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Illinois guidance regarding COVID-19 impact on 2019 income tax and 2020 estimates

Apr 06, 2020

The Illinois Department of Revenue announced in Informational Bulletin FY 2020-24 (“Bulletin 2020-24”) that the tax filing and income tax payment deadlines for 2019 “individual returns, trusts, and corporations” were being automatically extended from April 15, 2020 to July 15, 2020. 

The department has not yet formally confirmed whether the July 15, 2020 deadline for filing and paying tax also applies to either replacement tax or pass-through withholding tax, given that the language of Bulletin 2020-24 refers exclusively to “income tax” payments.  However, in response to questions from practitioners, the department has informally made the following clarifications:

  • Illinois is extending the 2019 tax year filing and payment due date for C corporations who file Form IL-1120 from April 15, 2020 to July 15, 2020.
  • Illinois is not extending the filing or payment due dates for tax year 2019 returns for partnerships, including nonresident withholding (Form IL-1065), which still falls on April 15, 2020.
  • Illinois is not extending the due date of an already extended income tax return tax return and payment for fiscal year taxpayers whose extended due date would otherwise be April 15, 2020 must still file and pay on that date).

Illinois’ 2020 quarterly estimated tax payment

Bulletin 2020-24 explains that its’ relief “does NOT impact the first and second installments of estimated payments for 2020 taxes that are due April 15 and June 15.”

On April 2, 2020 Illinois published Informational Bulletin FY 2020-26 (“Bulletin 2020-26”) to explain the relief that Illinois would provide.

In Bulletin 2020-26, Illinois authorized taxpayers to base their 2020 estimated tax payments upon 100% of the taxpayers’ estimated 2020 liability or 100% of their actual 2018 or 2019 liability. 

In addition, taxpayers who timely pay in four equal installments  will avoid late payment penalties if they base their installments upon the lesser of (1) 90% of their 2020 estimated liability or (2) 100% of their actual 2018 or 2019 liability.

  • Calculating 2020 quarterly estimates based on 100% of 2018 liability for taxpayers who have not filed for 2019

According to Bulletin 2020-26, individuals who want to compute their 2020 estimated tax payments using 100% of their 2018 liability should use Form IL-1040-ES and base their 2020 estimated tax on the amount of tax they owed on 2018 Form IL-1040.

Businesses who want to compute their 2020 estimated tax payments using 100% of their 2018 liability should use the Form IL-1120 instructions, Appendix B, or IL-990-T instructions, Appendix A, to calculate their estimated payment amount and base their 2020 estimated tax on the amount of tax they owed on their 2018 return.

Taxpayers who wish to base their 2020 Illinois quarterly estimates upon 100% of their 2018 or 2019 liability should keep in mind that their expected 2020 payroll tax withholdings should be netted against their gross tax liability in order to compute the quarterly estimates.

  • Applying 2019 overpayments towards 2020 quarterly estimated taxes

Many Illinois taxpayers and practitioners have asked whether they could defer payment of their Illinois 2020 Q1 or Q2 estimates until July 15 by overpaying their Illinois extension payment on July 15, 2020, and retroactively applying that overpayment back to the April 15 and June 15 estimates in a way that would cause those estimates to have been timely paid. According to Bulletin 2020-26, however, overpayments shown on a 2019 return filed on July 15, 2020 will not be considered timely applied to a taxpayer’s 2020 Q1 or Q2 estimates to the extent the overpayment was comprised of payments received after April 15, 2020.

What’s next

Illinois is one of a minority of states who that has not followed the IRS’ approach of extending the due date of 2020 Q1 estimates to July 15, 2020.  In addition, its’ guidance regarding allowances for computing 2020 quarterly estimates was published less than two weeks before the due date of Illinois’ Q1 2020 estimate.  Even though this combination of factors is sure to raise questions, the department is unlikely to significantly clarify these issues prior to April 15. 

With the April 15, 2020 deadline coming up soon for all taxpayers’ 2020 Q1 estimates, as well as for the 2019 returns for partnerships, taxpayers should consult with their Wipfli tax advisor to evaluate the best approach for filing and paying these taxes.

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Jessica L. Macklin, CPA
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Daniel N. Kidney, CPA, JD
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Richard J. Salter, CPA, JD, LL.M.
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