Whether or not you are obligated to file a state return in Illinois depends on whether you meet the filing requirements as described in the tax form instructions. However, even if you are not required to submit a return, you may wish to do so anyway, especially if you are entitled to a refund. The due date for the 2010 Illinois return has been extended from April 15 to April 18, 2011.http://www.revenue.state.il.us/TaxForms/IncmCurrentYear/Individual/IL-1040-Instr.pdf  

If you earn income in Illinois, it is automatically considered taxable by the state. Illinois residents will also be taxed on any income received from Iowa, Kentucky, Michigan, or Wisconsin while residing in Illinois. Some unearned income sources, such as unemployment compensation, lottery winnings, and bank interest are also subject to taxation.http://www.revenue.state.il.us/TaxForms/IncmCurrentYear/Individual/IL-1040-Instr.pdf 

To get started on your Illinois return, gather all of the important tax paperwork you will need to complete your state forms. This includes the following:

1. Your Social Security number
2. Your current mailing address
3. The full name and Social Security number of your spouse, even if you will be filing a separate tax return
4. The total earned income you received during the year - If you are employed, this total will be reported to you on Form W-2 or Form 1099 as total taxable wages. If you are self-employed, add up your gross earnings and deduct any eligible business expenses.
5. Your total unearned income that is subject to Illinois state tax, including dividends, capital gains, and retirement distributions.
6. The amount of state income taxes you have already paid this year - Employees will generally have this automatically deducted from their regular pay. It will appear on Form W-2 as state taxes withheld. Self-employed taxpayers will use the total of any estimated state tax payments made.
7. A copy of your completed federal income tax return, if you will be filing onehttp://www.revenue.state.il.us/TaxForms/IncmCurrentYear/Individual/IL-1040-Instr.pdf 
   

The Illinois state tax form begins calculating your state tax liability by working from your federal adjusted gross income, or AGI, so you will want to complete your federal return before you start your state return. If you will not be filing a federal return, you may wish to ask a tax professional for additional help in calculating your federal AGI.http://www.irs.gov/pub/irs-pdf/f1040.pdf

Your next step is to begin preparing your state tax return forms. If at all possible, consider filing your return electronically. E-filing speeds up the processing of your return and any refund you are due. The state of Illinois provides state residents with free e-filing through the IL-1040 WebFile service on the Illinois Department of Revenue website.https://www.revenue.state.il.us/app/ifile/

If you will be using tax software to prepare your federal income tax return, you will also be given the option to include your Illinois tax forms for an additional charge. To file your Illinois return electronically, simply follow the program prompts using the information you collected in step one.http://www.revenue.state.il.us/ElectronicServices/Other/index.htm

The directions that follow will be for filing your return by mail. If you have access to the Internet, you can download Form IL-1040 "Illinois Individual Income Tax Return" and the accompanying tax form instructions from the Illinois Department of Revenue website. If you do not have Internet access, you can generally pick up paper copies from your local library.http://www.revenue.state.il.us/TaxForms/IncmCurrentYear/Individual/IL-1040.pdf 

Begin preparing the tax return by entering your name and Social Security number as well as your spouse's, if necessary. Complete the address section and select the same filing status you used on your federal tax forms.http://www.revenue.state.il.us/TaxForms/IncmCurrentYear/Individual/IL-1040.pdf

Before proceeding with the return, take time to read the instruction booklet carefully. There may be adjustments to income that you will need to make or state tax credits that you can claim. Both of these sections are fully explained in the instructions.http://www.revenue.state.il.us/TaxForms/IncmCurrentYear/Individual/IL-1040-Instr.pdf 

Enter the amount of your federal adjusted gross income from your IRS Form 1040 on line 1 of your Illinois return. Make any additions or subtractions necessary on lines 2 through 8 to calculate your Illinois base income on line 9. Subtract your total exemption allowance to figure your net taxable income on line 11. Multiply your net taxable income by the flat tax rate of 3 percent and enter the result on line 13 as your tax. Include any additional taxes for which you are liable to arrive at your total tax owed on line 15.http://www.revenue.state.il.us/TaxForms/IncmCurrentYear/Individual/IL-1040.pdf 

Deduct any state tax credits you are eligible to claim on lines 17 through 20. Then subtract your state taxes paid through either withholding or estimated payments on lines 22 and 23. What remains after these subtractions will be either a refund on line 33 or an additional balance due on line 36. Sign and date the return and have your spouse do the same if necessary.http://www.revenue.state.il.us/TaxForms/IncmCurrentYear/Individual/IL-1040.pdf 

If you are entitled to a refund and you would like it deposited directly into your bank account, enter your financial institution's routing number and your account number. If you do not complete this section, you will receive any refund due by a paper check. Make a copy of the completed form for your personal records. Then enclose the return, along with a check or money order for any balance due, in an envelope and send it to the address listed on the form.http://www.revenue.state.il.us/TaxForms/IncmCurrentYear/Individual/IL-1040-Instr.pdf

If you have a balance due and you will not be able to complete your state tax return before the filing deadline, see the Mahalo page about how to get a state tax extension in Illinois.