Statutory Reference
Definition
The Illinois Income Tax is imposed on every corporation earning or receiving income in 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
S Corporations pay 1.5% Personal Property Tax Replacement Income Tax (replacement tax).
S Corporations do not pay regular Illinois income tax. The regular income tax is paid at the shareholder's level. Generally, income from an S corporation is passed on to the shareholders. The shareholders must include this income in their federal adjusted gross income (for individuals) or taxable income (for other taxpayers). This is the starting point for Illinois income tax purposes and where regular income tax is paid.
Tax base
The starting point for the Illinois Small Business Corporation Replacement Tax Return 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-1120-ST, Illinois Small Business Corporation Replacement Tax Return, if you are a small business corporation, as defined in Internal Revenue Code (IRC), Section 1361(a), that
- has net income or loss as defined under the Illinois Income Tax Act (IITA); or
- is qualified to do business in the state of Illinois and is required to file U.S. Form 1120S (regardless of net income or loss).
Your Illinois filing period is the same as your federal filing period. In general, Form IL-1120-ST is due on or before the 15th day of the 3rd month following the close of the tax year.
An S Corporation may act as an authorized agent to file returns and pay taxes for its shareholders. These agents must file Form IL-1023-C, Illinois Composite Income and Replacement Tax Return, annually by the 15th day of the 4th month following the close of the tax year.
If you own a qualified subchapter S subsidiary (QSSS) defined in IRC, Section 1361(b)(3), as well as any other entity that is disregarded as an entity separate from you for purposes of the IRC, it is likewise disregarded as a separate entity for purposes of the IITA. You must include all items of income, deduction, loss, credit, etc. from such entities on your return as if they were earned or incurred by you directly.
If you are an S Corporation that is a member of a unitary business group, you should see Illinois Schedule UB, Combined Apportionment for Unitary Business Group, and the instructions for information about filing requirements. S Corporations may file as members of a unitary group but may not file a combined return.
It is your duty as a taxpayer to obtain forms. Failure to obtain them is not an excuse for failure to file returns as required by law.
Automatic seven-month filing extension
We grant you an automatic seven-month extension of time to file your small business corporate 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-1120-ST does not extend the amount of time you have to pay your Illinois tax liability.
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-1120-ST. Mark the form "CORRECTED" at the top and show the changes. Any correction made may cause a recalculation of penalties and interest.
- 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-1120-ST-X, Amended Small Business Corporation Replacement Tax Return, showing the changes. Use Form IL-843, Amended Return or Notice of Change in Income, for tax years prior to 12/31/2006.
For more information refer to the IL-1120-ST-X Instructions.
