolution Division by mail, fax, or email ([email protected]).
Power of Attorney (Form IL‑2848)
- If you wish to appoint a representative, attach a completed Form IL‑2848.
- The form must be signed by the taxpayer or authorized agent; if the representative is not a CPA, attorney, or enrolled agent, signatures must be witnessed or notarized.
Register with Illinois Tax System
- Register via MyTax Illinois or submit Form REG‑1 if unregistered.
- Once IDOR approves BOA‑2, they’ll send an executed copy with instructions.
After Approval
- File four years of returns and pay all tax and interest within 30 days of approval (a 60-day extension may be granted upon request).
- IDOR processes returns and issues a liability notice. Pay the remaining amount within 60 days to maintain penalty waiver .
Following this process carefully ensures you protect your business and take full advantage of the Voluntary Disclosure Program.
What Happens After You Apply
Once you submit your Form BOA‑2 application to IDOR’s Problems Resolution Division (PRD), the review process begins—here’s what to expect.
Application Review
The PRD checks that your application meets the voluntary disclosure standards. They verify that you weren’t already under audit or investigation before submission. If everything qualifies, they approve and sign your Form BOA‑2. The executed application is then returned to you, along with a letter containing instructions for the next steps.
Filing Returns & Payment
After receiving approval:
- You generally have 30 days to file the required returns covering the allowed four-year look-back period, and to pay the tax due plus interest.
- You may request an extension—up to 60 days total—if needed, but it must be submitted in writing within the initial 30‑day window.
IDOR Processing & Final Settlement
Once IDOR receives your filings:
- They process each return, assess interest, and compute your total liability.
- You’ll receive a Notice of Assessment for any outstanding balance.
- As long as you pay the remaining tax and interest within 60 days, all penalties are cleared.
Continuing Compliance
After final payment, IDOR removes the disclosure from your record. You must then remain current with all future filing and payment obligations to maintain good standing.
Following these steps ensures your voluntary disclosure not only resolves past issues—but sets you up for a penalty-free, compliant future.
Key Timelines & Extensions
Timing is crucial when navigating the Illinois Voluntary Disclosure Program. Here’s a concise summary of key deadlines and how to request extensions.
Core Deadlines
You have 30 days from IDOR’s approval letter to:
- File the required four years of past returns, and
- Submit payment for all overdue tax and interest to preserve penalty waiver rights .
If more time is needed to gather information and complete filings, you can request an extension in writing, submitted within the initial 30-day window. If approved, your total window—to file returns, pay tax, and remit interest—can extend up to 60 days from the approval date .
How to Request an Extension
- Submit a written extension request to the Problems Resolution Division before the 30-day deadline.
- Clearly state your good-faith reasons for needing extra time to complete filings.
- If granted, the extension typically allows additional time within the 60-day maximum, but only upon written approval .
Missing these deadlines risks losing penalty protection, so plan ahead and contact IDOR promptly if additional time is required.
After Disclosure: Staying Compliant
Once your Voluntary Disclosure Program request is approved and you’ve settled past obligations, maintaining good standing with the Illinois Department of Revenue (IDOR) is essential. Here’s what to expect next:
Register for Required Taxes
If not already registered, sign up for appropriate Illinois taxes—such as sales, withholding, or income tax—using MyTax Illinois or Form REG‑1. This ensures your company is properly identified and ready for ongoing filings.
Follow Ongoing Filing Schedules
Continue filing all required returns on time, whether monthly, quarterly, or annually. IDOR expects consistent compliance following any look-back disclosures. Your commitment to ongoing filing is a condition for continuing penalty protection.
Maintain Good Documentation
- Keep accurate records of nexus triggers, filings, payments, and exemption certificates.
- Retain all tax records for at least five years, in line with standard IDOR audit guidelines.
Demonstrate Good-Faith Compliance
Actively collecting, remitting, and filing taxes shows you are serious about following Illinois tax laws. Any deviation could jeopardize your VDP benefits—IDOR reserves the right to revoke waiver eligibility or audit disclosed years if ongoing compliance is not maintained.
Proper post-disclosure diligence ensures the advantages of voluntary participation—especially the limited look-back and waived penalties—continue to protect your business in future tax cycles.
HOST Makes Voluntary Disclosure Easy
Applying for a Voluntary Disclosure Agreement (VDA) doesn’t have to be overwhelming. HOST simplifies each step so you stay compliant while minimizing exposure.
VDA Service Highlights
HOST begins with a short, one-page Engagement Letter, which is submitted anonymously, protecting you from premature attention by IDOR or other states. Once accepted, they coordinate with the relevant tax authority to determine your owed taxes, apply the reduced statutory look-back (typically 3–4 years), and abate penalties. HOST then prepares and submits your returns, pays your historical tax liability, and ensures your registration is updated—all on your behalf.
Comprehensive Sales Tax Compliance Services
After resolving past obligations through your VDA, HOST keeps you compliant into the future with these services:
- Sales Tax Registration: Filing permits across multiple states.
- Filing & Remittance: Ongoing returns, including zero-returns, filed on time.
- Economic Nexus Monitoring: Alerts when sales cross new state thresholds.
- Resale Certificate Creation: Quick setup via HOST’s proprietary tool – ResaleCertify.
- Audit Defense & Notice Management: Managing notices and defending audits.
- Nexus Analysis & Custom Tax Matrix: Detailed reviews and rate decision support.
- Tax Software Management: Integration via TaxJar or Avalara.
HOST acts as your full-service partner—handling everything from Voluntary Disclosure Agreements to everyday filings—so you can focus on your business, not backlogged tax headaches.
Resolve Past Risk, Stay Compliant for the Future
The Illinois Voluntary Disclosure Program offers a second chance for businesses to come clean—without facing crushing penalties or full audits. But navigating the process, deadlines, and filings takes precision. That’s where expert help makes all the difference.
Whether you need to fix old liabilities, register properly going forward, or manage ongoing sales tax compliance, HOST is the one-stop solution. From anonymous disclosure filings to full compliance support across all states, they make sure you’re protected, proactive, and penalty-free.
Reach out to HOST today for a personalized consultation and get back in control of your tax situation.
Frequently Asked Questions
1. What taxes are covered under the Illinois Voluntary Disclosure Program?
The program applies to most Illinois-administered taxes, including sales and use tax, income tax, and withholding tax. However, not all local or specialty taxes are eligible. You can confirm applicability by contacting the Illinois Department of Revenue’s Problems Resolution Division.
2. Can I apply for the Voluntary Disclosure Program if I’ve already been contacted by IDOR?
No. To be eligible, your business must not have been contacted by the Illinois Department of Revenue for audit or investigation before applying. Once you’re on their radar, voluntary disclosure is no longer an option.
3. How far back will I have to file returns?
If accepted, the look-back period is generally limited to four years. This means you’ll only need to file and pay taxes for the last four years—even if you’ve been operating longer.
4. Do I still have to pay interest on the taxes I owe?
Yes. While penalties are waived, statutory interest still applies. However, interest payment extensions may be available if requested within 60 days.
5. Can I apply on my own, or do I need a representative?
You can apply on your own using Form BOA-2, but many businesses choose to work with a representative and file a Power of Attorney (Form IL-2848) to handle filings, negotiations, and anonymity. HOST can manage the entire process on your behalf.
