The state comptroller has determined that Illinois non-residents performing contractual services within the state are subject to income tax reporting on earnings other than salaries and wages.
The reporting criteria is stated below:
| Payment is made pursuant to a written contract for the performance of contractual services which will necessitate the presence at some time in Illinois of a particular individual or group of individuals whose identities are specified in the contract. |
| The sum of the payments required under a contract will exceed $1,000 during a calendar year. |
| Tax reporting is based on individual contracts rather than the sum of all business during the calendar year; however a series of written contracts which are substantially identical to one another and which were entered into solely to avoid reporting will be deemed to be a single contract. |
| Reporting is required regardless of the type of contracting organization; i.e., corporation, partnership or proprietorship. |
| An individual's identity will not be considered specified in the contract unless the contract names the particular individual. |
| A Purchase Order and/or a Direct Payment Voucher is considered a written contract. |
| Reporting is required even if payment is made to a third party. |
| Contractual services include all services requiring personal performance or efforts by the named individuals. This includes consultants, presenters at workshops, performing artists, or products or the use of property where the named individual's personal efforts created such products or property. |
| In the case of reporting for a group of individuals, the credit available to each individual in the group shall be an amount equal to the total amount of contract payments made to the group, divided by the number of individuals in the group. |
Reporting is not required in the case of: salaries and wages where the payer is the employer of the individual; payments of scholarships, fellowships, and grant-in aid; and in those cases where individuals certify they are residents of Illinois.
Certification of Illinois residency may be made in the body of the contract, on form IL-W-5NR, or on any invoice or billing statement. Such certification must be made by the named individual(s) or the contractor as the employer. Fiscal agents must determine instances where Illinois income tax reporting is required, collect the necessary residency certifications, and instruct contractors on the preparation of the Contractual Service Voucher (C-02) when state operating appropriations are involved. Contractual Service Vouchers are available in Procurement Services.
Instructions for the preparation of the Contractual Service Voucher are explained in section M3 of this manual.
Questions regarding tax reporting for non-residents
should be directed to the Controller's Office, room E 212. The Director
of Financial Affairs/Controller may be reached by phone on extension 5143.