Pass-through withholding is required payments that are reported and paid by the pass-through entity on behalf of its
nonresident partners, shareholders, and beneficiaries (members)
- who have not submitted Form IL-1000-E, Certificate of Exemption for Pass-through Withholding, to the pass-through entity, and
- who receive business and nonbusiness income from the pass-through entity.
Pass-through withholding is
- reported to your members on the Schedule K-1-P or K-1-T you send to them,
- reported to the Department on your Form IL-1120-ST or Form IL-1065 and Illinois Schedule B, or Form IL-1041 and Schedule D, and
- paid with the voucher for your return type (IL-1065-V, IL-1120-ST-V or IL-1041-V).
If any of your members are pass-through entities themselves, they are required to report and pay pass-through withholding on behalf of their own nonresident partners, shareholders, or beneficiaries on the income you passed through to them. Your members may claim a credit on their Illinois Income Tax return for pass-through withholding you reported and paid on their behalf.