Illinois Schedule K-1-T(3), officially titled Pass-through Withholding Calculation for Nonresident Members, is a tax schedule issued by the Illinois Department of Revenue. It is used by trusts and estates filing Form IL-1041 to calculate the pass-through withholding attributable to individual nonresident beneficiaries and other nonresident members.
The schedule applies to tax years ending on or after December 31, 2025, and before December 31, 2026. Its primary purpose is to determine the amount of Illinois income allocated to a nonresident beneficiary that is subject to pass-through withholding. The calculation takes into account the beneficiary’s share of Illinois nonbusiness income, business income, additions, and subtractions before determining the final withholding amount.
Trusts and estates must generally complete a separate Schedule K-1-T(3) for each nonresident beneficiary who has not submitted Form IL-1000-E. The schedule must not be completed for a beneficiary who is an Illinois resident or who has already submitted Form IL-1000-E to the trust or estate.
The form collects information about the trust or estate, including its legal name and Federal Employer Identification Number (FEIN). It also identifies the nonresident beneficiary through their name and Social Security Number or FEIN. The preparer must classify the beneficiary’s organization type by selecting the appropriate checkbox, such as individual, corporation, trust, partnership, S corporation, or estate.
The main calculation appears in Step 3. It uses information from the beneficiary’s Schedule K-1-T to determine the beneficiary’s Illinois-allocable income. The calculation begins with nonbusiness income and business income, adds applicable Illinois additions, and subtracts allowable Illinois subtractions. If the resulting income amount is negative, the schedule requires the amount to be entered as zero.
The final calculation determines the beneficiary’s total pass-through withholding. This amount must be reported on the beneficiary’s Schedule K-1-T, Step 7, Line 49. It must also be reported on the trust’s or estate’s Form IL-1041, Schedule D, Section B, Line G, on the line corresponding to that beneficiary.
Schedule K-1-T(3) is an internal calculation and recordkeeping schedule. Trusts and estates must retain a copy for each applicable nonresident beneficiary with their income tax records. The schedule should not be sent to beneficiaries or submitted to the Illinois Department of Revenue unless the department specifically requests it.
Completing the schedule accurately is important because the calculation determines the withholding associated with each nonresident beneficiary’s share of Illinois income. Incorrect income allocations, additions, subtractions, or beneficiary classifications can result in an incorrect withholding amount and inconsistencies between Schedule K-1-T(3), Schedule K-1-T, and Form IL-1041.
How To File Illinois Schedule K-1-T(3)
Illinois Schedule K-1-T(3) is completed by trusts and estates filing Form IL-1041. It is used to calculate pass-through withholding for qualifying nonresident beneficiaries.
Unlike a standalone income tax return, this schedule is primarily maintained with the trust’s or estate’s tax records. It is not routinely submitted to the Illinois Department of Revenue.
Who Must Complete Schedule K-1-T(3)?
A trust or estate filing Form IL-1041 must complete a separate schedule for each nonresident beneficiary who has not submitted Form IL-1000-E.
Do not prepare this schedule for:
- Beneficiaries who are Illinois residents.
- Beneficiaries who have submitted Form IL-1000-E to the trust or estate.
Information To Prepare Before Completing Schedule K-1-T(3)
Gather the following information before starting:
- Trust’s or estate’s legal name as shown on Form IL-1041.
- Trust’s or estate’s Federal Employer Identification Number.
- Nonresident beneficiary’s full name.
- Beneficiary’s Social Security Number or FEIN.
- Beneficiary’s organization type.
- Beneficiary’s Schedule K-1-T.
- Schedule K-1-T, Step 3, Column B, Lines 11 through 16 and 18.
- Schedule K-1-T, Step 4, Column B, Lines 19 through 22, 25, 28, and 29.
- Schedule K-1-T, Column B, Lines 30 through 35.
- Schedule K-1-T, Column B, Lines 36a through 45.
- Information concerning Illinois August 1, 1969, appreciation amounts, where applicable.
- Applicable information needed to calculate pass-through withholding.
- Beneficiary-level withholding allocation information.
Important Recordkeeping And Filing Considerations
Separate Schedule For Each Beneficiary
Prepare an individual Schedule K-1-T(3) for every qualifying nonresident beneficiary who has not submitted Form IL-1000-E.
Resident Beneficiaries
Do not complete the schedule for beneficiaries who are residents.
Form IL-1000-E
Do not prepare this schedule for a beneficiary who has submitted Form IL-1000-E to the trust or estate.
Record Retention
Keep a copy of each completed schedule with the trust’s or estate’s income tax records.
Submission To The Department
Do not routinely send Schedule K-1-T(3) to the Illinois Department of Revenue. Submit it only if the department specifically requests it.
Reporting The Withholding Amount
Transfer the calculated withholding to the beneficiary’s Schedule K-1-T, Step 7, Line 49, and Form IL-1041, Schedule D, Section B, Line G.
How To Complete Illinois Schedule K-1-T(3)
Schedule K-1-T(3) contains three main steps:
- Step 1 identifies the trust or estate.
- Step 2 identifies the nonresident beneficiary.
- Step 3 calculates the beneficiary’s pass-through withholding.
Complete the steps in order and use the corresponding amounts from the beneficiary’s Schedule K-1-T.
Tax Year Information
Year Ending – Month
Enter the month in which the trust’s or estate’s tax year ends.
Use the ending month corresponding to the tax year being reported.
Year Ending – Year
Enter the year in which the tax year ends.
The schedule applies to tax years ending on or after December 31, 2025, and before December 31, 2026.
Step 1: Identify Your Trust
Step 1 collects the identifying information of the trust or estate responsible for calculating and reporting the nonresident beneficiary’s pass-through withholding.
Line 1: Trust Or Estate Name
Enter the legal name of the trust or estate exactly as shown on Form IL-1041.
Ensure that the name matches the income tax return filed with the Illinois Department of Revenue.
Line 2: Federal Employer Identification Number (FEIN)
Enter the trust’s or estate’s federal Employer Identification Number.
Use the FEIN associated with the entity filing Form IL-1041.
Check the number carefully to avoid identification errors.
Step 2: Identify Your Nonresident Beneficiary
Step 2 identifies the specific nonresident beneficiary for whom the pass-through withholding calculation is being prepared.
A separate schedule must be completed for each qualifying beneficiary.
Line 3: Beneficiary Name
Enter the full legal name of the nonresident beneficiary.
Use the name shown in the beneficiary’s tax and trust or estate records.
For an individual beneficiary, enter their full legal name. For an entity beneficiary, enter the entity’s registered legal name.
Line 4: Social Security Number Or FEIN
Enter the beneficiary’s identifying number.
Use the Social Security Number when the beneficiary is an individual.
Use the Federal Employer Identification Number when the beneficiary is an entity.
Verify that the identification number corresponds to the beneficiary named on Line 3.
Line 5: Beneficiary Organization Type
Check the appropriate box to identify the legal or organizational classification of the nonresident beneficiary.
The form provides six choices:
- Individual: Select this option when the beneficiary is an individual person.
- Corporation: Select this option when the beneficiary is a corporation.
- Trust: Select this option when the beneficiary is another trust.
- Partnership: Select this option when the beneficiary is a partnership.
- S Corporation: Select this option when the beneficiary is an S corporation.
- Estate: Select this option when the beneficiary is an estate.
Choose the classification that correctly describes the beneficiary.
Do not select multiple categories unless the form’s applicable instructions specifically permit it.
Step 3: Calculate Your Nonresident Beneficiary’s Pass-Through Withholding
Step 3 calculates the amount of Illinois income attributable to the nonresident beneficiary and determines the resulting pass-through withholding.
The calculations use information from the beneficiary’s Schedule K-1-T.
Before completing this section, verify that the beneficiary is not an Illinois resident and has not submitted Form IL-1000-E to the trust or estate.
Nonbusiness Income And Business Income
Line 6: Share Of Nonbusiness Income Allocable To Illinois
Add the amounts reported on the beneficiary’s Schedule K-1-T, Step 3, Column B, Lines 11 through 16 and Line 18.
The calculation is:
\[ \text{Line 6}=\text{Lines 11–16}+\text{Line 18} \]
Use the corresponding amounts from Column B of Step 3 on the beneficiary’s Schedule K-1-T.
Enter the total on Line 6.
This amount represents the beneficiary’s share of nonbusiness income allocable to Illinois before modifications and credits.
Line 7: Share Of Business Income Allocable To Illinois
Add the amounts reported on the beneficiary’s Schedule K-1-T, Step 4, Column B, Lines 19 through 22, 25, 28, and 29.
The calculation is:
\[ \text{Line 7}= \text{Lines 19–22}+\text{Line 25}+\text{Line 28}+\text{Line 29} \]
Use the corresponding amounts from Column B of Step 4 on the beneficiary’s Schedule K-1-T.
Enter the total on Line 7.
This amount represents the beneficiary’s share of business income allocable to Illinois before modifications and credits.
Total Illinois Income Before Additions
Line 8: Total Nonbusiness And Business Income
Add Line 6 and Line 7.
The calculation is:
\[ \text{Line 8}=\text{Line 6}+\text{Line 7} \]
Enter the resulting amount.
This represents the beneficiary’s combined share of Illinois-allocable nonbusiness and business income before additions and subtractions.
Illinois Additions
Line 9: Share Of Additions Allocable To Illinois
Add the amounts reported on the beneficiary’s Schedule K-1-T, Column B, Lines 30 through 35.
The calculation is:
\[ \text{Line 9}=\sum_{30}^{35}\text{Column B Amounts} \]
Enter the total on Line 9.
This amount represents the beneficiary’s share of additions allocable to Illinois.
Use the corresponding Column B amounts from the beneficiary’s Schedule K-1-T.
Income After Additions
Line 10: Total Income After Additions
Add Line 8 and Line 9.
The calculation is:
\[ \text{Line 10}=\text{Line 8}+\text{Line 9} \]
Enter the resulting amount.
This represents the beneficiary’s Illinois-allocable income after including the applicable additions.
Illinois Subtractions
Line 11: Share Of Subtractions Allocable To Illinois
Add the amounts reported on the beneficiary’s Schedule K-1-T, Column B, Lines 36a through 45.
The calculation is:
\[ \text{Line 11}=\sum_{36a}^{45}\text{Column B Amounts} \]
Enter the total on Line 11.
This represents the beneficiary’s share of subtractions allocable to Illinois.
Important: August 1, 1969, Appreciation Amounts
The schedule includes a special instruction for beneficiaries classified as individuals, partnerships, trusts, or estates who received Illinois August 1, 1969, appreciation amounts from the trust or estate.
If the beneficiary falls into one of these categories and received such appreciation amounts, review the applicable instructions before completing Line 11.
Illinois Income Subject To Pass-Through Withholding
Line 12: Illinois Income Subject To Pass-Through Withholding
Subtract Line 11 from Line 10.
The calculation is:
\[ \text{Line 12}=\text{Line 10}-\text{Line 11} \]
If the result is negative, enter zero.
This amount represents the beneficiary’s share of Illinois income subject to pass-through withholding.
Check the calculation carefully because this amount forms the basis for the final withholding calculation.
Final Pass-Through Withholding
Line 13: Total Pass-Through Withholding
Calculate the beneficiary’s pass-through withholding using the amount reported on Line 12 and the applicable Illinois withholding instructions.
The form refers taxpayers to the accompanying instructions for the withholding calculation.
Enter the resulting withholding amount on Line 13.
This is the beneficiary’s total pass-through withholding.
The completed amount must be reported in two places:
- Beneficiary’s Schedule K-1-T: Enter the amount on Step 7, Line 49.
- Trust’s Or Estate’s Form IL-1041: Enter the amount on Schedule D, Section B, Line G, on the line corresponding to the beneficiary.
Ensure that the same withholding amount is reported in both locations.
Additional Instructions And Recordkeeping Requirements
Schedule K-1-T(3) includes important instructions about how the completed schedule should be handled after the calculation is finished.
Retaining A Copy For Each Beneficiary
The trust or estate must keep a copy of Schedule K-1-T(3) for each nonresident beneficiary with its income tax records.
If multiple nonresident beneficiaries require withholding calculations, maintain a separate completed schedule for each individual beneficiary.
Do Not Send The Schedule To Beneficiaries
The schedule specifically instructs trusts and estates not to send Schedule K-1-T(3) to their beneficiaries.
The beneficiary receives the relevant withholding information through their Schedule K-1-T.
Submission To The Illinois Department Of Revenue
Do not routinely submit Schedule K-1-T(3) with Form IL-1041.
The schedule must be provided to the Illinois Department of Revenue only when the department specifically requests it.
Required Disclosure
The form states that it is authorized under the Illinois Income Tax Act and that disclosure of the requested information is required.
Failure to provide the information could result in a penalty.
Electronic Form Instructions
The schedule also includes instructions for completing the electronic form:
- Use the mouse or Tab key to move through the available fields.
- Use the mouse or space bar to enable checkboxes.
- Use the Reset control to clear entries when necessary.
- Use the Print control to print the completed schedule.
The form identifies itself as an electronic-only document with one printed copy authorized by the State of Illinois.
Final Review Before Filing
Before finalizing Illinois Schedule K-1-T(3), review the trust information, beneficiary classification, income allocations, additions, subtractions, and final withholding amount.
Use the following checklist to conduct a final review.
Tax Year And Trust Information
- Verify the tax year ending month.
- Enter the correct tax year ending year.
- Enter the trust’s or estate’s legal name on Line 1.
- Verify the FEIN on Line 2.
- Confirm that the information matches Form IL-1041.
Step 2: Beneficiary Information
- Enter the beneficiary’s full legal name on Line 3.
- Enter the correct SSN or FEIN on Line 4.
- Select the appropriate organization type on Line 5.
- Confirm that the beneficiary is a nonresident.
- Verify that the beneficiary has not submitted Form IL-1000-E.
- Prepare a separate schedule for each qualifying beneficiary.
Step 3: Withholding Calculation
- Calculate Line 6 using Schedule K-1-T, Step 3, Column B, Lines 11 through 16 and 18.
- Calculate Line 7 using Schedule K-1-T, Step 4, Column B, Lines 19 through 22, 25, 28, and 29.
- Add Lines 6 and 7 on Line 8.
- Calculate Illinois additions using Column B, Lines 30 through 35, on Line 9.
- Add Lines 8 and 9 on Line 10.
- Calculate Illinois subtractions using Column B, Lines 36a through 45, on Line 11.
- Review the special August 1, 1969, appreciation amount instruction where applicable.
- Subtract Line 11 from Line 10 on Line 12.
- Enter zero if Line 12 is negative.
- Calculate the withholding on Line 13 using the applicable Illinois instructions.
- Verify that the withholding calculation is accurate.
Reporting And Recordkeeping
- Transfer Line 13 to the beneficiary’s Schedule K-1-T, Step 7, Line 49.
- Report the same amount on Form IL-1041, Schedule D, Section B, Line G.
- Confirm that the amount agrees in both locations.
- Retain a copy of the completed schedule for each beneficiary.
- Keep the schedules with the trust’s or estate’s income tax records.
- Do not send the schedule to beneficiaries.
- Do not submit the schedule to the Illinois Department of Revenue unless specifically requested.
Final Filing Reminder
Illinois Schedule K-1-T(3) is a beneficiary-level pass-through withholding calculation used by trusts and estates filing Form IL-1041. Its primary purpose is to determine the Illinois income attributable to each qualifying nonresident beneficiary and calculate the corresponding withholding amount.
The most important calculations occur in Step 3. Line 6 captures nonbusiness income, Line 7 captures business income, Line 9 accounts for additions, and Line 11 accounts for subtractions. These amounts are combined to determine the beneficiary’s Illinois income subject to withholding on Line 12. Line 13 then establishes the final withholding amount.
Trusts and estates should pay particular attention to beneficiary eligibility. The schedule must not be prepared for Illinois resident beneficiaries or beneficiaries who have submitted Form IL-1000-E.
Accurate completion of Schedule K-1-T(3), proper reporting of the withholding amount, and retention of the supporting schedule are essential for meeting Illinois pass-through withholding recordkeeping and reporting requirements for the 2025 tax year.