Schedule K-1-T(3) (IL-1041)

This article provides detailed, step-by-step instructions on how to complete and file Illinois Schedule K-1-T(3) for nonresident beneficiaries of trusts or estates.

Schedule K-1-T(3) is a form used by trusts or estates filing Form IL-1041 with the Illinois Department of Revenue. This form is required for tax years ending on or after December 31, 2024, and before December 31, 2025. It is specifically used for calculating pass-through withholding for nonresident members of a trust or estate. Nonresident members are individuals or entities who are not residents of Illinois and have not submitted Form IL-1000-E to the trust or estate. If a member is a resident or has submitted Form IL-1000-E, they are not required to complete this schedule. The completed Schedule K-1-T(3) should be retained with income tax records and only submitted to the Illinois Department of Revenue upon request. It plays a key role in reporting the Illinois income allocable to nonresident beneficiaries before tax modifications and credits are applied.

How to File Schedule K-1-T(3)

To file Schedule K-1-T(3), you must first identify your trust or estate and its nonresident beneficiaries. Complete the required sections of the form based on the nonresident member’s income allocable to Illinois. The information includes income from both business and non-business activities, along with relevant subtractions and additions to Illinois income. After calculating the nonresident member’s share of income, you’ll determine the pass-through withholding amount, which should then be reported on both the Schedule K-1-T(3) and your Form IL-1041.

How to Complete Schedule K-1-T(3)

How to Complete Schedule K-1-T(3)

Step 1: Identify Your Trust

  1. Enter Your Trust’s Name
    • In this field, provide the name of the trust or estate as it appears on Form IL-1041.
  2. Enter Your Federal Employer Identification Number (FEIN)
    • Enter the FEIN assigned to your trust or estate for identification purposes.

Step 2: Identify Your Nonresident Beneficiary

  1. Enter Beneficiary’s Name
    • Provide the full legal name of the nonresident beneficiary.
  2. Enter Beneficiary’s Social Security Number (SSN) or FEIN
    • Enter either the SSN or FEIN of the beneficiary, depending on whether they are an individual or an entity.
  3. Check the Appropriate Box for Organization Type
    • Select the box that best describes the type of entity the beneficiary represents:
      • Individual
      • Corporation
      • Trust
      • Partnership
      • S Corporation
      • Estate

Step 3: Figure Your Nonresident Beneficiary’s Pass-Through Withholding

  • Note: This section applies only to nonresident beneficiaries who are not residents or have not submitted Form IL-1000-E. If they have, skip this section.
  1. Nonbusiness Income Allocable to Illinois (Before Modifications and Credits)
    • Add the amounts from the beneficiary’s Schedule K-1-T(3), Step 3, Column B, Lines 11 through 16 and 18. Enter the total here. This is the portion of income allocated to Illinois before applying any modifications or credits.
  2. Business Income Allocable to Illinois (Before Modifications and Credits)
    • Add the amounts from the beneficiary’s Schedule K-1-T(3), Step 4, Column B, Lines 19 through 22, 25, 28, and 29. Enter the total here. This is the business income allocated to Illinois before applying modifications and credits.
  3. Total Income Allocable to Illinois (Before Modifications and Credits)
    • Add the totals from Lines 6 and 7. Enter the result here. This is the total income allocated to Illinois before applying any modifications or credits.
  4. Additions Allocable to Illinois
    • Add the amounts from the beneficiary’s Schedule K-1-T(3), Column B, Lines 30 through 35. Enter the total here. This reflects any additional income items that are taxable in Illinois.
  5. Total Income Plus Additions
  • Add the totals from Line 8 and Line 9. Enter the result here. This is the sum of the nonbusiness income, business income, and additions.
  1. Subtractions Allocable to Illinois
  • Add the amounts from the beneficiary’s Schedule K-1-T(3), Column B, Lines 36a through 45. Enter the total here. If the beneficiary is an individual, partnership, trust, or estate that received Illinois August 1, 1969, appreciation amounts, special instructions apply. This represents income subtracted from Illinois taxable income.
  1. Illinois Income Subject to Pass-Through Withholding
  • Subtract the total from Line 11 from the total on Line 10. If the result is negative, enter zero. This is the amount of Illinois income that is subject to pass-through withholding.
  1. Pass-Through Withholding
  • Calculate the pass-through withholding based on the instructions provided. This is the amount that needs to be reported on the beneficiary’s Schedule K-1-T(3), Step 7, Line 49, and also reported on your Form IL-1041, Schedule D, Section B, Line G.

Final Notes

  • Retention: Keep a copy of this form for each member with your income tax records.
  • Submission: Do not send Schedule K-1-T(3) to your members unless requested by the Illinois Department of Revenue.
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