Good news and bad news for Illinois taxpayers, local CPA says

By DAN CONNORS
 
Illinois taxpayers woke up to some good news on Jan. 1 when the temporary state tax rate increase of 2012 finally began phasing out. Individual rates went from 5 percent in 2014 to 3.75 percent in 2015. Corporate rates dropped from 9.5 percent to 7.75 percent.

With this decline, the Missouri/Illinois tax bite will mostly go away. For the past three years many Illinois residents who worked in Missouri were hit with surprise bills from Illinois because their home state now had a higher tax rate than their neighbor across the river. Starting in 2015, single Illinois residents with wages of roughly $40,000 or more will owe Illinois nothing if they work in Missouri.

Those with incomes below $40,000 will owe a bit to Illinois because of Missouri’s graduated tax rate, but not enough to trigger the onerous tax and withholding penalties.

Those who work in Illinois but live in Missouri will have the opposite problem- if they make over $40,000 they will likely owe Missouri taxes for the first time in 4 years!

That said, Illinois’ fiscal crisis continues, with a new governor and the same bills coming due. Illinois will be more diligent than ever on penalties and interest for those who underpay their tax during the year. If you owe more than $500, or don’t make estimated payments in line with your income, this means you.

If your income comes from self-employment, investments or other non-wage based income, be wary of the Illinois penalties for not prepaying your taxes.

Dan Connors is an Enrolled Agent and Certified Public Accountant at Buenger Accounting in Granite City. He can be reached at [email protected]

 

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