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How can a partnership, S corporation, or trust pay Illinois Income and Replacement Tax for nonresident partners, shareholders, or beneficiaries?

Answer #80 -- ( Published 08/04/2005 12:28 PM | Updated 07/12/2017 10:38 AM )

How can a partnership, S corporation, or trust pay Illinois Income and Replacement Tax for nonresident partners, shareholders, or beneficiaries?

You are required to report and pay pass-through withholding on behalf of your nonresident partners, shareholders, and beneficiaries if they have not provided Form IL-1000-E, Certificate of Exemption for Pass-through Withholding Payments, to you. This process has changed for tax years ending on or after December 31, 2014.

For tax years ending on or after December 31, 2014:

Current year forms and instructions are linked below. Prior year forms and instructions for each tax type can be found by clicking the "Prior Years" link on our Business Tax Forms page and selecting the corresponding year.

Partnerships and S corporations:

Trusts:

Note: Nonresidents whose Illinois Income Tax liability is fully paid by pass-through withholding are not required to file an Illinois Income Tax return, but may file returns and claim a credit for any pass-through withholding made on their behalf.

All residents must file their own Illinois Income Tax return and claim a credit for any pass-through withholding made on their behalf.

If any of your partners, shareholders, or beneficiaries are pass-through entities themselves, they must withhold from their own partners, shareholders, and beneficiaries on the income you passed through. Your partners, shareholders, or beneficiaries may claim a credit for amounts you withheld against:

  • the pass-through withholding they owe for their own partners, shareholders, or beneficiaries or
  • their own Illinois Income Tax liability.

For more information, see the instructions for the following forms and schedules, as applicable.

For tax years ending before December 31, 2014:

Prior year forms and instructions for each tax type can be found by clicking the "Prior Years" link on our Business Tax Forms page and selecting the corresponding year.

Partnerships and S corporations:

  • File Form IL-1000, Pass-through Entity Payment Income Tax Return, for all nonresident partners and shareholders or
  • File Form IL-1023-C, Composite Income and Replacement Tax Return, for nonresident individuals, estates and trusts.

Trusts:

  • File Form IL-1000, Pass-through Entity Payment Income Tax Return, for all nonresident beneficiaries.

Note: Nonresidents whose Illinois Income Tax liability is fully paid by pass-through withholding are not required to file an Illinois Income Tax return, but may file returns and claim a credit for pass-through withholding made on their behalf.

All residents must file their own Illinois Income Tax return and claim a credit for any pass-through withholding made on their behalf.

If any of your partners, shareholders, or beneficiaries are pass-through entities themselves, they must withhold from their own partners, shareholders, and beneficiaries on the income you passed through. Your partners, shareholders, or beneficiaries may claim a credit for amounts you withheld against:

  • the pass-through withholding they owe for their own partners, shareholders, or beneficiaries or
  • their own Illinois Income Tax liability.

For more information, see the instructions for the following forms and schedules, as applicable.

  • Form IL-1023-C Instructions
  • Form IL-1000 Instructions
  • Schedule K-1-P(1), Instructions for Partnerships and S Corporations Completing Schedule K-1-P and Schedule K-1-P(3)
  • Schedule K-1-P(2), Partner's and Shareholder's Instructions
  • Schedule K-1-T(1), Instructions for Trusts and Estates Completing Schedule K-1-T and Schedule K-1-T(3)
  • Schedule K-1-T(2), Beneficiary's Instructions

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