Illinois Form IL-1065 — Partnership Replacement Tax Return 2025-2026

Get the blank Form IL-1065 (PDF)  ·  Checked line by line against the official Illinois form, last verified October 14, 2026  ·  How we verify

What is Form IL-1065?

Illinois partnerships pay a replacement tax on their own base income, separate from the income tax their partners pay. A partnership that does not elect PTE tax must also withhold Illinois income tax on behalf of its nonresident partners (pass-through withholding), and reports that withholding on the return.

The PTE tax election is made on the return itself. Publicly traded partnerships under IRC section 7704 cannot elect, and the Illinois Income Tax Act was amended so the PTE tax no longer has an expiration date.

Who Must File Form IL-1065?

File Form IL-1065 if you are a partnership with base income or loss, as defined in the Illinois Income Tax Act, allocable to Illinois. A partnership organized only to play the Illinois State Lottery does not file.

Combined returns are not allowed. A partnership in a unitary business group cannot file a combined return, but it may have special filing requirements (Schedule UB).

Investment partnerships can elect PTE tax but must still calculate investment partnership withholding; they complete all applicable lines of Schedule B, Section B for each partner.

Partnerships that do not elect PTE tax must withhold on behalf of nonresident partners and report it on Line 59 and Schedule B.

How to File Form IL-1065

• Decide whether to elect PTE tax. If you do, check Box I and complete Lines 60 and 61, and make estimated payments if liability will exceed $500.
• Complete the income steps: income or loss (Step 4), base income (Step 5), allocation to Illinois if multistate (Step 6), net income (Step 7) and net replacement tax (Step 8).
• Complete Schedule B with each partner’s information and Schedules K-1-P as required. Section B, Lines J, K and L cannot be negative.
• Pay with Form IL-1065-V or electronically (MyTax Illinois, credit card or ACH credit) by the original due date.
• File electronically through Modernized e-File or tax software, or mail the return.
• Amend with Form IL-1065-X.

When Is Form IL-1065 Due?

Form IL-1065 is due on or before the 15th day of the 4th month following the close of the tax year. Illinois grants an automatic six-month extension to file, whether or not you request it. An additional extension is granted only if the IRS grants one beyond the Illinois date, and you must attach the approved federal extension. An extension is not an extension of time to pay: replacement tax, pass-through withholding and PTE tax must be paid in full by the original due date, using Form IL-1065-V or an electronic method. Estimated payments for PTE tax filers fall on the 15th day of the 4th, 6th, 9th and 12th months of the tax year.

Where to Mail Form IL-1065

If a payment is enclosed, mail Form IL-1065 to: Illinois Department of Revenue, PO Box 19053, Springfield IL 62794-9053. If no payment is enclosed, mail it to: Illinois Department of Revenue, PO Box 19031, Springfield IL 62794-9031.

How to Complete Form IL-1065 Line by Line

Step 1 — Identify Your Partnership (Boxes A–J)

Enter the legal name, address, FEIN and other identifying information. Box I is the PTE tax election: check it if you elect to file and pay PTE tax. Box J is checked, with Form IL-2220 attached, if you annualized income. Other boxes indicate attached schedules, apportionment formulas and whether this is a first or final return.

Steps 4–5 (Lines 14–35) — Income and Base Income

Start from federal partnership income and make Illinois additions: the special depreciation addition (Line 17), related-party expenses (Line 18), distributive share of additions (Line 19), guaranteed payments to partners from federal Form 1065 (Line 20), the amount of loss distributable to a partner subject to replacement tax (Line 21) and other additions (Line 22).

Step 6 (Lines 36–46) — Income Allocable to Illinois

Complete this step only if the partnership does business inside and outside Illinois. Business income is apportioned by the sales factor:

Steps 7–8 (Lines 47–58) — Net Income and Replacement Tax

Investment partnerships skip Step 8.

Step 9 (Lines 59–64) — Withholding, PTE Income and Tax, and Penalty

Step 10 (Lines 65–68) — Payments, Overpayment and Refund

The refund or balance due follows. Schedule B reports each partner’s information, including the PTE tax credit passed through on Line K (each partner’s PTE income times 4.95%) and credits received from other electing entities on Line L.

Common Mistakes to Avoid

• Electing PTE tax but still completing K-1-P(3). It is not completed once you elect.
• Missing PTE estimated payments. Electing partnerships expecting liability over $500 must pay quarterly.
• Assuming the 6-month extension covers payment. Pay by the original due date.
• Filing a combined return for a unitary group. Partnerships cannot, though Schedule UB may apply.
• Using the wrong form year. The 2025 form is for years ending December 31, 2025 through December 30, 2026.
• Negative Schedule B amounts. Lines J, K and L cannot be negative.

Frequently Asked Questions

What is the Illinois partnership replacement tax rate? 1.5% of net income after a $1,000 standard exemption allowance (apportioned).

What is the PTE tax rate? 4.95% of the partnership’s calculated net income, if it elects to pay PTE tax.

When is Form IL-1065 due? The 15th day of the 4th month after the close of the tax year, with an automatic six-month extension.

Can a publicly traded partnership elect PTE tax? No. A publicly traded partnership under IRC section 7704 cannot elect.

Who pays estimated tax? Partnerships that elect PTE tax and expect total liability above $500.

How do I amend? File Form IL-1065-X.

Final Review Before Filing

• The partnership has Illinois base income or loss and is not exempt (such as a lottery-only partnership).
• The PTE tax election decision is made and Box I is checked if electing.
• Schedule B is complete for each partner; K-1-P(3) is not completed if PTE tax is elected.
• The replacement tax and exemption allowance are computed correctly.
• Estimated tax payments are made if PTE tax is elected and liability exceeds $500.
• Payment is made by the original due date.

General information from the official form and its instructions, not advice for your circumstances. See the full disclaimer.