Illinois business taxes for solo owners

EIN and Illinois registration

An EIN is free from the IRS. A sole proprietor with no employees can use an SSN. An EIN is needed with employees and for most LLC banking.

Register with the Illinois Department of Revenue through MyTax Illinois, or Form REG-1, if you owe sales tax, withholding, or certain other taxes. A service-only freelancer with no employees and no taxable sales generally does not need this registration, but still files personal income tax.

Sales tax

Illinois Retailers’ Occupation Tax applies to selling tangible personal property at retail. The state rate is 6.25% on general merchandise and 1% on qualifying drugs and medical appliances, plus local taxes. Use the IDOR Tax Rate Finder for the address.

The service portion of a sale is not taxable. Only tangible property transferred as part of a service may be taxed. Since January 1, 2025, businesses that lease or rent tangible property are treated as retailers.

Marketplaces such as Amazon and Etsy generally collect and remit tax for platform sales. Sales on your own site or in person are your responsibility.

For remote sellers, since January 1, 2026, the only threshold is $100,000 in gross receipts from Illinois sales. The 200-transaction test was eliminated.

Income and estimated taxes

Illinois individual income tax is a flat 4.95%. Sole proprietors and disregarded LLCs report on Form IL-1040.

Illinois estimated payments on Form IL-1040-ES are required if you expect Illinois tax over $1,000 after withholding and credits. The 2026 due dates are April 15, June 15, September 15, 2026, and January 15, 2027.

Self-employment tax is 15.3% of net earnings: 12.4% Social Security and 2.9% Medicare. The 2026 Social Security wage base is $184,500.

Planning rule of thumb: set aside 25% to 35% of net profit for federal, self-employment, and Illinois taxes combined.

Partnerships and S-corps pay Personal Property Replacement Tax of 1.5% on net income. A disregarded single-member LLC does not. See the S-corp election guide.

Deductions and contractor reporting

Deductible business expenses must be ordinary and necessary. The home office simplified method is $5 per square foot up to 300 square feet, for a maximum of $1,500. It requires regular and exclusive business use.

For payments made after 2025, the Form 1099-NEC threshold is $2,000. The form is due January 31. See hiring and contractors for classification and payroll obligations.

Tax calendar

For the LLC filing, see annual reports and missed filings. For financial records, see banking and bookkeeping.

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