Illinois Tax Return for 2020: A Guide for Understanding State Tax Laws

In 2020, Illinois required taxpayers to file returns using the flat income tax rate of 4.95 percent.
Part-year residents and non-residents with Illinois-sourced income must follow state-specific filing rules carefully. The process involved gathering income documents, completing the correct state forms, and submitting them electronically or by mail. Accuracy in filing helped taxpayers avoid penalties, interest charges, and delays in receiving eligible refunds from the Illinois Department of Revenue.

Understanding Illinois state tax laws allowed individuals to calculate liabilities correctly and claim allowable credits without errors. Under Illinois regulations, small business owners benefited from knowing specific deductions, such as business-related expenses or eligible property tax credits. Knowledge of rules for out-of-state income and Illinois adjustments prevented costly compliance mistakes. Familiarity with state requirements also reduced stress during tax season by providing a clear roadmap for preparation and submission.

This guide explains how to identify the correct forms, which include IL-1040 for individuals and IL-1065 for partnerships. It also outlines filing deadlines, extension procedures, and penalties for late submission to help taxpayers plan effectively. Readers will also learn about standard deductions and credits often overlooked, such as the education expense credit or property tax credit. By the end, taxpayers will have practical knowledge to complete their 2020 Illinois tax return more confidently and accurately.

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Overview of Illinois State Income Tax Laws for 2020 and How They Affect Your Income Taxes

Understanding the Illinois Tax Return for 2020 requires more than just knowing the numbers—it requires knowing how the Illinois Income Tax Act, exemptions, and residency rules work together to determine your yearly income taxes. Below is a breakdown of the essential points you need to know for the current tax year liabilities.

Flat Tax Rate and Personal Exemptions Under the Illinois Income Tax Act

Illinois's income tax act outlines a uniform net income tax rate of 4.95% for the 2020 tax year.
This flat tax rate means individuals and limited liability company members pay the same percentage, regardless of income level.
Personal exemption amounts for 2020 were $2,325 per eligible taxpayer and dependent, which directly reduces taxable income.
Employers' taxes withheld throughout the year are applied toward this liability, and underpayment can lead to an estimated payment penalty.

Residency Status and How It Affects Your Income Tax Return

Residents must report all taxable income, including earnings from other states, though credits are available under the tax act for taxes paid elsewhere.
Part-year residents are taxed only on income earned while living in Illinois, while nonresident purchasers and other non-retailers are taxed based on their Illinois-source income.
Special rules apply for income from private party vehicle sales, motor vehicles purchased for business use, or when claiming the rolling stock exemption under the Illinois Vehicle Code.

Key Differences Between Federal and Illinois Tax Laws

While the IRS announced federal adjustments for certain deductions and credits, Illinois does not always conform, creating differences in your income tax return.
Illinois disallows some federal deductions, such as those related to the Use Tax Act, Retailers Occupation Tax Act, and Service Occupation Tax Act, while enforcing its rules for items like the hotel operators' occupation tax and tobacco products sold under the tobacco products definition.
The Illinois Department offers a MyTax Illinois account to track state-specific obligations, including identity verification letters, electronic filing exceptions, and final notices from IDOR’s audit bureau.

By understanding these core principles for your Illinois tax return for 2020, you can better align your filings with state requirements, avoid unnecessary penalties, and use tools like your MyTax Illinois account to stay compliant and minimize errors.

Who Is Required to File a Tax Return for 2020

Filing an Illinois tax return for 2020 isn’t just about meeting an income tax filing deadline—it’s about knowing exactly who the Illinois Income Tax Act applies to and when filing is mandatory. The rules differ for residents, part-year residents, and non-residents, and certain taxpayers face unique filing triggers due to specific state laws such as the Retailers Occupation Tax Act, Use Tax Act, and even the Transportation Network Providers Act.

Residents—Meeting Illinois Income Tax Obligations

Full-Year Residency Requirement: Under the Illinois Income Tax Act, anyone who lived in Illinois for the entire tax year and earned income—whether from wages, business, or investments—must file an income tax return if their taxes withheld are less than their actual income taxes owed.
Uniform Tax Rate Application: Residents are taxed at the flat tax rate of 4.95%, with no graduated brackets, ensuring consistent treatment of current tax year liabilities regardless of income type.
State-Specific Obligations: Residents may also owe under laws like the Service Occupation Tax Act for certain business activities or the Hotel Operators Occupation Tax for short-term rentals and hosting platforms.

Part-Year Residents – Allocation of Illinois Income

Prorated Filing Obligation: Those who moved into or out of Illinois during 2020 must report income earned while living in the state and may exclude vehicles subject to other states’ tax when reporting under the Illinois Vehicle Code.
Nonresident Purchaser Rules: If a part-year resident bought motor vehicles or private party vehicles in Illinois but qualified as a nonresident purchaser, the Use Tax Act may still apply unless an exemption claimed is valid, such as the rolling stock exemption for commercial transport.
Transition in Employment: Wages from Illinois employers remain taxable even if you worked remotely from another state, unless covered by certain exceptions in reciprocal agreements.

Non-Residents – Illinois-Sourced Income Requirements

Illinois-Sourced Income Trigger: Non-residents must file if they earned wages from Illinois-based work, ran a business in Illinois, or had rental income from consumers located in Illinois, including re-renter arrangements.
Special Provisions for Transportation Services: Under the Transportation Network Providers Act, non-resident drivers operating in Illinois may be required to file if their income meets reporting thresholds.
Taxed Based on Illinois Revenue: Non-retailers selling tobacco products to Illinois customers may be subject to the tobacco products tax, which uses the wholesale price and definition of tobacco products under state law.

Exceptional Cases – Retirees, Border Workers, and Business Owners

Retired Residents: Even without wages, retirees must file if revenue committed from pensions, annuities, or distributions creates a current tax year liability under the tax act.
Neighboring State Workers: Certain taxpayers living in Illinois but working in states without reciprocal agreements must file in both states; credits may be claimed on the Illinois return to minimize double taxation.
Limited Liability Company Members: LLC owners may need to file individually for their share of pass-through income, plus any applicable business-related taxes under the Retailers Occupation Tax Act or Use Tax Act.

Income Thresholds and Filing Triggers

IRS Announced Federal Links: While the IRS sets federal thresholds, Illinois requires filing whenever income taxes are owed, regardless of federal filing status.
Estimated Payment Penalty: Many taxpayers face penalties if they did not make adequate estimated payments for 2020, even if no refund is due.
Electronic Filing Exception: Certain taxpayers may qualify for a paper filing if they meet the electronic filing exception criteria. However, most are encouraged to use a MyTax Illinois account for faster processing.

Filing requirements in Illinois for 2020 go beyond income—they intersect with other state tax laws, specialized acts, and industry-specific obligations. Understanding these rules ensures that taxpayers are effectively reminded of their obligations, helps avoid penalties, and allows residents to respond electronically to identity verification letters or final notices from the Illinois Department and IDOR’s audit bureau.

If you meet any of these criteria, you are not only expected to file under Illinois law—you’re protecting yourself from unnecessary estimated payment penalties, preserving your eligibility for exemptions, and complying fully with state and federal tax year requirements.

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Essential Forms and Schedules for Tax Return

When preparing your Illinois 2020 state tax return, having the proper forms and understanding their purpose can make the filing process smoother and help you avoid costly errors. Here’s a breakdown of the key documents you’ll likely encounter:

IL-1040 – Individual Income Tax Return: This is Illinois's primary form for reporting personal income. Part-year residents and non-residents with Illinois-source income use IL-1040 to declare earnings, apply for credits, and calculate any refund or amount owed.
IL-1065 – Partnership Replacement Tax Return: Partnerships, including multi-member LLCs taxed as partnerships, use IL-1065 to report business income and calculate the Illinois replacement tax. This form ensures the state collects taxes on income before it’s distributed to partners.
Schedule ICR – Illinois Credits: This schedule allows taxpayers to claim refundable and nonrefundable credits, such as the property tax credit or the K–12 education expense credit, directly impacting how much tax you owe.
Schedule M – Other Additions and Subtractions: Used to report income adjustments unique to Illinois tax law. This includes adding federally exempt income to your state return or subtracting income that Illinois does not tax.
Schedule NR – Nonresident and Part-Year Resident Computation: This form calculates the portion of your income subject to Illinois tax if you lived in Illinois for only part of the year or earned Illinois-sourced income as a nonresident.
Where to Find Official Forms and Instructions: All official Illinois tax forms and line-by-line instructions are available on the Illinois Department of Revenue’s website (tax.illinois.gov). Forms can be downloaded in PDF format or completed online through the MyTax Illinois portal, which also offers built-in error checking.

By gathering and understanding these forms before you begin, you’ll be in a much better position to file accurately, claim all eligible credits, and avoid unnecessary delays in processing your 2020 Illinois tax return.

Step-by-Step Guide to Filing Your Income Tax Return

Filing your Illinois 2020 income tax return is smoother when you approach it clearly and methodically. Below is a breakdown of the essential steps to prepare thoroughly and avoid common mistakes.

Gather Your Required Income and Expense Records: Before you begin, collect all relevant tax documents, including W-2 forms from employers, 1099 forms for freelance or investment income, and receipts or statements for deductible expenses such as property tax bills. This preparation ensures accurate reporting and reduces the risk of delays if the Illinois Department of Revenue requests verification.
Complete the IL-1040 Form Accurately: Begin by entering your personal information and income figures from your federal return. Carefully apply eligible credits—such as the Illinois property tax credit—before calculating your final tax owed or refund due. Double-check each figure, as minor entry errors can delay processing.
Apply Illinois-Specific Adjustments: Illinois tax law requires certain income additions and allows specific subtractions not found on your federal return. Examples include adding federally tax-exempt interest from non-Illinois municipal bonds or subtracting federally taxed retirement income. Refer to the IL-1040 instructions to ensure you include these correctly.
Report Business Income by Entity Type: Sole proprietors must complete Schedule C and transfer net income to the IL-1040. At the same time, partnerships and S corporations use forms like IL-1065 or IL-1120-ST to report and pass income through to owners. Ensure that K-1 statements are complete and accurate, as they affect both your federal and Illinois returns.

Following these steps with care will help you file a complete, compliant return and reduce the likelihood of processing delays or costly amendments later.

Common Tax Credits and Deductions for Your Income Tax in 2020

When filing your Illinois 2020 state income tax return, knowing which credits and deductions you qualify for can make a meaningful difference in the amount you owe or the size of your refund. Below are some of the most commonly claimed—and often overlooked—opportunities for Illinois taxpayers in 2020.

Property Tax Credit—Who Qualifies and How Much You Can Claim

Available to Illinois residents who owned and occupied their primary residence in 2019 and paid property taxes in 2020.
The credit equals 5% of the real estate tax paid on the principal residence but does not include taxes for improvements or special assessments.
You cannot claim this credit if your property taxes were fully reimbursed (e.g., by a housing assistance program).
Documentation required: Your property tax bill and proof of payment (often found on your county treasurer’s statement).

Education Expense Credit – Relief for Qualified Learning Costs

Available to parents or guardians of K–12 students in Illinois who paid for qualified education expenses in 2020.
The credit is 25% of qualifying expenses over $250, with a maximum credit of $750 per household.
Eligible costs include tuition, book fees, and lab fees charged by the school. Transportation, uniforms, and after-school programs do not qualify.
Keep receipts and school-issued statements to support your claim in case of an audit.

Often-Missed Illinois Subtractions and Credits

Retirement Income Subtraction: Illinois does not tax most retirement income (including Social Security benefits, certain pensions, and distributions from IRAs), which can significantly reduce taxable income.
Credit for Taxes Paid to Another State: If you lived in Illinois but earned income in another state, you may avoid double taxation by claiming this credit.
Military Pay Subtraction: Active duty military pay earned outside Illinois can be subtracted from taxable income.
Earned Income Tax Credit (EITC): Illinois offers a state EITC worth 18% of your federal EITC amount, helping low-to-moderate-income workers.

By understanding and documenting your eligibility for these Illinois tax credits and deductions, you can reduce your 2020 state tax liability and keep more of your hard-earned income where it belongs—in your pocket.

Electronic Filing vs. Paper Filing Through the Illinois Department of Revenue

When deciding how to file your 2020 Illinois tax return, the choice between electronic filing and paper submission can affect how quickly your return is processed, how easily you can track it, and how soon you might receive a refund. Here’s how the two methods compare and what to know before you send your paperwork.

Benefits of Using MyTax Illinois for E-Filing

Faster Processing & Refunds: Returns submitted through MyTax Illinois are generally processed within days, meaning eligible refunds can be issued much sooner than with paper filings.
Immediate Confirmation: The system provides an instant confirmation number so you know your return was successfully received by the Illinois Department of Revenue (IDOR).
Built-In Accuracy Checks: MyTax Illinois automatically flags common errors, reducing the risk of processing delays caused by mistakes or missing information.
Secure Access to Tax Records: Once filed, you can log in anytime to view prior returns, make payments, and check refund status without calling IDOR.

Processing Times for Electronic vs. Paper Submissions

Electronic Returns are typically processed in 1–2 weeks, and if there are no errors or verification issues, many refunds are issued in under 10 business days.
Paper Returns: Can take 6–8 weeks to process, and delays are common during peak filing season due to manual handling.
Impact of Errors: Any mistakes on paper returns often result in longer delays because corrections require additional mailing and review.

Address and Mailing Instructions for Paper Returns

Correct Form & Envelope: Use the official IL-1040 form for individuals or the correct business return form, and mail in a standard business envelope to avoid scanning issues.
If You Are Enclosing a Payment: Send your return and payment to:
Illinois Department of Revenue
P.O. Box 19027
Springfield, IL 62794-9027
If You Are Not Enclosing a Payment (Send your return to):
Illinois Department of Revenue
P.O. Box 19048
Springfield, IL 62794-9048
Certified Mailing Recommended: For added proof of submission, consider sending via certified mail with tracking, especially if filing close to the deadline.

Choosing between electronic and paper filing comes down to speed, convenience, and certainty. For most taxpayers, MyTax Illinois offers the quickest, most secure, and most efficient way to file and track a 2020 Illinois tax return.

FAQs

What happens if I miss the deadline?

You can still file if you missed Illinois’ 2020 state tax filing deadline, but late filing and payment penalties and interest on unpaid taxes may apply. Filing as soon as possible can reduce penalties. You won't face penalties if you're due a refund, but you should still file promptly. Visit the Illinois Department of Revenue’s MyTax Illinois site for instructions and penalty details (IDOR).

Can I file jointly if I moved during the year?

Yes, you can file jointly with your spouse if you meet Illinois’ requirements for joint filing, even if you moved during 2020. Your residency status (resident, part-year resident, or non-resident) will determine how you report income. Part-year residents must use Schedule NR to allocate income earned inside and outside Illinois. Federal filing status must generally match your Illinois filing status (IDOR).

How do I request an extension?

For 2020, Illinois automatically granted a state filing extension if you obtained a federal extension using IRS Form 4868. This extends your filing deadline to mid-October but does not extend the time to pay. Pay your estimated Illinois tax due by the original April deadline using MyTax Illinois or Form IL-505-I (IDOR) to avoid interest and penalties.

Can I e-file for free?

Eligible taxpayers can e-file Illinois state returns for free through MyTax Illinois or approved Free File partner programs. Qualification depends on income limits and filing complexity. E-filing offers faster processing, immediate confirmation, and quicker refunds than paper filing. Check the Illinois Department of Revenue’s Free File page for 2020 eligibility and approved providers (IDOR).

How do I claim tax paid to another state?

Illinois residents who paid income tax to another state in 2020 can claim a credit on Schedule CR to avoid double taxation. You must attach a copy of the other state’s return and proof of payment. The credit applies only to income, which Illinois also taxes. Part-year residents use Schedule NR to allocate and claim credits proportionally (IDOR).