IL-1041: Illinois Fiduciary Tax Return Instructions

Form IL-1041, the Fiduciary Income and Replacement Tax Return, is the designated state tax form for trusts and estates in Illinois. Fiduciaries, the individuals or institutions responsible for managing the trust or estate, use this form to report annual income and calculate the corresponding income and personal property replacement tax owed. The return accounts for the entity’s financial activities over a tax year, serving as the main instrument for settling its state tax obligations.

Filing Requirements for Form IL-1041

The obligation to file Form IL-1041 depends on the residency status of the trust or estate and its income. A fiduciary must file if the trust or estate has any net income or loss as defined by the Illinois Income Tax Act. The requirement also applies if the entity is an Illinois resident and is required to file a federal income tax return, Form 1041, regardless of whether it has a net income or loss.

An Illinois resident trust is one created by a grantor who was domiciled in Illinois when the trust became irrevocable. A resident estate is the estate of a person who was domiciled in Illinois at the time of their death. For these resident entities, all income, regardless of where it was earned, is generally allocable to Illinois.

Nonresident trusts and estates are required to file an IL-1041 if they receive income from Illinois sources that was not already covered by pass-through withholding. For nonresidents, only the income sourced from within Illinois is subject to state tax. To properly calculate this, they must complete and attach Schedule NR (Form IL-1041), the Nonresident Computation of Fiduciary Income. Grantor trusts, where the grantor retains control and is taxed individually, are not required to file Form IL-1041.

Information and Schedules Needed to Complete the Return

Preparing to file Form IL-1041 involves gathering specific financial documents and supporting schedules. The foundational document is the completed federal income tax return, U.S. Form 1041, which provides the starting point for calculating Illinois taxable income. The fiduciary will also need the trust or estate’s Federal Employer Identification Number (FEIN) and the names, addresses, and Social Security numbers or FEINs for all beneficiaries.

Schedule F addresses gains from property acquired before August 1, 1969. This schedule is used to calculate the appreciation amount that is not subject to Illinois tax, which results in a subtraction modification that reduces the entity’s taxable income. To complete it, the fiduciary must have records of property acquired before this date that was sold during the tax year, including details from federal Form 4797 or federal Schedule D.

Schedule CR is used by resident trusts and estates to claim a credit for income taxes paid to other states. This prevents double taxation on income that is taxed by both Illinois and another state. To properly calculate this credit, the fiduciary needs copies of the tax returns filed in the other states, as the credit is limited to the lesser of the tax paid to the other state or the Illinois tax due on that same income.

The fiduciary must also prepare a Schedule K-1-T for each beneficiary who receives a distribution or has income allocated to them. This schedule details each beneficiary’s specific share of income, deductions, and credits. The fiduciary is responsible for providing a copy to each beneficiary so they can accurately report the information on their own Illinois income tax returns. The totals from all Schedules K-1-T are then summarized on Schedule D of the IL-1041.

The Filing and Payment Process

The due date for filing Form IL-1041 and paying any tax owed is the 15th day of the fourth month after the close of the tax year, typically April 15 for calendar-year filers. Illinois grants an automatic six-month extension to file the return, moving the filing deadline to October 15 for calendar-year filers. No specific form is needed to request this extension.

This extension of time to file is not an extension of time to pay. If the fiduciary anticipates that the trust or estate will owe tax, a payment must be made by the original April 15 due date to avoid penalties and interest.

Fiduciaries can submit the completed IL-1041 electronically through approved third-party software or file by mail. When mailing, use the P.O. Box designated for payments if a payment is included, or a different address specified for non-payment returns.

Payments can be made electronically through MyTax Illinois or via ACH credit. Any payment made by mail, either for an extension or with the return, must be accompanied by Form IL-1041-V, Payment Voucher for Fiduciary Income and Replacement Tax. The check or money order should be payable to the “Illinois Department of Revenue,” with the FEIN and tax year written on it. If the return results in an overpayment, the fiduciary can choose a refund, which can be issued via direct deposit, or a credit forward to the next year’s tax liability.