I Got Audited by the Illinois Department of Revenue. Here’s What Actually Happened.

I’ve owned Windsor Tap for about three and a half years and The Beer and Now for close to two. A few months ago we got our first sales tax audit from the Illinois Department of Revenue. I want to walk through exactly what happened because when I got that first notice I was genuinely scared — and I didn’t need to be.

HOW IT STARTED

The first sign was a notice in my MyTax Illinois account. If you have a business in Illinois, MyTax is the platform you use to pay taxes, renew licenses, and manage your state obligations. The message showed up in red — something like “IDOR Audit In Effect” — and it was hard to miss.

I panicked a little. I assumed I had done something wrong. I assumed they had flagged something. I was wrong on both counts.

Shortly after the MyTax notice, two letters arrived in the mail. The first was just a heads up that an audit was coming. The second explained what to expect — though honestly it didn’t say much. Then an agent from the Illinois Department of Revenue called my cell phone, left a voicemail, and I called him back.

He was calm. Professional. He explained that this was routine, that I hadn’t done anything wrong, that they do these periodically. That was the first real stress reliever. He wasn’t hunting for a problem — he was doing a process check.

WHAT THEY ACTUALLY WANT

After that first call the agent sent me a questionnaire. It asked things like what point of sale system I use, how I calculate sales tax, whether I pay on gross or net sales. Basic operational questions. Some were checkboxes, some were open fields. Since I handle my own taxes I answered everything myself. If you have an accountant, you can include them in the process — they give you that option.

Then he emailed me a formal list of requirements. Our audit covered 2024, 2025, and year-to-date 2026. Here’s exactly what they asked for:

• All 1099-K statements — these come from your credit card processor. Square issues these. They show how much you processed in credit card payments for the year.

• Bank statements for the audit period.

• Credit card statements if applicable — we don’t use business credit cards so this didn’t apply to us.

• Your State & Federal Tax Returns

• Depreciation schedules — these are included in your federal tax return.

• Monthly point of sale reports — I pulled these directly from Square.

• Sales tax liability reports — I found a report in Square that went back further than the standard one-year window for detailed data. It took me a long time to find and the AI chat support in Toast was useless. I eventually stumbled on it myself.

• Working papers used to prepare your ST1 returns — essentially any spreadsheets or notes you used when filing. I didn’t have formal working papers but I showed him how I filled out the forms and walked him through my process.

WHAT THEY WERE ACTUALLY CHECKING

The core of what they were doing was pretty simple once I understood it. They wanted to make sure that what my POS said I collected in credit card sales matched what actually hit my bank account. If Square says $800 in credit card sales deposited on a given day, they want to find that $800 in the bank statement.

They did this comparison monthly for 2024 and 2025, and monthly year-to-date for 2026. They weren’t doing it transaction by transaction — it was period by period.

Cash deposits were a different conversation. Bank statements get complicated because not every deposit is from sales — sometimes you’re putting in personal money to cover a slow week, or there’s a reimbursement, or whatever. The agent didn’t dig too hard into that side. He was primarily focused on the credit card reconciliation.

HOW IT RESOLVED

We went back and forth for about two weeks. Casual email exchanges, nothing adversarial. He’d ask for something, I’d find it and send it. Most of it was straightforward.

At the end of the audit he found a $7 difference across the entire period — 2024 through mid-2026. He said it was almost certainly a timing or rounding issue, possibly from being open on New Year’s Eve when a day straddles two tax periods. The difference was small enough that he called it immaterial. The case was closed.

About two weeks later I got a letter in the mail confirming the audit was resolved with no outstanding balance. That was it.

We actually overpaid by about $8 in total. He said if there had been an underpayment they would have given me an opportunity to correct it and pay what was owed. He also mentioned that two other bars or breweries in my area were going through the same audit at the same time, so it seemed like a regional sweep rather than anything targeted at me specifically.

WHAT I LEARNED

A few things worth noting for any bar owner reading this.

Keep your records organized before you need them. The most stressful part of this process was hunting for reports. Toast only stores detailed sales data for one year — I had to dig to find the longer-range summary report, and their support was no help. If I had been more organized from the start it would have been half the work.

The ST1 is not that scary. I learned how to file it by watching how my accountant did it and copying the process. There are about five fields to fill in. Your POS gives you everything you need (mostly, you still need the amount you spent on liquor & beer – which in my case comes from Fintech). Don’t pay someone $150 a month to do this for you.

As long as you’re following the rules you have nothing to fear. This felt like an IRS letter level of scary when it showed up. It turned out to be a routine check that took two weeks of casual back-and-forth and ended with a $7 rounding error. If your books are clean and your filings match your deposits, you’re fine.

And if you’ve never been audited — keep your bank statements, your 1099-Ks, your tax returns, and your POS reports somewhere you can actually find them. Organized records are the difference between a two-week process and a two-month nightmare.