Illinois Pass Through Entity Tax

[Ephesians3-14]

I have a simple question about the new Illinois PTE tax for S Corporations.

If an IL S Corporation makes the PTE election on the 2021 IL-1120-ST, then the S Corporation must remit 4.95% of the pass-through income to IDOR by March 15, 2022. The taxpayer would then claim the tax credit on their 2021 IL-1040.

Since the PTE tax is being remitted by the S Corporation in 2022 (cash basis taxpayer), I am assuming that the partnership would claim the deduction for the PTE payment on their 2022 partnership tax return.

Do I have that right?

[garman22 · Accepted solution]

@Ephesians3-14 That is my understanding as well. For it to have been deductible in 2021, it would've had to have been paid by 12/31/21. So, it should be deducted in 2022. 

[Ephesians3-14]

OK - that's what I understand as well. So at this point, the S Corp makes the election and pays the PTE tax. Then the shareholder includes that tax credit on his 2021 Form IL-1040. No tax benefit for the S Corp (and ultimately the shareholder on his personal tax return) until 2022 because the payments are being made in Jan/Feb 2022.

Then the S Corp will need to make estimated tax payments in 2022 based on the expected 2022 PTE tax. 

So, would the S Corp be able to claim a deduction on the 2022 partnership for both the PTE tax that is due now (for the 2021 tax year) as well as for the estimated tax payments being made for the PTE tax that is associated with the 2022 tax year? That is, basically deducting two years worth of PTE taxes in 2022. Does that sound correct?

[jeffmcpa2010]

Sounds right to me.

[garman22]

I agree with @jeffmcpa2010 

It would appear you'd have the amount paid for 21 and 22 payments being deducted for 22. 

[Connecto1]

Would you consider accruing the PTE tax for an accrual basis S-Corp or Partnership?  So this way the company gets a 2021 deduction for PTE paid in 2022?  This was a mess and when I emailed Illinois in mid-December to get some guidance there was none to be had.