18481: IL - Pass-Through Entity Tax Election and Credit (PTE)

Illinois law allows certain pass-through entities to make an election to pay tax at the entity level. If the S corporation or partnership makes this election, they are then called an "electing pass-through entity." Members of an electing pass-through entity are eligible for a credit on their individual return. See Illinois Publication 129 for details.

The election must be filed no later than the due date or extended due date of the return. The election can be made annually. Once the election is made for the tax year, it cannot be revoked after the extended due date.

Per IL Guidelines, the PTE tax is 4.95 percent (.0495) of the taxpayer’s calculated net income for the taxable year paid by a partnership or subchapter S corporation who elects to pay the tax for taxable years ending on or after December 31, 2021, and beginning prior to January 1, 2026.

S Corp or Partnership Return

Make the election by going to IL screen INFO and selecting Check this box if you elected to file and pay Pass-through Entity Tax (item L in the S corp or item I in the partnership).

When this box is checked, the following occurs:

• The election is applied to all the shareholders or partners.
• IL Schedule K-1-P, line 53a for each shareholder/partner reflects the amount paid by the entity.
  • The shareholder/partner can claim a tax credit on their individual income tax return.
• An IL PTE Income Worksheet is produced in the return.
  • The PTE income that is calculated on this worksheet (line 14 for S corp or line 15 for partnerships) flows to Line 60 of the main IL1120 or IL1065.
  • When there are amounts on line 60 and 61, line 59 must be blank.

If pass-through entity taxes were already paid by estimates for this year, enter the amount on the left-hand side of the federal ES screen, using a St/City of IL and a Type of PT.

IMPORTANT: When the PTE taxes are deducted on the federal return (federal ES screen), you must manually add-back the amount of tax deducted by going to IL screen 1 and entering the total on line 16, Illinois replacement tax deducted in arriving at the unmodified base income.

If pass-through entity taxes were not already paid by estimates, or there is balance due remaining after the payments, Form IL-1065-V (partnership) or IL-1120ST-V (S corporation) is generated, showing any amount due. If e-filing the return, payments can be made using federal screen PMT.

To generate quarterly estimated tax vouchers for the upcoming year, use the right-hand side of the federal ES screen. Select:

• Select St/City of IL
• Select Type of PT
• Enter amounts for Vouchers 1-4, as needed. 
  

1040

Complete IL screen K1P, including the Pass-through Entity Tax Credit on line 53a. This amount carries to Form IL-1040, line 28.

Pass-Through Withholding VS PTE- Pass-Through Entity Tax

The pass-through withholding and the pass-through entity tax are different. The Pass-Through Withholding is the tax that the IL S Corp or Partnership pays on behalf of its non-resident members. This is shown on the shareholders/partners K1P line 55. See the instructions for details.