IDOR Waives Late Estimated Payment Penalty for Newly Enacted Entity-Level Tax

The Illinois Department of Revenue (IDOR) will not assess penalty for late estimated payments due for tax years ending before December 31, 2022, because of the election to pay the entity-level tax under Public Act 102-0658. IDOR encourages taxpayers to make estimated payments to reduce the tax payment due when the return is filed.

Public Act 102-0658, enacted August 27, 2021, creates an entity-level tax for partnerships and subchapter S corporations allowing partners and shareholders to work around the federal cap on the deduction for state and local taxes effective for tax years ending on or after December 31, 2021. When a partnership or S corporation makes the election to pay the entity-level tax, it is required to make quarterly estimated payments if the tax due is expected to be $500 or greater or incur late payment penalties for the underpayment of estimated taxes per Illinois Income Tax Act Section 804.

However, for most taxpayers, two estimated payment deadlines have already passed and the third quarterly estimated payment for calendar-year filers is due on or before September 15, 2021. Partners and shareholders of pass-through entities should continue making all required quarterly installments even if they expect the pass-through entity to pay an entity-level tax.