Illinois LLC Taxes: The Complete Filing Guide (2025)
Running an LLC in Illinois means dealing with taxes at federal, state, and sometimes local levels. This guide simplifies everything you need to know to stay compliant and avoid surprises, from income tax and sales tax to city-specific requirements.
Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes.
Illinois LLC Tax Basics
Navigating your Illinois LLC tax obligations doesn’t have to be complicated. We’ll walk you through the essentials of pass-through taxation, explain Illinois’s specific requirements, and highlight strategies to stay compliant and organized. This guide covers everything from federal income taxes to city-specific requirements and filing deadlines.
Use the links below to jump directly to the section you need:
- Illinois LLC Taxes at a Glance
- Understanding LLC Taxation Basics
- Federal Tax Obligations
- Illinois State Taxes
- Local Tax Considerations
- Tax Calendar and Filing Tips
- Tax Strategies for Illinois LLCs
- Forms and Resources
Illinois LLC Taxes at a Glance
| Tax Type | Rate | Filing Deadline | Forms Required |
|---|---|---|---|
| Federal Income Tax | 10%-37% (personal brackets) | April 15, 2025 | Form 1040 + Schedule C or Schedule E/K-1 |
| Self-Employment Tax | 15.3% | April 15, 2025 | Schedule SE |
| Illinois Income Tax | 4.95% (flat rate) | April 15, 2025 | Form IL-1040 |
| Illinois Corporate Tax Rate | 7% | April 15, 2025 | Form IL-1120 |
| Federal Payroll Taxes (If Employees) | 7.65% employer + 7.65% employee (FICA) | Quarterly (April 30, July 31, October 31, January 31) | Form 941 |
| Illinois Unemployment Tax (If Employees) | 0.75%-7.85% (new employers: 3.65%) | Quarterly (April 30, July 31, October 31, January 31) | Filed online |
| Federal Unemployment (FUTA) | 6% on first $7,000 per employee (0.6% after credits) | January 31, 2026 (annual) | Form 940 |
| Sales & Use Tax | 6.25% | Monthly, quarterly, or annually based on sales volume | Form ST-1 |
| Annual Report | $75 fee | Varies by registration date | Form LLC-50.1 |
Understanding LLC Taxation Basics
How Illinois LLCs Are Taxed by Default
Your Illinois LLC doesn’t pay taxes itself. Instead, profits flow through to you and your members, who report them on their personal tax returns. This is called pass-through taxation.
Here’s how it works:
- Your LLC earns income from business activities
- The LLC itself files no tax return (unless you elect otherwise)
- Profits “pass through” to members based on ownership percentage
- Each member reports their share on their personal tax return
- Members pay tax at their individual income tax rates
What this means for you: Unlike corporations, your business profits are only taxed once — which typically saves you money.
Time-Saving Tip: If you’re uncertain about your LLC’s tax classification, a tax professional can review your LLC’s tax setup in 30 minutes and help you choose the most tax-efficient option.
Tax Classification Options
While pass-through taxation is the default, your Illinois LLC can choose two alternative tax treatments.
Default LLC Tax Status:
- Single-member LLC: Taxed as a sole proprietorship
- Multi-member LLC: Taxed as a partnership
Optional Tax Classifications:
- S Corporation: Can reduce self-employment taxes by paying “reasonable salaries”
- C Corporation: LLC pays corporate tax on profits, members pay personal tax on distributions (creates double taxation)
Not sure which tax classification is right for your business? Schedule a free consultation with 1-800Accountant.
Federal Tax Obligations
Income Tax
As an Illinois LLC owner, you’ll report your share of business profits on your personal tax return using:
- Form 1040 + Schedule C (single-member LLCs)
- Form 1040 + Schedule E + Schedule K-1 (multi-member LLCs)
Federal income tax rates range from 10% to 37% based on your tax bracket (actual brackets will depend on inflation adjustments and any tax law changes).
Simply Put: Whatever money your business makes (after expenses) gets added to your personal tax return — just like income from a job.
Self-Employment Tax
LLC members actively involved in the business must pay self-employment tax of 15.3% (covering Social Security and Medicare) on their share of LLC profits.
Key points:
- Applies to net earnings of $400 or more
- Calculated on Schedule SE
- You can deduct 50% of the self-employment tax as an “above-the-line” deduction, which lowers your adjusted gross income
What happens if I miss this payment? The Internal Revenue Service (IRS) charges penalties of 0.5% per month plus interest. However, first-time mistakes can often qualify for penalty abatement if you have a clean compliance history.
Employment Taxes
If your LLC has employees, you must:
- Withhold federal income tax
- Pay and withhold FICA taxes (7.65% each for employer and employee)
- Pay federal unemployment tax (FUTA)
- File quarterly employment tax returns (Form 941)
- Provide Forms W-2 annually
Estimated completion time: 2-3 hours per quarter (significantly less with payroll software or professional help)
Estimated Tax Payments
Because no tax is withheld from your LLC profits, you’ll likely need to make quarterly estimated tax payments using Form 1040-ES. These payments cover both income and self-employment taxes on your share of the business income. Missing deadlines or underpaying can lead to IRS penalties — even if you pay in full later.
Working with an accountant can help ensure accurate calculations, on-time payments, and a smarter overall tax strategy.
Key deadlines:
- April 15
- June 16
- September 15
- January 15
Pro Tip: Set calendar reminders 15 days before each deadline. This gives you time to prepare without the last-minute rush that leads to mistakes.
Illinois State Taxes
Illinois Income Tax
Illinois has a flat personal income tax rate of 4.95% that applies to your LLC’s profits on your personal return.
Filing requirements:
- Use Illinois Form IL-1040
- Due April 15, 2025
Bottom Line: For every $1,000 your LLC earns, expect to pay about $49.50 in Illinois state income tax (in addition to federal taxes).
Illinois Corporate Income Tax
LLCs that have elected to be taxed as c corps are subject to Illinois’ 7% corporate income tax.
Filing requirements:
- Use Illinois Form IL-1120
- Due April 15, 2025
Sales and Use Tax
If your Illinois LLC sells physical products or certain services:
- Collect 6.25% sales tax on taxable sales
- Register for a sales tax license MyTaxIllinois
- File and pay collected taxes monthly, quarterly, or annually based on sales volume
- Due dates vary based on filing frequency
60-Second Check: Do I Need to Collect Sales Tax?
- Do you sell physical products in Illinois? → Yes, collect tax
- Do you sell digital products? → Generally not taxable
- Do you provide services? → Most services are exempt (see exceptions below)
- Do you sell online to Illinois customers? → Yes, collect tax
Services typically exempt from sales tax include:
- Professional services (legal, accounting)
- Personal services (haircuts, fitness training)
- Medical services
Products typically subject to sales tax include:
- Tangible personal property
- Prepared food
- Some digital products
Payroll Taxes
If you have employees in Illinois, you will be responsible for two types of payroll taxes.
Unemployment Insurance (UI) Tax
- Register through MyTaxIllinois (if you haven’t already)
- Rate is 3.65% for new employers (0.75%-7.85% afterwards)
- Due quarterly
Withholding Tax
- Register through MyTaxIllinois (if haven’t already)
- Flat rate of 4.95%
- Due monthly, quarterly, or annually using Illinois Form IL-941
Annual Report Filing
While not a tax, your Illinois LLC must file an annual report each year to remain in good standing with the Secretary of State.
- Due on or before the first day of your LLC’s anniversary month
- $75 filing fee
- Filed with the Illinois Secretary of State online or by mail
Calendar Alert: Set a reminder for the month prior to your LLC’s anniversary month to ensure you don’t miss this easy but required filing.
Local Tax Considerations
Local Option Sales Taxes
Illinois allows cities to impose local sales taxes up to 4.75% in addition to the statewide sales tax rate.
Filing requirements:
- You can determine the local tax rate for your location using the MyTaxIllinois tax rate finder
- All sales are reported using Form ST-2 (submitted together with ST-1 return)
- You do not need to file separate returns for each city where you conduct business
- Due date varies depending on average monthly sales liability (monthly, quarterly, or annually)
Property Taxes
If your LLC owns real property in Illinois:
- Rates vary by locality
- Assessed annually
- May qualify for various exemptions based on business type
- Personal property tax may apply to business equipment
Tax Calendar and Filing Tips
Key Deadlines for Illinois LLCs
January:
- January 15: Final estimated tax payment for previous year
- January 31: Issue W-2s/1099s to employees/contractors
- January 31: Fourth quarter payroll tax payment due (state and federal)
April:
- April 15: Personal or corporate income tax returns due
- April 15: Federal income and self-employment tax returns due
- April 15: First quarter estimated tax payment due
- April 30: First quarter payroll tax payment due (state and federal)
June:
- June 16: Second quarter estimated tax due
July:
- July 31: Second quarter payroll tax payment due (state and federal)
September:
- September 15: Third quarter estimated tax payment due
October:
- October 31: Third quarter payroll tax payment due (state and federal)
Record-Keeping Checklist
Keep these records for at least 7 years:
- Business income records (invoices, receipts)
- Expense receipts and documentation
- Bank and credit card statements
- Asset purchase and improvement records
- Vehicle mileage logs
- Home office documentation
- Payroll records
- Previous tax returns
Tax Strategies for Illinois LLCs
S Corporation Election Benefits
Converting your LLC to an S corp for tax purposes can help you save on self-employment taxes. To do this, you must:
- File Form 2553 with the IRS
- Pay yourself a “reasonable salary” subject to employment taxes
- Take any remaining profits as distributions exempt from self-employment tax
Example: An LLC making $100,000 in profit pays 15.3% self-employment tax on the entire amount. As an S Corp, if $60,000 is a reasonable salary and $40,000 is taken as distributions, only the $60,000 is subject to employment taxes.
Potential Savings: In this example, you’d save about $6,120 in self-employment taxes.
Business Expense Deductions
Common deductions Illinois LLC owners often overlook include:
- Home office deductions
- Business mileage (70¢ per mile for 2025)
- Health insurance premiums
- Retirement plan contributions
- Professional development expenses
- Business meals (50% deductible)
Forms and Resources
Federal Tax Forms
- Schedule C: Profit or Loss From Business (sole proprietors)
- Form 1065: U.S. Return of Partnership Income
- Schedule K-1: Partner’s Share of Income, Deductions, Credits
- Form 1120-S: U.S. Income Tax Return for an S Corporation
- Form 2553: Election by a Small Business Corporation (S Corp)
- Form 8832: Entity Classification Election
Illinois Tax Forms
- Form IL-1040: Illinois Individual Income Tax Return
- Form IL-1120: Illinois Corporate Income Tax Return
- Form ST-1: Sales & Use Tax Return
- Form LLC-50.1: Illinois LLC Annual Report
Helpful Resources
- Illinois Department of Revenue
- MyTaxIllinois
- Internal Revenue Service
- Illinois Department of Employment Security
Illinois LLC Taxes FAQs
To pay your LLC taxes in Illinois, file the appropriate tax returns with the Illinois Department of Revenue. This includes paying Illinois LLC payroll taxes, income taxes, sales taxes, among others. Payments can be made online through MyTax Illinois or by filing tax returns to the Department of Revenue.
In Illinois, an LLC’s tax treatment depends on its chosen tax status. By default, it’s a pass-through entity, meaning profits are taxed on members’ personal tax returns, however it can elect to be taxed as a corporation — in which case corporate tax rules apply.
To find out more about this topic, see our LLC Taxes article.
Illinois is considered a fairly decent state for LLCs. While it offers a stable business environment and access to a large market, Illinois LLCs face relatively high tax rates and fees compared to some other states, which should be a consideration for new businesses.
To find out more about the benefits of an LLC, see our Illinois LLC formation article.
The annual fee for filing in Illinois is $75. This is for filing the annual report, which is a requirement for maintaining good standing with the Illinois Secretary of State’s office. You’ll need to do this before the first day of the anniversary month of your business’s formation to avoid incurring additional fees.
Need Professional Help? While this guide covers the essentials, tax laws are complex and constantly changing. Schedule a free consultation with 1-800Accountant to ensure your Illinois LLC remains fully compliant while minimizing your tax burden.