UPDATE: Illinois SALT Workaround Instructions, PTE Payment Due 12/31/2021

Last August, we published a blog post entitled “What The New SALT Workaround Legislation Means for Taxpayers” detailing how the new Illinois law could provide owners of partnerships or S corporations with a workaround to the federal $10,000 state and local tax (SALT) deduction cap for individual taxpayers.

The following update is intended for those business owners electing to take advantage of the workaround by paying the PTE (pass-through entity tax) for the current tax year.

The election to pay the PTE tax for 2021 is made on Form IL-1065, Partnership Replacement Tax Return, or Form IL-1120-ST, Small Business Replacement Tax Return. It’s important to note that businesses taking advantage of this election for 2021, regardless of accounting method (cash or accrual), must submit their estimated PTE tax payment by December 31, 2021 in order for the shareholders or partners to secure the deduction.

For businesses electing to pay the entity-level tax in future tax years, quarterly estimated payments must be paid if the expected tax due (including both the pass-through entity tax and replacement tax) is more than $500 or incur late estimated payment penalties.

However, the Illinois Department of Revenue will waive late estimated payment penalties related to an election to pay the PTE tax for tax years ending before December 31, 2022. Taxpayers are encouraged to make voluntary prepayment of the pass-through entity tax to reduce any tax payment due when the return is filed. These prepayments can be made electronically using MyTax Illinois or ACH Credit, or by mail using 2021 Form IL-1065-V or 2021 Form IL-1120-ST-V.

The penalty relief only applies to partnerships and subchapter S corporations that elect to pay PTE tax. Partners and shareholders of these entities are not eligible for the penalty relief. However, partners and shareholders may claim a tax credit against their own tax liability for distributive shares of the PTE tax credit and may adjust their estimated payments accordingly.

If you have any questions or need assistance in this or any other tax-related matter, please do not hesitate to contact a Weiss tax professional.