Rules and a checklist for the Illinois PTE tax and the Illinois Income Tax Act, for owners outside Illinois.
What the law requires
| Requirement | In plain words |
|---|---|
| Register, file, estimate | REG-1 before hiring or selling; the entity's return; four installments past a trigger |
| Withhold | 4.95% of employee pay above allowances, owed even if skipped; willful failure can mean personal liability |
| Owners | Elect PTE tax, or pay withholding for nonresident owners; only non-individual owners can give Form IL-1000-E |
Key numbers and dates
| Item | Amount or date | Year |
|---|---|---|
| Rates | Individual 4.95%; C corporation 7% plus 2.5%; pass-through 1.5% replacement tax | 2026 |
| PTE tax | 4.95%; owner credit 4.95% of share, capped at tax paid | Years ending on or after 31 Dec 2021 |
| Estimate triggers | $1,000 individual; $400 C corporation; $500 electing entity | 2026 |
| Individual estimates | 15 Apr, 15 Jun, 15 Sep 2026; 15 Jan 2027 | 2026 |
| Late payment | 2% for 1 to 30 days; 10% after; 15% after an audit starts | 2026; Pub. 103 (Sept 2025) |
Source: Illinois Department of Revenue; sums ours
Recent and pending changes
- 12 Dec 2025: P.A. 104-0453 removed the PTE tax expiration date.
- 16 Jun 2026: P.A. 104-0468 took effect; IDOR says to catch up estimates in the first installment due on or after that date.
- Years ending on or after 31 Dec 2026: the IRC 1202 small business stock exclusion is added back; partnerships may choose a second PTE method, per IDOR.
Illinois PTE tax checklist: the Meridian Owner Roll-Call
- List each owner, mark every month as Illinois resident or nonresident (residency guide), and note who is an individual.
- Decide yearly on the PTE election, fixed after the extended due date.
- With no election, confirm withholding for each nonresident owner; with one, IL-1000-E is ignored.
- Set estimates and recalculate after a mid-year law change (calendar).
- Pay by the original date; amend within 120 days of a federal change.
Common mistakes
- Treating an extension as time to pay.
- Assuming S corporations and partnerships pay no Illinois tax.
- Relying on IL-1000-E after the PTE election, or from an individual owner.
- Skipping REG-1 before hiring.
When to bring in an attorney
- A notice you want to contest.
- Fraud-penalty exposure or a voluntary disclosure.
- Operating agreement questions behind a PTE or S election.
How we can help
We handle the U.S. tax, payroll and accounting side, alongside your attorney, Canadian CPA or Indian CA. See business tax returns and planning and payroll and employer compliance.
Frequently asked questions
Do S corporations and partnerships pay Illinois tax?
They pay 1.5% replacement tax; owners pay on their shares unless PTE tax is elected (foreign-owned LLC guide).
Does an extension give more time to pay?
No. Tax is due on the original date.
Do remote employees trigger Illinois withholding on day one?
IDOR does not require it for a nonresident with under 31 days of Illinois service and pay not localized here.
Is the PTE tax permanent?
The expiration date was removed, but it is tied to years the federal SALT limit applies.
Official sources
- Illinois Department of Revenue: Publication 103, penalties and interest
- Illinois Department of Revenue: Publication 129, pass-through entity tax
- Illinois Department of Revenue: Publication 131-D, 2026 withholding dates
- Illinois Department of Revenue: Bulletin FY 2027-01, income tax changes
- Illinois General Assembly: Public Act 104-0468
This page summarizes public guidance in plain language. If anything here differs from the official source, the official source controls.