§ 804 — Failure to pay estimated tax

(a) In general. In case of any underpayment of estimated tax by a taxpayer, except as provided in subsection (d) or (e), the taxpayer shall be liable to a penalty in an amount determined at the rate prescribed by Section 3-3 of the Uniform Penalty and Interest Act upon the amount of the underpayment (determined under subsection (b)) for each required installment. (b) Amount of underpayment. For purposes of subsection (a), the amount of the underpayment shall be the excess of: (1) the amount of the installment which would be required to be paid under subsection (c), over (2) the amount, if any, of the installment paid on or before the last date prescribed for payment. (c) Amount of Required Installments. (1) Amount. (A) In General. Except as provided in paragraphs (2) and (3), the amount of any required installment shall be 25% of the required annual payment. (B) Required Annual Payment. For purposes of subparagraph (A), the term "required annual payment" means the lesser of: (i) 90% of the tax shown on the return for the taxable year, or if no return is filed, 90% of the tax for such year; (ii) for installments due prior to February 1, 2011, and after January 31, 2012, 100% of the tax shown on the return of the taxpayer for the preceding taxable year if a return showing a liability for tax was filed by the taxpayer for the preceding taxable year and such preceding year was a taxable year of 12 months; or (iii) for installments due after January 31, 2011, and prior to February 1, 2012, 150% of the tax shown on the return of the taxpayer for the preceding taxable year if a return showing a liability for tax was filed by the taxpayer for the preceding taxable year and such preceding year was a taxable year of 12 months. (2) Lower Required Installment where Annualized Income Installment is Less Than Amount Determined Under Paragraph (1). (A) In General. In the case of any required installment if a taxpayer establishes that the annualized income installment is less than the amount determined under paragraph (1), (i) the amount of such required installment shall be the annualized income installment, and (ii) any reduction in a required installment resulting from the application of this subparagraph shall be recaptured by increasing the amount of the next required installment determined under paragraph (1) by the amount of such reduction, and by increasing subsequent required installments to the extent that the reduction has not previously been recaptured under this clause. (B) Determination of Annualized Income Installment. In the case of any required installment, the annualized income installment is the excess, if any, of: (i) an amount equal to the applicable percentage of the tax for the taxable year computed by placing on an annualized basis the net income for months in the taxable year ending before the due date for the installment, over (ii) the aggregate amount of any prior required installments for the taxable year. (C) Applicable Percentage. In the case of the following The applicable required installments: percentage is: 1st .................... . . . . . . . . . . . . . . . . . . . . 22.5% 2nd .................... . . . . . . . . . . . . . . . . . . . . 45% 3rd .................... . . . . . . . . . . . . . . . . . . . . 67.5% 4th .................... . . . . . . . . . . . . . . . . . . . . 90% (D) Annualized Net Income; Individuals. For individuals, net income shall be placed on an annualized basis by: (i) multiplying by 12, or in the case of a taxable year of less than 12 months, by the number of months in the taxable year, the net income computed without regard to the standard exemption for the months in the taxable year ending before the month in which the installment is required to be paid; (ii) dividing the resulting amount by the number of months in the taxable year ending before the month in which such installment date falls; and (iii) deducting from such amount the standard exemption allowable for the taxable year, such standard exemption being determined as of the last date prescribed for payment of the installment. (E) Annualized Net Income; Corporations. For corporations, net income shall be placed on an annualized basis by multiplying by 12 the taxable income (i) for the first 3 months of the taxable year, in the case of the installment required to be paid in the 4th month, (ii) for the first 3 months or for the first 5 months of the taxable year, in the case of the installment required to be paid in the 6th month, (iii) for the first 6 months or for the first 8 months of the taxable year, in the case of the installment required to be paid in the 9th month, and (iv) for the first 9 months or for the first 11 months of the taxable year, in the case of the installment required to be paid in the 12th month of the taxable year, then dividing the resulting amount by the number of months in the taxable year (3, 5, 6, 8, 9, or 11 as the case may be). (3) Notwithstanding any other provision of this subsection (c), in the case of a federally regulated exchange that elects to apportion its income under Section 304(c-1) of this Act, the amount of each required installment due prior to June 30 of the first taxable year to which the election applies shall be 25% of the tax that would have been shown on the return for that taxable year if the taxpayer had not made such election. (d) Exceptions. Notwithstanding the provisions of the preceding subsections, the penalty imposed by subsection (a) shall not be imposed if the taxpayer was not required to file an Illinois income tax return for the preceding taxable year, or, for individuals, if the taxpayer had no tax liability for the preceding taxable year and such year was a taxable year of 12 months. The penalty imposed by subsection (a) shall also not be imposed on any underpayments of estimated tax due before the effective date of this amendatory Act of 1998 which underpayments are solely attributable to the change in apportionment from subsection (a) to subsection (h) of Section 304. The provisions of this amendatory Act of 1998 apply to tax years ending on or after December 31, 1998. (e) The penalty imposed for underpayment of estimated tax by subsection (a) of this Section shall not be imposed to the extent that the Director or his or her designate determines, pursuant to Section 3-8 of the Uniform Penalty and Interest Act that the penalty should not be imposed. (f) Definition of tax. For purposes of subsections (b) and (c), the term "tax" means the excess of the tax imposed under Article 2 of this Act, over the amounts credited against such tax under Sections 601(b) (3) and (4). (g) Application of Section in case of tax withheld under Article 7. For purposes of applying this Section: (1) tax withheld from compensation for the taxable year shall be deemed a payment of estimated tax, and an equal part of such amount shall be deemed paid on each installment date for such taxable year, unless the taxpayer establishes the dates on which all amounts were actually withheld, in which case the amounts so withheld shall be deemed payments of estimated tax on the dates on which such amounts were actually withheld; (2) amounts timely paid by a partnership, Subchapter S corporation, or trust on behalf of a partner, shareholder, or beneficiary pursuant to subsection (f) of Section 502 or Section 709.5 and claimed as a payment of estimated tax shall be deemed a payment of estimated tax made on the last day of the taxable year of the partnership, Subchapter S corporation, or trust for which the income from the withholding is made was computed; and (3) all other amounts pursuant to Article 7 shall be deemed a payment of estimated tax on the date the payment is made to the taxpayer of the amount from which the tax is withheld. (g-5) Amounts withheld under the State Salary and Annuity Withholding Act. An individual who has amounts withheld under paragraph (10) of Section 4 of the State Salary and Annuity Withholding Act may elect to have those amounts treated as payments of estimated tax made on the dates on which those amounts are actually withheld. (i) Short taxable year. The application of this Section to taxable years of less than 12 months shall be in accordance with regulations prescribed by the Department. The changes in this Section made by Public Act 84-127 shall apply to taxable years ending on or after January 1, 1986.

Legislative History

(Source: P.A. 96-1496, eff. 1-13-11; 97-507, eff. 8-23-11; 97-636, eff. 6-1-12 .)