How to File Your Illinois Tax Return for 2016: A Step-by-Step Guide

Filing your Illinois tax return for 2016 might feel overwhelming, especially if you're doing it late or for the first time. This guide is here to help individuals, sole proprietors, and small business owners complete their 2016 tax return for Illinois correctly and confidently. Whether you lived in Illinois for the whole year, part of the year, or earned income from Illinois sources while living elsewhere, this step-by-step guide will walk you through what you need to know.

Although the tax filing deadline for 2016 was April 18, 2017, many taxpayers still need to file a late return due to missed deadlines, errors, or amended income. Knowing you can still file and meet your state obligations is essential if that's you. Filing now helps minimize penalties and keeps you compliant with the Illinois Department of Revenue.

This article explains filing your Illinois tax return for 2016 using the proper forms, including IL-1040 and any supporting schedules. It covers issues like missing documents, payment options, and refund tracking. Whether you're filing on paper or electronically, this guide will help ensure your return is complete and accurate, even years after the original due date.

Who Needs to File an Illinois Tax Return for 2016?

The Illinois Income Tax Act requires specific individuals and businesses to file a state tax return if they meet specific income, residency, or filing criteria. Even if you missed the 2016 deadline, the state still expects qualifying taxpayers to submit a return and pay any taxes owed. This section outlines who must file based on residency status, income thresholds, and special conditions like working across state lines or running a small business.

1. Full-Year Illinois Residents

You were required to file a 2016 Illinois return (Form IL-1040) if:

You were a full-year resident and had to file a federal income tax return.
Your Illinois base income exceeded your Illinois exemption allowance ($2,175 per exemption in 2016), even if you were not required to file federally.

2. Part-Year and Nonresidents

You must also file if:

You lived in Illinois for part of 2016 and earned income then.
You were a nonresident but earned enough taxable income from Illinois sources to have a tax liability.

3. Residents Who Worked in Neighboring States

Illinois has reciprocal agreements with Iowa, Kentucky, Michigan, and Wisconsin. If you lived in Illinois and worked in any of these states:

You must file an Illinois return and report your total income, including wages earned in the reciprocal state.
You do not need to file a nonresident return in that other state unless tax was mistakenly withheld. You may be eligible for a refund from that state.

4. Self-Employed Individuals and Small Business Owners

If you owned or operated a business in 2016 as any of the following, you may have additional filing requirements:

Sole proprietors: Report income on your federal Schedule C and include it on Form IL-1040.
Depending on the structure, partners or LLC members must file Form IL-1065 (Partnership) or Form IL-1120-ST (S Corporation).
Corporation owners: Use Form IL-1120 (C Corporation) or Form IL-1041 if filing for a trust or estate.

Income earned through service occupation tax, retailer's occupation tax, or other specialized business activities may require additional reporting. Always consult the Illinois Department of Revenue or your tax advisor if you're unsure whether your business meets state filing thresholds.

Which Illinois Tax Forms to Use?

Filing the correct forms is essential for accurate reporting, especially if handling income from multiple sources or managing a business. Below is a breakdown of the most common Illinois tax forms used by individuals, sole proprietors, and small business owners when filing for the 2016 tax year. Each form serves a different purpose, depending on your income type, residency status, or business structure.

Individual Taxpayer Forms

If you were an Illinois resident, part-year resident, or nonresident with Illinois income in 2016, you’ll likely use the following:

Form IL-1040: The primary state income tax return for individuals.
Schedule NR: Used to allocate income for part-year and nonresidents.
Schedule ICR: This is for claiming property tax credits and K-12 education credits.
Schedule CR: To receive credit for income taxes paid to other states.
Schedule M: For specific additions or subtractions from income (e.g., federally taxed retirement income).
Form IL-505-I: For requesting an extension. While Illinois granted automatic 6-month extensions, interest still applied to unpaid taxes after the income tax filing deadline.
Form IL-1040-X: For amending previously filed returns.

If your return includes purchases subject to the Use Tax Act, such as untaxed internet or mail-order items, complete Line 23 of IL-1040. Failing to report this can result in an estimated payment penalty, especially if large purchases were made.

Business and Self-Employment Forms

If you earned business income in 2016, your structure determines which forms you must file with the Illinois Department of Revenue:

Schedule C (Federal): Sole proprietors must report business income on their federal return using Schedule C. This income then flows through to Form IL-1040 for Illinois filings.
Form IL-1065: Partnerships and certain limited liability companies (LLCs) must file this form to report replacement tax and distribute income to partners or members.
Form IL-1120-ST: As state law requires, S corporations use this form to report income and pay replacement tax.
Form IL-1120: C Corporations must file Form IL-1120 if subject to the Retailers’ Occupation Tax Act or Service Occupation Tax Act.
Form IL-1041: Estates and trusts use this form to report fiduciary income and compute any tax due to the state.

Some industries or business types require additional attention:

Transportation network providers, such as ride-share operators, may be subject to special reporting under the Transportation Network Providers Act.
Hotel operators must report rental income under the Hotel Operators’ Occupation Tax.
Retailers registered with the state must review product classifications, especially for tobacco products sold, to ensure they apply the correct definition and account for wholesale prices where applicable.
If discrepancies arise, taxpayers involved in short-term rentals, hosting platforms, or non-retailers with high-volume cash sales may be reviewed by IDOR’s Audit Bureau or referred to the Informal Conference Board.

Vehicle-related business filers should reference the Illinois Vehicle Code and understand the tax implications for motor vehicles purchased from private parties and the drive-away permit rules. Certain exemptions, such as the rolling stock exemption or when you must exclude vehicles subject to other state use taxes, may apply.

Step-by-Step Instructions for Completing Form IL-1040

Filing your 2016 Illinois income tax return begins with completing Form IL-1040, the state’s primary individual income tax form. This section explains what documents to gather, how to complete each section, and how to determine whether you owe a balance or are due a refund. Filing this form accurately helps ensure compliance and reduces the risk of errors, penalties, or delays.

Documents You’ll Need Before Starting

Before you begin, it’s essential to gather all the documents required to complete Form IL-1040 accurately:

You will need all W-2 forms from every employer you worked for in 2016.
If you received other types of income, such as freelance or investment income, you must include all relevant 1099 forms (e.g., 1099-MISC, 1099-INT, 1099-R).
You should have a copy of your federal income tax return (Form 1040, 1040A, or 1040EZ), as it serves as the starting point for your Illinois return.
If you claim the property tax or K-12 education credits, you need supporting receipts, tax bills, or expense documentation.
Those who made estimated payments must include payment records and dates to ensure proper credit.
If you bought a private party vehicle, keep your bill of sale and related tax payment documents to comply with the state’s uniform tax rate policies.
You must have verification documents to claim retirement income or subtraction of contributions.
If you paid income taxes to another state, retain copies of those tax returns and payment confirmations.
Business owners should include profit and loss records for the year, especially if income is reported through a federal Schedule C.

Line-by-Line Guidance

Step 1: Personal Information

Enter your full name, Social Security number, and current mailing address. Select the correct filing status (e.g., single, married filing jointly) to match your federal return.

Step 2: Income

On Line 1, enter your federal adjusted gross income (AGI) from your federal return.
On Line 2, include federally tax-exempt interest and dividends.
On Line 3, report any additional income listed on Schedule M.
On Line 4, add Lines 1 through 3 to calculate your total income.

If your business involves selling taxable goods, such as products defined under the definition of tobacco products, ensure your income reporting is accurate and complete. These amounts may affect certain credits or adjustments on later lines.

Step 3: Base Income

On Line 5, subtract federally taxed Social Security benefits or retirement income that Illinois does not tax.
On Line 6, enter any overpayments of Illinois tax included in your federal income.
On Line 7, include other allowable subtractions (e.g., military pay, education savings contributions).
Use Lines 8 and 9 to calculate your base income after subtractions.

Step 4: Exemptions

On Line 10a, enter the number of exemptions you claim from your federal return.
On Lines 10b through 10d, check any boxes that apply if you or your spouse were 65 or older or legally blind.
Each exemption claimed reduces your base income before calculating tax due.

Step 5: Net Income and Tax Calculation

On Line 11, subtract your exemption allowance from your base income to determine your net income.
On Line 13, multiply your net income by the 2016 tax rate of 3.75% (0.0375) to calculate your income tax.
On Line 14, report any investment credit recapture or adjustments from prior filings.

Revenue from income taxes supports public programs, and Illinois's increase in funding was partly driven by returns filed by certain taxpayers during this period.

Step 6: Nonrefundable Credits

On Line 16, enter the credit for taxes paid to other states if applicable (Schedule CR).
On Line 17, report credits for property tax or K-12 education expenses (Schedule ICR).
On Line 18, list additional credits, if you qualify, as directed by Schedule 1299-C.

Step 7: Other Taxes and Payments

On Line 22, report any household employment tax if you paid wages to a household employee.
On Line 23, enter the tax owed for untaxed online or mail-order purchases in 2016. If none, enter zero.
On Lines 26 through 29, list all Illinois withholding amounts, estimated tax payments, pass-through withholding, and Earned Income Credit amounts.

If you fall under certain exceptions or receive correspondence such as an identity check, review your MyTax Illinois account for updates, especially if your return was electronically filed or flagged for review.

Step 8: Refund or Amount Owed

If your payments exceed the amount you owe, you will receive a refund. You can choose direct deposit, debit card, or paper check.
If you owe tax, calculate your balance due and include applicable penalties and interest. Make sure your payment is submitted promptly to avoid enforcement actions.

Some filers, such as nonresident purchasers or renters of previously taxed property, may require extra documentation to ensure tax is applied correctly and not duplicated.

How to File Your Illinois Return

Whether you prefer to file electronically or by paper, Illinois provides multiple filing options for individual taxpayers, sole proprietors, and small business owners. Choosing the correct method can affect how quickly your return is processed and how soon you receive your refund or pay your balance due.

E-File Options Through the Illinois Department

Electronic filing is the most efficient way to file your 2016 income tax return. The Illinois Department of Revenue supports several e-file options:

MyTax Illinois: The program is the state’s free and secure online system for filing Form IL-1040 and making payments. To begin, you must create or log into a MyTax Illinois account, which allows you to upload documents, check the status of your return, and communicate directly with the department.
Tax Software Providers: Commercial providers like TurboTax, H&R Block, and others offered e-file options for 2016 returns. Many of them integrated state and federal filing into one process. Depending on your income, some may have provided free filing.
Tax Professionals: Certified Public Accountants (CPAs), enrolled agents, and tax preparers can file electronically on your behalf. This may be especially useful if you have business income, complex credits, or amended returns.

Most refunds were issued within four weeks if you e-filed your return and requested direct deposit. This is significantly faster than paper returns, which typically took 8 to 12 weeks to process.

Paper Filing for Certain Taxpayers

While e-filing is recommended, some individuals are qualified for or prefer paper filing:

You must complete Form IL-1040 and attach all required schedules, W-2s, 1099s, and the first page of your federal return.
Choose the correct mailing address based on whether your return includes a refund or a payment.
Always sign and date your return. If filing jointly, both spouses must sign.

Paper returns are ideal for certain taxpayers who do not meet eligibility for electronic filing or who prefer a physical record. However, it is essential to note that these returns are processed manually, so they take longer to review and issue refunds.

Additional Filing Help and Featured Programs

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The Illinois Department of Revenue offers tools and assistance through its featured programs page for added support. These programs include resources tailored for low-income taxpayers and specialized help for seniors, veterans, and individuals with disabilities. Small business owners and sole proprietors can access outreach materials to clarify state filing obligations. In addition, multilingual households will find filing assistance resources available in multiple languages to help navigate language-related challenges. Suppose you are unsure which filing method suits your situation or need help understanding your obligations. These featured resources can offer personalized guidance and connect you with the most appropriate next steps.

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Payment Options and Late Payment Guidance

Once you've completed your 2016 income tax return for Illinois, the next step is to determine whether you owe a balance or are due a refund. If you owe, submitting your payment promptly is essential to avoid additional penalties and interest. This section outlines available payment methods, the consequences of late fees, and what to do if you can't pay in full immediately.

Ways to Pay Your 2016 Tax Balance

The Illinois Department of Revenue offers several convenient ways to make a payment:

MyTax Illinois: You can pay directly through your MyTax Illinois account, using a checking or savings account with no added fees.
Credit or Debit Card: Payments can be made online or by phone, but service providers may charge processing fees.
Paper Check or Money Order: Mail your payment with Form IL-1040-V to the address specified for returns with a balance due. Write your Social Security number, tax year, and "IL-1040" on your check.
Electronic Funds Transfer (EFT): Businesses and frequent filers may opt for EFT if enrolled in an approved payment program.

Each method is secure and traceable, allowing you to choose the option that best fits your financial situation.

Understanding Deadlines and Penalties

For the 2016 tax year, the initial deadline for income tax payments was April 18, 2017. If you filed late or failed to pay on time, you may owe interest and penalties:

Late Payment Penalty: Typically 1.5% per month on the unpaid balance.
Late Filing Penalty: 2% per month, up to a maximum of 10%, based on the unpaid tax at the time of filing.
Interest Charges: These accrue in addition to penalties until the full balance is paid.

Remember that penalties are taxed based on the amount you owe, not just the delay in filing. Paying as much as possible by the deadline can help reduce total penalties even if you cannot pay the full amount.

If You Can’t Pay in Full

You should still file your return on time if you cannot pay your entire tax bill. This helps avoid higher penalties and shows good-faith compliance. The Illinois Department of Revenue provides taxpayers with the following options:

Request a Payment Plan: You may contact the department to set up an installment plan.
Submit Partial Payments: Paying a portion up front will reduce accruing interest.
Communicate Early: Early contact with IDOR is recommended for those experiencing financial hardship.

This flexibility benefits individuals, such as a renter who may owe use tax on subleased items or vehicles and face unexpected liability. Regardless of your situation, engaging proactively is better than delaying and risking enforcement action.

How to Track Your Refund or Balance Due

After submitting your 2016 Illinois income tax return, you’ll want to monitor the status of your refund or confirm that any payment you owed has been received. The Illinois Department of Revenue provides secure tools to help you check the progress of your return, track your refund, or review outstanding balances, all using simple online or phone-based methods.

Track Your Illinois Income Tax Refund Online or by Phone

You can check your refund status in one of two ways:

Online (Recommended): Visit MyTax Illinois and use the “Where’s My Refund?” tool. You’ll need your Social Security number, the exact refund amount, and Illinois Adjusted Gross Income (AGI) from Line 1 of your IL-1040.
By Phone: Call the Illinois Department of Revenue at 1-800-732-8866, Monday through Friday from 8:00 a.m. to 5:00 p.m.

Online access offers more detailed status updates and faster turnaround, especially if your return was e-filed.

Expected Processing Times and Refund Delivery

Processing times vary based on how you filed:

E-filed returns: Refunds are typically issued within 4 weeks.
Paper returns: Refunds may take 8 to 12 weeks, depending on accuracy and attachments.

Refunds are issued in one of three ways:

Direct deposit: Fastest and most secure.
Illinois Debit Card: The prepaid card was mailed to your address.
Paper check: Mailed to your mailing address on file.

Returns may be delayed due to math errors, missing documents, identity verification, or offsetting debts. If your refund is adjusted or delayed, IDOR will send a written explanation or request additional information.

Final Filing Checklist for 2016

Reviewing a few final steps before submitting your 2016 tax return for Illinois is essential to avoid delays or processing issues. Start by verifying all calculations on Form IL-1040, including income, exemptions, credits, and total tax due. Attach all required documents, such as W-2s, 1099s, and the first page of your federal return. If you claim any credits or subtractions, include the appropriate schedules, such as Schedule ICR, CR, or M. Make sure to sign and date your return; both spouses must sign if you are filing jointly. Use the correct mailing address based on whether you expect a refund or send a payment. Keep copies of your entire return and all supporting documents for your records. Lastly, if you requested a filing extension using Form IL-505-I, submit your return no later than October 16, 2017.

Frequently Asked Questions (FAQ)

What happens if I miss the filing deadline for April 18, 2017?

If you missed the deadline, you should still file your 2016 return as soon as possible. Filing late may result in penalties and interest, but the sooner you file, the more you minimize those charges. Illinois grants an automatic six-month extension to file, but any tax owed was still due by April 18, 2017.

Can I still e-file my 2016 Illinois tax return?

Yes, you may still be able to e-file your 2016 return through approved providers or by using a tax professional. However, many platforms stop supporting older tax years, so you may need to file a paper return instead. Always check with the Illinois Department of Revenue or your tax preparer for current filing options.

What credits were commonly overlooked on 2016 returns?

Commonly missed credits include the property tax credit, the K-12 education expense credit, and the Earned Income Credit. Many taxpayers also overlooked subtractions for federally taxed retirement income. Reviewing Schedule ICR and Schedule CR instructions carefully can help ensure that you receive all eligible credits on your 2016 return.

How do I file an amended return for 2016?

To amend a 2016 Illinois tax return, use Form IL-1040-X. You must explain the changes and include updated copies of any affected schedules or W-2s. Filing an amended return helps correct mistakes and may allow you to claim additional credits or reduce tax owed. Always keep records of both the original and amended filings.

Where do I report household employee wages on my return?

If you had household employees in 2016 and withheld Illinois income tax, report those amounts on Line 22 of Form IL-1040. Do not report these wages again if they were filed using Form IL-941 or IL-501. You may need to refer to Publication 121 for complete guidance on household employment requirements.