Category Archives: Illinois

How To Raise Capital For Your Small Business Start-Up — FREE Webinar 8/10/22

This excellent series of free webinars designed to help small business owners succeed in a challenging world — offered by the Chicago Department of Business Affairs and Consumer Protection (BACP) — is back with a can’t-miss Business Education Workshop Webinar on Wednesday, August 10th at 3 pm Central. All their webinars are free and open to the public, and many are offered online, which means that anyone can attend — they’re not restricted to Chicago small business owners.

I wanted to highlight this upcoming session in particular; it’s part of the SCORE Chicago Funding Webinar Series. In case you’re unfamiliar with SCORE (the Service Corps Of Retired Executives), it’s an amazing resource funded in part by the U.S. Small Business Administration, offering education, mentorship, and tools to help people start, develop, and grow businesses. The Chicago Chapter is particularly robust and offers many opportunities for training, as well as a free suite of templates — such as business planning and financial projections.

Both SCORE and BACP offer many sessions on raising capital, which you can watch on the Chicago BACP YouTube Channel, or SCORE’s Online Webinar Library.

This webinar should be of special interest to our readers, as it’s an interview with two small business owners who will walk through the experience that they had working with SCORE to access capital through different methods of financing, in different rounds throughout the stages of their business growth. For me, hearing “how we did it” from other small business owners is not only educational, but inspiring, and I hope this upcoming webinar will offer you both angles.

Wednesday, 8/10 Webinar at 3:00 PM
How We Did It: Raising Capital for Your Business
Presented by Score Chicago
(Part of a Score Chicago Funding Webinar Series)

In this webinar, you will learn how two Chicago entrepreneurs, former SCORE Chicago clients, and founders of Tiesta Tea Dan Klein and Patrick Tannous raised 4 rounds of financing totaling over $8 million. Tiesta Tea has also used many different methods of funding including friends/family, factoring, purchase order (PO) financing, SBA loans, Angel Investors, and VC funding. Dan and Patrick will share their experiences raising capital during the different growth stages of their business.

Tiesta Tea is a company that used SCORE Chicago to get started in 2010. Dan and Patrick know first-hand how important mentorship is for aspiring entrepreneurs and established businesses seeking mentoring from SCORE to accelerate the growth and success of their businesses. The founders, Dan Klein and Patrick Tannous, started with nothing but an idea to sell tea, and fast-forward 10 years, they have sold over $54MM of their product. They sell their teas in thousands of retail stores, including Walmart, Jewel, Mariano’s, Amazon, Costco and many more.

Register for the 8/10 Webinar

Please email BACPoutreach@cityofchicago.org with any webinar questions.

Visit BACP’s YouTube for all webinars.

BACP Entrepreneur Certificate Program

The Chicago Department of Business Affairs & Consumer Protection (BACP) Entrepreneur Certificate Program is a free and optional program available to attendees of the free BACP business education workshop and webinar series.

For program details (enrollment, requirements, contact information, etc.) and to enroll go to Entrepreneur Certificate Program.


If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Illinois Small Businesses: Upcoming Aug 5-14 Sales Tax “Holiday” Is Anything But One

My inbox on June 27th.

On June 27th I woke to find dozens of notifications from MyTax Illinois in my email inbox — one for each and every client of ours who files sales taxes.

Just in case you got one or more of these yourself and haven’t logged in to check it out yet, here’s what it looks like —

It doesn’t give you much to go on — just a sort of “hey we saw you’re registered to file sales taxes, so you should read these four bulletins which may or may not apply and you’re unlikely to understand anyway” note.

But, if you dig through the bulletins you’ll find two in particular that could be important to a small business owner. One of them I covered in a recent blog post — Illinois Grocery Sales Tax Reduced by 1% For The Next 12 Months — it’s only likely to apply if you sell groceries that qualify for the low-tax food rate.

The other — FY 2022-24 State Sales Tax Holiday August 5, 2022, through August 14, 2022 (illinois.gov) — which I’ll discuss here, is a notice basically saying that all retailers have to reduce their sales tax rate on certain clothing and supplies by 5 percentage points for a 10-day (Aug 5-14) period, to give consumers a break during back-to-school time.

If you want to skip my rant and go to the section on what a small business owner should do next, scroll down to the next line in bold.

While I’m super-supportive about giving working families a break on prices — this is a terrible way to do it! It costs small businesses more in accounting and bookkeeping work than it could possibly save anyone.

It requires a small business owner — already overworked and without sufficient staff, and having in most cases barely survived the pandemic and still scraping to get by — to paw through every item in their Point of Sale system and change sales tax on an item-by-item basis. It’s hard enough to change sales tax amounts on a department-by-department basis… but item-by-item? Honestly, it will cost them so much more to figure this out than anyone will ever save on this “holiday”. And worse are the folks who don’t keep inventory in an automated system. They are stabbing in the dark and have no way to implement it at all. I just have to hope they don’t get audited by IDOR.

To make matters worse, the guidance says that the retail selling price per clothing item must be less than $125, and that supplies must be used by students in the course of study, in order to qualify. It’s simply impossible to program any Point of Sale system to create a sales tax discount on certain dollar-amounts of products and not others, or to change the sales tax rate on an individual item for some sales but not others (i.e., only after finding out that it will be used in the course of study at school). If small business owners are going to be able to comply with any of these rules, it will have to apply to all sales of a certain product — not just some sales.

This type of well-intentioned law — like the bag tax, carbonated beverage tax, and ill-fated sweetened beverage tax — has my full support from a social perspective. But they are so poorly-worded, difficult-to-enact, and misguided, that no small business could ever properly implement any of them cost-effectively.

This is just like that. Well-intentioned but completely out of touch and indicative that our representatives don’t have a clue what’s going on “on the ground”.

I received a hilarious text from a client when she read the IDOR notice:

Texts from a client when she read the IDOR notice.

As an aside, I wrote my state rep and begged him not to support this kind of thing in the future, and to work with other elected officials to find more reasonable, sustainable ways to provide relief to hard-working families, without crushing small business owners along the way. His response was truly wonderful, and he apologized profusely for not involving stakeholders in the last-minute rush to get it passed.

“Looks like we really did a terrible job here.  You’re absolutely right that this was an example of government decision making at its worst. I think in the abstract these are largely good ideas, but looking at that guidance, it’s clear that implementation is going to be a nightmare. You have my word that I’ll try to do a better job of asking questions like “yes but is this feasible?” or “how much of an administrative burden is it placing on our small business owners?” when we’re contemplating things like this in the future.”

What does this mean for you, the small business owner? What are your next steps?

Follow these steps, in order, to determine what actions to take:

Step 1 – Check this list to see if you sell any products on it:

The great news is, that if you don’t sell any of these products, then you do not need to make any changes or do any extra work. However, I’d recommend rehearsing the phrase, “the sales tax holiday is only for back-to-school clothing and supplies, and as we don’t sell any items that would qualify, we aren’t able to offer you the 5% sales tax discount.” Because for sure there are going to be people who think that anything they buy during the 10-day period will be at a lower sales tax rate.

If you do sell products on the list above, then move on to the next step.

Step 2 – Identify all the products you sell that are on the list above. If any of the clothing items are priced at $125 or more, cross them off. Then make sure none of the remaining products you just identified are on this list of non-qualifying items:

Step 3 – Look at the items that made it onto your “qualified” list, and ask yourself who your clients generally are that buy these items — are they likely to be used for school? If the answer is definitely no, then again — no worries. You do not need to make any changes or do any additional work. (Except rehearsing that phrase from above and teaching it to your staff.)

However, if the answer is maybe or likely, then we’ve got some work to do.

Step 4 – If the answer is maybe, then you have to decide whether it’s worth your effort to go through your Point of Sale system and change the tax rate on each product that qualifies (and then change it back 10 days later) — or if you don’t have a POS system, if it’s worth it to figure out how to manually change the tax rate on each sale of one of these items, and to track how many were sold during the period of Aug 5-14. Because an alternative might be to just leave everything at the higher sales tax rate unless a customer specifically states that they are buying it for school use (you could even ask each customer who buys one of these items during that period if it’s for school use or not) — and then just give them a discount and write down the sale somewhere so that later on when you file your ST-1, you know how much to enter onto the Schedule GT so you get your money credited back to you — yes, I know that this means your cash drawer and your Sales Tax Payable accounts will be off. You can just have your accountant book an adjustment after the correct amount of tax is paid to the state. Or, in all honesty, you could even give them the discount out of the business’ own pocket and it would still be cheaper than reassigning tax rates in your POS system.

Step 5 – On the other hand, if the answer is likely, then you need to:

  1. Create a new tax rate in your POS system called “holiday rate” that is 5 points lower than the current sales tax rate (in Chicago, 10.25% — so the new rate will be 5.25%). Hopefully your system allows enough rate slots to accommodate this. If not, maybe consider the approach outlined in Step 4.
  2. After close of business on August 4th, assign that new rate to all the items that qualify.
  3. Make a note to reassign the old rate to all those items after the close of business on August 14th.
  4. Be sure you can run a report of all the items that sold at this rate, since you’ll need to declare that total on a separate tax form (Schedule GT) when you prepare your monthly sales tax return (ST-1).

If you do not have inventory or non-inventory sales-taxable items stored in your POS system — or if you have a cash register instead of a POS — then you’ll need to look at how you charge sales taxes to each item and come up with a plan that mimics the approach I just outlined. For example, if your system allows you to manually edit the sales tax rate on a sale-by-sale basis, you could keep a list of all the qualifying items by the register, and simply adjust for each qualifying sale. The problem is that only some of the items get the discounted rate, so if this is how your system works, you’d have to run a separate sale for all the qualifying items and then one for the non-qualifying items. You also will need to keep a list of all the sales made at the lower rate, since as mentioned above, you’ll have to note those on a separate schedule when you prepare your sales tax return. And if your system doesn’t allow you to manually edit the sales tax rate, you’ll have to take the approach I mentioned earlier, whereby you just give the customer a discount and adjust the inaccurate books later, hoping it all comes out in the wash.

Step 6 – Once the time comes to file your monthly (or quarterly) ST-1 sales tax return, you’ll notice there is an additional form– Schedule GT, Sales and Use Tax Holiday and Grocery Tax Suspension Schedule. This was created for retailers to report sales of qualifying items sold during the sales tax holiday. Per IDOR:

Form ST-1 has not changed. Retailers should continue to report their normal taxable sales, including sales of qualifying items, on Lines 4a and 4b, Lines 6a and 6b, or Lines 12a and 12b, of Form ST-1 and will then use Lines 2a and 2b, Lines 3a and 3b, or Lines 4a and 4b on Schedule GT to calculate a credit against the tax reported on those lines for the tax they are not collecting during the state sales tax holiday.

So you’ll report the sales of these items, on which you charged the lower tax amount, on Schedule GT and it will flow onto your ST-1 as a credit so that you’re not remitting more to the IDOR than you collected.

Whichever approach you take, make sure to rehearse the phrase, “the sales tax holiday is only for back-to-school clothing and supplies, and as we don’t sell any items that would qualify, we aren’t able to offer you the 5% sales tax discount.” Lots of folks read the headlines, but not the small print.

Hopefully this was all clearer to read than it felt to write it! And please make sure your state representative knows how you feel about having had to think about it in the first place. Small businesses have enough to deal with these days!


If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Illinois Grocery Sales Tax Reduced by 1% For The Next 12 Months

Illinois’ 1% sales tax on groceries will be suspended for the state’s fiscal year, from June 1, 2022 through June 30, 2023. This sales tax reprieve is predicted to net approximately $400 million in consumer savings.

State and county taxes are still in place, meaning that in the City of Chicago, the tax on groceries went from 2.25% down to 1.25%.

Interestingly, medical products and devices — which are usually taxed at the same low rate as groceries — will remain taxable at their usual rate instead of getting the additional 1% suspension.

For retailers, this means that all “grocery low-tax” departments will need to have the tax reduced in Point of Sale systems, but not in medical/drug departments or grocery high-tax (alcoholic beverages, food consisting of or infused with adult use cannabis, soft drinks, candy, and food that has been prepared for immediate consumption).

There are also signage requirements for retailers. Per the IDOR’s May bulletin:

Retailers, to the extent feasible, shall include the following statement on any cash register tape, receipt, invoice, or sales ticket issued to Retailers, to the extent feasible, shall include the following statement on any cash register tape, receipt, invoice, or sales ticket issued to customers: “From July 1, 2022, through June 30, 2023, the State of Illinois sales tax on groceries is 0%.” If it is not feasible for the retailer to include the statement on any cash register tape, receipt, invoice, or sales ticket issued to customers, then the retailer shall post the statement on a sign that is clearly visible to customers. The sign shall be no smaller than 4 inches by 8 inches. A printable sign will be available on our website at tax.illinois.gov.

In related tax news, the same state budget also provides automatic $50 income tax rebates for individuals who made less than $200,000 in 2021, $100 for couples filing jointly who made less than $400,000, and $100 per dependent claimed in 2021, up to three. Additionally, the Illinois state earned income credit will increase from 18% to 20% of the federal credit, and eligible homeowners will receive property tax rebates equal to their 2021 property tax credit, up to $300.


If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Important Changes for Chicago Businesses As Of July 1, 2022

Chicago’s Minimum Wage Increase, Fair Workweek Changes, and Sexual Harassment Laws Enhancements — and a Chicago Sick Pay Reminder

The City of Chicago’s fiscal year runs from July 1-June 30, so most changes tend to take effect at the beginning of the “new year”. This year is no exception — and there’s a lot that has changed. The Chicago Department of Business Affairs and Consumer Protection (BACP) released this information recently, much of which affects small business owners in the city.

Minimum Wage Increase

The annual scheduled increase in Chicago’s minimum wage goes into effect on Friday, July 1, 2022. The Chicago minimum wage is tiered for large businesses with 21 or more employees, and small businesses with 4-20 employees. Since reaching $15 per hour in 2021, the minimum wage for larger employees increases annually according to the Consumer Price Index or 2.5%, whichever is lower. The minimum wage for small businesses continues to increase towards $15 per hour by 2023.

As of July 1, 2022, the Chicago minimum wage will be:

  •  $15.40 for employers with 21 or more employees (including all domestic workers, regardless of the number employed)
  • $14.50 for employers with 4-20 employees
  • The minimum wage for tipped employees will be $9.24 for employers with 21 or more employees, and $8.70 for employers with 4-20 employees (employers must make up the difference between any tips received and the applicable minimum wage for non-tipped workers.)
  • Anyone age 24 or younger employed by, or engaged in employment coordinated by, a nonprofit organization or government agency will see a minimum wage increase to $12.00.

Employers that maintain a business facility within the City of Chicago or are required to obtain a business license to operate in the City are required to pay their employees at least the Chicago minimum wage. Additionally, any employee that works two hours or more in the City within a two-week period must also receive at least the Chicago minimum wage.

Chicago BACP recently presented a free hour-long webinar called “Employer Responsibilities Under Chicago’s Minimum Wage Ordinance”, available here.

Fair Workweek Ordinance Changes

 As of July 1, 2022, scheduled enhancements to the Fair Workweek Ordinance will require:

  • Employers in “covered industries ” (see below) to post work schedules with at least 14 days’ notice, an increase from the previous 10 days’ notice.
  • Employees will need to earn less than $29.35 per hour or $56,381.85 per year to gain protection under the Fair Workweek Ordinance.
  • Covered industries include building services, healthcare, hotel, manufacturing, restaurant, retail, or warehouse services.

Chicago businesses are required to post the Minimum Wage Notice and Fair Workweek Notice at their business. The notices will be available to workers and business owners in English, Spanish, Polish, Simplified Chinese, Tagalog, and Korean by July 1, 2022. Employers that violate the minimum wage ordinance can be fined $500 to $1,000 per day for each offense. 

Chicago BACP recently presented a free hour-long webinar called “Employer Responsibilities Under Chicago’s Fair Workweek Ordinance”, available here.

Sexual Harassment Law Updates

As of July 1, 2022, all employers in the city of Chicago must have a written policy on sexual harassment. Additionally, employers are required to display a public notice advising of the prohibition on sexual harassment where employees can see it, and there are increased training requirements. A model policy, written notice, and training templates are available by visiting Chicago.gov/SexualHarassment.

Recent updates to the law include:

  • Adding sexual misconduct to the definition. Sexual misconduct is defined as any behavior of a sexual nature which also involves coercion, abuse of authority, or misuse of an individual’s employment position.
  • Requiring all employers to have a written policy on sexual harassment. The written policy must be available in the employee’s primary language within the first calendar week of starting employment.
  • Requiring all employers to post a written notice on sexual harassment.
  • Increasing the statute of limitations from 300 to 365 days.
  • Create flexibility to notify a respondent up to 30 days from the time of complaint (compared to 10 days currently), to mitigate any retaliation such as denial of a reasonable accommodation request.
  • Requiring additional annual training for all employees including the one hour of prevention training aligned with State requirements and one hour of bystander intervention. Supervisors and managers are required to have an additional one hour of training.
  • Increasing the penalty for individuals or businesses that participate in discriminatory practices in the workplace including sexual harassment. The penalty is increasing from $500 – $1,000 per violation to $5,000 – $10,000.

The Chicago Commission on Human Relations (CCHR) recently presented a 20-minute video update in collaboration with BACP, available here.

Reminder: Sick Pay Responsibilities

It seems not all small business owners are aware of the responsibility to provide Chicago workers paid sick leave. It applies to any business or individual that employs at least one “employee” and has a facility within Chicago’s city limits (though Cook County now has a similar requirement). The term “employee” covers anyone who works at least 80 hours within a 120-day period (20 hours a month).
– For hourly employees, paid sick leave accrues at one-hour for every 40 hours worked. Salaried-exempt employees are presumed to have worked 40 hours/week.
– Employees are capped at accruing a total of 40 hours of sick leave each year, unless the employer opts to set a higher limit.
– Employers must permit employees to carry over half of their accrued leave, to a maximum of 20 hours of unused sick leave each year (40 for employers with 50 or more employees).
– Employers are not required to pay out any accrued but unused sick leave upon employment termination.

In an attempt to drive this point home, I recently revisited my previous blog posts on the topic, and these were the three resources that seemed most helpful, which I encourage all employers to watch/read:
1) BACP Webinar: Paid Sick Leave Overview – YouTube
2) Think Your PTO Policy Complies With the Chicago or Cook County Paid Sick Leave Ordinances? Think Again. | Bryan Cave Leighton Paisner – JDSupra
3) Paid Sick Leave Enhancements: Chicago workers are guaranteed one hour of paid sick leave for every 40 hours worked. Starting August 1, 2021, the possible uses for that paid sick leave will be expanded to include caring for a family member with a closed school or place of care, compliance with public health orders, and mental and behavioral health.

In case it’s helpful, those resources were highlighted in these blog posts:
Year-End Reminders For Chicago Businesses | The Dancing Accountant
April 2021 FREE Small Business Webinars – City of Chicago | The Dancing Accountant
– BACP Updates | Chi Biz Strong Initiative | The Dancing Accountant

Even the least expensive version of Gusto Payroll allows for a sick pay plan, and it’s not hard to set up and track (see instructions here).

Reminder that if you sign up and run Gusto using my link, you’ll get a free trial period… and after running your first payroll you’ll receive a $100 Visa gift card! My clients instead will receive a 15% discount for the life of the plan.

And a final point: all Chicago worker protections are enforced by the BACP Office of Labor Standards (OLS). The OLS is dedicated to promoting and enforcing Chicago’s labor laws, including Minimum Wage, Paid Sick Leave, Fair Workweek, and Wage Theft Ordinance. The BACP OLS webpage offers informational materials on Chicago’s Labor Standards Laws.


If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

How to Apply for a Chicago Sidewalk Cafe Permit – FREE Webinar 3/3/22

Thursday, 3/3 at 10:00 AM

How to Apply for a Sidewalk Cafe Permit

Presented by the Department of Business Affairs & Consumer Protection (BACP)

Sidewalk cafes provide restaurants an opportunity to expand their footprint to serve customers outside. This webinar will cover sidewalk cafe basics including sidewalk cafe operational conditions and requirements, as well as how to apply for a Sidewalk Cafe Permit, which is required to operate a sidewalk cafe in Chicago.

Register here: Webinar Registration – Zoom

Also, check out this recording of BACP’s webinar, “How to Apply for a Sidewalk Sign Permit” on YouTube.


If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Chicago “Joint Readiness Summit” This Fri 2/4 – Small Biz Funding Opportunities

From Chicago Business Affairs & Consumer Protection

JOINT READINESS SUMMIT: This Friday, February 4 from 9:00AM to 4:00PM

Join the City of Chicago, Cook County, and State of Illinois leaders as well as other experts to learn about what it takes to be “ready” to apply for grants and contracts funded by American Rescue Plan Act (ARPA) and other economic recovery funding streams.

This event will take place via Zoom and will be simultaneously streamed on YouTube. Meeting information will be sent via email prior to the event. ASL interpretation and closed captioning will be provided.

Learn about the Chicago Recovery Plan — the City’s plan to amplify once-in-a-generation federal funding to create an equity-based investment strategy to catalyze a sustainable economic recovery from the COVID-19 pandemic. The funding under the Chicago Recovery Plan, which includes funding from the American Rescue Plan Act and over $600 million in local bond funds, is allocated alongside all other available resources in the City budget to maximize this opportunity over the next 3-5 year funding period. The initiatives and strategic priorities that make up the Chicago Recovery Plan were a result of several stages of community engagement and input during the 2022 budget development process.  The list of current funding opportunities can be found here:
Funding Opportunities (chicago.gov)

Register by visiting the Joint Readiness Summit Registration Webpage.


If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

How To Make IL Dept Of Rev (IDOR) Business Tax Payments Online: Estimates & Extensions – UPDATED

The step-by-step instructions I painstakingly wrote up earlier this year for making business replacement income tax estimated and extension payments are now out-of-date, because IDOR revamped their MyTaxIllinois website in September (grrrrr). So here are the basic instructions (screenshots are coming soon, but this will have to do for now):

— Log into the business’s My Tax IL account
— On the ‘Summary’ tab, look for the ‘Business Income Tax’ section
— Click on the link for ‘View more account options’

There are two ways to do it from here; the first is:
— In the ‘Account Options’ section, click the link for ‘Make An Estimated Payment’
— Select the period you want to pay (which is 12/31/2021 for tax year 2021 — choose a later period if paying estimated taxes for 2022)
— Click the first ‘Add Payment’ hyperlink in the Payment Schedule table for each payment you would like to schedule.
— If your payment information is saved in MyTax Illinois, then in the ‘Choose’ tab you can select the dropdown under ‘Payment Channel’
— Otherwise, select ‘New’ and enter your company bank info.
— In either case, on the right where it says ‘Payment’, you can change the payment’s debit date and enter the amount.
— Click Submit, and re-enter your password for security purposes

Alternatively:
— In the ‘Periods and Submissions’ section, click the link for ‘View Account Periods’
— Click the 12/31/2021 link so that your payment is applied to tax year 2021 (or a later period if paying 2022 estimated quarterly taxes)
— In the upper right corner of this page, click the ‘Make A Payment’ link
— Select the ‘Bank Account Debit’ link
— Click the IL-1120-ST Payment link (ST denotes a “Small Business” payment)
— Enter the amount you want to pay in the Amount and Confirm Amount fields
— Click Submit, and re-enter your password for security purposes

Congrats, you did it!


If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

2021 Year-End Priority: Pass-Through Entities Should Pay State Taxes By 12/31

Slide from December 23, 2021 AICPA Town Hall

In a December 17th IAAI tax update webinar, the Illinois Department of Revenue (IDOR) walked through instructions for claiming a new “SALT” tax benefit signed into law in September, and in today’s AICPA Town Hall, the importance of making these payments before year-end was underscored. This new law is a workaround for individual taxpayers who are otherwise unable to benefit from a full deduction on state tax payments on pass-through income from their businesses.

As a result, we (along with probably thousands of other CPA firms) have made a list of our own pass-through clients (aka S-Corps and Partnerships) who might benefit from this increased deduction, and we’re scrambling to calculate estimates and reach out to them to recommend these payments be made by 12/31.

So, what the heck is SALT? And why have the deduction rules changed?

SALT stands for “state and local taxes”, and they are generally deducted by individual taxpayers on their annual 1040 tax return. Before 2018, taxpayers could deduct these taxes by itemizing them on Schedule A.

However, the Tax Cuts & Jobs Act limited this to $10,000. This cap was likely to be removed with the Build Back Better Act, but it appears that legislation will not be passed before year-end after all.

Many states, including Illinois, have passed legislation allowing these taxes to be paid at the business level, on behalf of the shareholders and partners. Since these companies “pass-through” their income to owners, they are known as Pass-Through Entities (PTEs). The PTE does not have a cap on this type of tax, so it reduces both federal and state income and also allows the full deduction.

My colleague, James Hamilton, wrote up a clear explanation with an example, which I recommend reading if you’d like to get into the details.

Why are we all scrambling to do this before year-end?

Usually, estimated state tax payments are paid by the individual and are due 4/15, 6/15, 9/15 and 1/15, with any balance remaining payable by the following 4/15. The IL state law was not passed until after estimated tax deadlines for the first three quarters were already paid. And a December 20 article in Journal of Accountancy, as well as the aforementioned AICPA Town Hall from earlier today, suggest that the IRS guidance requires the business pay the tax by year-end, not by 1/15.

From The Journal of Accountancy: Crucially, a specified income tax payment is one the PTE “makes … during a taxable year” in computing its taxable income “for the taxable year in which the payment is made” (Notice 2020-75, Section 3.02(2)). Even though Sec. 164(a) provides that the SALT deduction is for the tax year in which taxes are “paid or accrued,” the more restrictive, literal application of the notice to taxes paid is the safer course, advocates say.

To get the largest tax benefit from the new law, businesses would want to pay in the entire state tax liability for the year by 12/31, even if the owners have already paid quarterly estimated taxes. In other words, take the company’s full taxable income for the year (which you won’t know before 12/31, but this is where estimates come in) times 4.95% (IL flat tax rate for individuals). The resulting overpayment would be refunded to the taxpayer upon filing their personal tax return.

Not all businesses will have the cash to do this, but to the extent it can be paid, it is certainly a smart tax-reduction move.

Okay, then how do we make the payments?

The step-by-step instructions I painstakingly wrote up earlier this year for making business replacement income tax estimated and extension payments are now out of date, because IDOR revamped their MyTaxIllinois website in September (grrrrr). So here are the basic instructions (a blog post with screenshots is coming soon, but this will have to do for now):

— Log into the business’s My Tax IL account
— On the ‘Summary’ tab, look for the ‘Business Income Tax’ section
— Click on the link for ‘View more account options’

There are two ways to do it from here; the first is:
— In the ‘Account Options’ section, click the link for ‘Make An Estimated Payment’
— Select the period you want to pay, which is 12/31/2021
— Click the first ‘Add Payment’ hyperlink in the Payment Schedule table for each payment you would like to schedule.
— If your payment information is saved in MyTax Illinois, then in the ‘Choose’ tab you can select the dropdown under ‘Payment Channel’
— Otherwise, select ‘New’ and enter your company bank info.
— In either case, on the right where it says ‘Payment’, you can change the payment’s debit date and enter the amount.
— Click Submit, and re-enter your password for security purposes

Alternatively:
— In the ‘Periods and Submissions’ section, click the link for ‘View Account Periods’
— Click the 12/31/2021 link so that your payment is applied to tax year 2021
— In the upper right corner of this page, click the ‘Make A Payment’ link
— Select the ‘Bank Account Debit’ link
— Click the IL-1120-ST Payment link (ST denotes a “Small Business” payment)
— Enter the amount you want to pay in the Amount and Confirm Amount fields
— Click Submit, and re-enter your password for security purposes

Best of luck, and… Happy New Year!


If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Year-End IDES Unemployment Rate Notices for Employers – How To Update In Gusto Payroll

IDES taking steps to address unprecedented volume of unemployment claims |  News | metropolisplanet.com

Most states, including Illinois, send out a letter at the end of each year to employers, informing them of their new “Contribution Rate Determination”. As I’m receiving lots of questions about them this year, I figured I’d take a moment to explain what these are and how to update your Gusto payroll account with this info.

This year, IDES is distributing the letter electronically for all who have opted in, with an email stating:

You have received new electronic correspondence from the Illinois Department of Employment Security (IDES). Please log into MyTax Illinois to view your correspondence as some may require a timely response. Below is a list of the new correspondence you have received.

  • Contribution Rate Determination (Mail Date: 11/30/2021)

If the notice you received has appeals rights, you must file your appeal according to the instructions stated on the notice. If you have questions, please call the IDES Employer Services Hotline: 800-247-4984.

For those who haven’t received a letter in the mail, you’ll want to log into MyTax Illinois to get your letter (or if you did get your letter in the mail, but want to download a pdf of it for your files).

Once you log into your company’s MyTax Illinois account (the same place you log into to make sales tax and corporate estimated tax payments), you’ll see a number next to the “Action Center”. Click on that and then click on the “View Letters” link.

Then click on the “View Letters” link.

And then click on the “Contribution Rate Determination” link to get your letter.

The letter will say “Rate Determination” at the top-left.

The new rate is listed at the end of the first row on the page, under where it says “Contribution Rate (New)”.

This rate is also known as your “experience rating” because it’s in part based on how many of your employees claimed unemployment over the past two years, compared with the total payroll for that same time period. (For 2020 and most of 2021 they paused this type of increase, because everyone was claiming unemployment due to the pandemic.) For 2021, the percentage will be between 0.200% and 7.625%.

You can see a list of the historical rates by year here: Annual Employer Contribution Tax Rates (illinois.gov)

If for some reason the wages, unemployment benefit claims, and rate don’t seem right, the next page in the letter allows you to contest it by sharing how your company records are different. The following page in the letter explains how the formula works, in case you’re not sure whether or not it deserves contesting.

Contesting a rate is rarely needed for small business owners, because we all have the option to contest individual claims when they happen. If a staff member quits/resigns, or if they are fired for dangerous behavior, then they don’t qualify to claim unemployment benefits — a notice for each claim is sent to the business owner and they have a short period in which they can dispute the claim. It’s important to do this to keep the IDES contribution rate down. Keep in mind that just this past year, they have stopped mailing claim letters, and business owners should check their MyTax Illinois account each month for these notices — see my blog post here for more: Illinois – No More Snail Mail for Unemployment Claim Notifications | The Dancing Accountant

In November, IDES sent out another round of reminders about this:

And on the final page they included an option to request a snail-mailed paper notification of claims:

So you’ve got your new rate — what does it mean and what should you do with it?

The rate will be multiplied against the first $12,960 of each employee’s wages (this increases slightly each year) and the resulting total will be paid as unemployment tax by the employer. That’s why you want as low a rate as possible. But if you don’t have a lot of employees, then even a high rate does not end up being a lot of money. Pretty amazing deal for how much our society depends on the unemployment safety net.

Provide the notice to your payroll provider to get the rate entered into your payroll system, or if you use Gusto, just update the rate yourself — it’s very easy, and this way you know it gets done! Log into Gusto and:

  1. Click the Taxes & compliance section and select Tax setup.
  2. Click Manage Taxes under the applicable State Tax section.
  3. Scroll to “State Tax Settings” and click edit next to SUI Rate.

The effective date for the new rate is the upcoming January 1st.

If you don’t update your payroll records asap, then you could end up paying in unemployment at a higher or lower rate than required. If it’s too low, you may end up owing penalties, and if it’s too high, then you have to file for a refund, which a lot of folks forget to do, leaving their money on the table in perpetuity.

One more reminder: anyone who received unemployment benefits in 2021 will be getting a 1099-G in January noting those amounts for tax purposes — see my blog post about this from last year here: Illinois IDES 1099-G Form For 2020 Unemployment: What You Need To Know | The Dancing Accountant


If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.