Fiduciary
Statutory Reference
35 ILCS 5/101 to 5/1701
Definition
The Illinois Income Tax is imposed on every trust and estate earning or receiving income in Illinois or as a resident of Illinois. The tax is calculated by multiplying net income by a flat rate. The Illinois Income Tax is based, to a large extent, on the federal income tax code. Tax rate
The income tax rate for a trust or estate is 3 percent. Trusts also pay a 1.5 percent Personal Property Tax Replacement Income Tax (replacement tax). Estates do not pay replacement tax.Income from a trust or estate is often passed on to beneficiaries who, in turn, must report this income on their federal income tax returns. This income is included in federal adjusted gross income (for individual beneficiaries), which is the starting point for the Illinois Individual Income Tax, or federal taxable income (for other beneficiaries).
Tax base
The starting point for the Illinois Fiduciary and Replacement Tax is federal taxable income, which is income minus deductions. Next, the federal taxable income is changed by adding back certain items (e.g., state, municipal, and other interest income excluded from federal taxable income) and subtracting others (e.g., interest income from U.S. Treasury obligations). The result is “base income.”Filing Requirements
You must file Form IL-1041, Illinois Fiduciary Income and Replacement Tax Return, if you are a fiduciary of a trust or an estate and the trust or the estate- has net income or loss as defined under the Illinois Income Tax Act (IITA), regardless of any deduction for distributions to beneficiaries; or
- is a resident of Illinois, is required to file, or files a federal income tax return (regardless of net income or loss).
Note: "Grantor" trusts are not required to file Form IL-1041.
If the trust is a charitable organization exempt from federal income tax by reason of the IRC, Section 501(a), it is not required to file Form IL-1041. However, unrelated business taxable income, as determined under IRC, Section 512, is subject to tax (without any deduction for the Illinois income tax) and must be reported on Form IL-990-T, Illinois Exempt Organization Income and Replacement Tax Return, instead of Form IL-1041. For more information see Form IL-990-T Instructions.Trusts and Estates
File Form IL-1041, Illinois Fiduciary Income and Replacement Tax Return, annually by the 15th day of the 4th month following the close of the year.
Automatic six-month extension filing
We grant you an automatic six-month filing extension of time to file your fiduciary tax return. You are not required to file Form IL-505-B, Automatic Extension Payment, in order to obtain this automatic extension. However, if you expect tax to be due, you must use Form IL-505-B to pay any tentative tax due in order to avoid interest and penalty on tax not paid by the original due date of the return. An extension of time to file your Form IL-1041 does not extend the amount of time you have to pay your Illinois tax liability.
Pass-through entity payments
A new law becomes effective for tax years ending on or after December 31, 2008. This law requires S corporations, partnerships, and trusts to make Illinois Income Tax payments on behalf of nonresident shareholders, partners, and beneficiaries. Although this is referred to as “pass-through entity withholding”, deductions are not actually taken from payments the pass-through entities make to their owners. Instead, the pass-through entities are required to make one income tax payment, a “pass-through entity payment”, on behalf of the nonresident owner for each taxable year.
Nonresident partners, shareholders, and beneficiaries must be notified by the partnership, S corporation, or trust of the amount of pass-through entity payments made on their behalf. If the pass-through entity payments are sufficient to satisfy the partner’s, shareholder’s, or beneficiary’s Illinois Income Tax liability, no return is required. Any taxpayer that files an Illinois tax return for any reason must include any income passed through from the entity and will be allowed a credit for the pass-through entity payment made on their behalf.
What if I need to correct or change my return?
- Corrected - If you need to correct or change your return after it has been filed, but before the automatic extension due date has passed, you must file a corrected Form IL-1041-X, Amended Fiduciary Income and Replacement Tax Return. Write "CORRECTED" at the top and show the changes. A corrected return is treated as your original return for all purposes.
- Amended - If you need to correct or change your return after it has been filed, and the automatic extension due date has passed, you must file Form IL-1041-X, Amended Fiduciary Income and Replacement Tax Return, showing the changes.
For more information refer to IL-1041-X Instructions. Use Form IL-843, Amended Return or Notice of Change in Income, for tax years prior to 12/31/2007.
