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Illinois State Payroll Taxes

Manage Illinois Requirements for Withholding and Filings for small, enterprise and exempt organizations/businesses with PayWow.

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Illinois State Payroll Tax Information

PayWow equips your business with the latest resources on state withholding and filings

Illinois Withholding Requirements

The state of Illinois requires all employers to withhold state income taxes from their employees' paychecks. In addition to that, they must also contribute to state unemployment taxes each quarter. To know how much tax to withhold from employees each pay period, you must collect Form IL W-4, Employee's Withholding Allowance Certificate.

According to the Illinois Department of Revenue, all taxes are equal, so a flat rate of 4.95% is imposed as a tax rate for all employees, and 7% for corporations. Certain exemptions in withholdings are allowed if the employee is over 65 years of age or blind.

The state has no local taxes and state disability insurance. But does support reciprocal agreements with certain states.

As you are required to report both state taxes and unemployment wages, you must register to the following agencies:

  • The Department of Revenue- For reporting state taxes withheld from employee wages. To file these taxes, Form IL-941 and IL-501 are needed. You can file electronically through the department’s online site MyTax Illinois.
  • The Department of Labor- For reporting unemployment taxes using MyTax Illinois. To file these taxes, Form UI-3/40 is needed.

Once you complete your registration, you will be provided with an Illinois state withholding tax ID, unemployment ID, and tax rate. We suggest you record this information in PayWow to remit and file taxes on your behalf.

State Unemployment Insurance

The State Unemployment Insurance (SUI) is a program that funds the Illinois Department of Employment Security (IDES) to offer benefits to eligible workers who lost their job. To pay unemployment taxes, new businesses must register with the IDES within 30 days of starting up.

Illinois Taxable Wage Base:

Illinois SUTA wage base limit for 2020 is $12,740.

Illinois Employer Contribution Rate:

Generally, the Illinois SUI tax rates for 2020 is between .625 and 7.25%.

If you are a new employer then the Illinois SUI tax for 2020 is 3.125%. Please note that unemployment taxes must be paid only by the employers and shall not be deducted from the employees’ wages.

Illinois mining employer: 3.425% for 2020

Employer's Contribution & Wage Report- Form UI-3/40:

Employers can report their unemployment insurance using this form that falls due on the last day of the month following the end of the quarter.

You can file and remit your unemployment tax payments to the Department of Employment Security through MyTax Illinois.

Quarter Reporting Period Due Date
1 January - March April 30th
2 April - June July 31st
3 July - September October 31st
4 October - December January 31st

State Disability Insurance (SDI)

Illinois does not have any state disability insurance.

State Labor Laws

Illinois Minimum Wage Rate:

The state minimum wage rate for Illinois is $9.25/hr, which is higher than the current federal minimum wage rate. If gratuities are paid to employees, then employers may pay 60% of the minimum wage. Also, overtime must be paid to employees at one half of their regular wage who work over 40 hours per week.

Though the state mandates on minimum wage payments, there are some exemptions:

  • Employees till their 90 days of employment can be paid 50 cents less than the usual wage rate.
  • Tipped employees can be paid 60% of the hourly minimum wage rate.

Please note that employees under 18 years of age who work more than 650 hours during a calendar year must be paid the state minimum wage.

Once you add employees and their compensation types in PayWow, their paychecks will be automatically calculated.

Termination Pay:

The state of Illinois mandates the termination pay on employers. If employees resign on their own or are fired on any grounds, then they must be paid their regular wages along with any severance amount by the next regular payday.

New Hire Reporting

As an employer of the state of Illinois, you must report all your new hires and rehired employees to the Department of Employment Security within 20 days from their first day of work. No one is exempt from this law and the main motive is to increase child support collections and prevent fraud.

Details Required to Complete New Hire Report:

Following are the details required to complete the new hire report:

Employer Details:

Employer Name, Address, State Employer Identification Number(Unemployment Insurance Number), Federal Employer Identification Number (FEIN)

Employee Details:

Employee Name, Address, Social Security Number, Date of Hire, Date of Birth (Optional)

Uses of New Hire Report:

If you have the new hire reports, those will be used for:

  • Establishing and enforcing child support orders
  • Detecting Unemployment Benefits overpayments and fraud
  • Detect Workers' Compensation overpayments and fraud

There are different ways to report new hire forms. Employers can send copies online or can fax to the below address.

Here is the address:

Illinois New Hire Directory
P.O. Box 19473
Springfield, IL 62794-9473
Phone: 312-327-4473
Fax: 217-557-1947

Penalties:

Employers failing to comply with the new hire report laws will have to pay a penalty of $15 for every report they miss to file.

Remit Withholding for Child Support

As an employer, you will be required to remit child support payments from your employees’ wages if any of your employees are liable to pay for child support. You will receive a withholding notice from the state agency asking you to remit payments to the below address:

Illinois State Disbursement Unit
P.O. Box 5400
Carol Stream, IL 60197-5400
Phone: 877-664-5738

The amount remitted will in turn be sent over to the custodial parent. PayWow lets you record any type of garnishments and during payroll processing, such deductions will be debited from the employee's paycheck.

For more information on this, please visit Illinois Child Support Program.

Local Taxes

There are no local taxes in the state of Illinois.

Reciprocal States

Reciprocal agreements between states are agreements that allow employees living in one state and working in another state to pay taxes only to their state of residence.

Now that you know what's a reciprocal agreement, the state of Illinois has reciprocal agreements with Iowa, Kentucky, Michigan, and Wisconsin. For this, employers must collect Form IL-W-5 and IL W-5-NR.

Form Il-W-5 is a Certificate of Residence in Illinois.

Form IL-W-5-NR is Employee’s Statement of Nonresidence of Illinois. If employees are residents of Iowa, Kentucky, Michigan, or Wisconsin, and are staying in Illinois because their spouse is stationed by the military, they would have to submit the NR form.

Illinois State Tax Forms

Below are the required Illinois State Forms:

DOR: Department Of Revenue DES: Department of Employment Security
IL-941, Illinois Withholding Income Tax Return Quarterly UI-3/40, Employer’s Contribution and Wage Report
IL-501, Illinois Withholding Tax Payment New Hire Report Form
Form W-2, Wage and Tax Statements
IL-W-5-NR, Employee’s Statement of Nonresidence of Illinois
Form IL W-4, Employee Withholding Allowance Certificate

Withholding Tax Forms

IL-941: Illinois Withholding Income Tax Return

You are required to file Form IL-941 if you have paid wages and other employee compensations like bonuses, commissions, and overtime pay on a W-2.

Or, you paid non-wage income like pensions, annuities, unemployment income, and sick pay. The state mandates the filing of form 941, even if there was no tax withheld during the reporting period.

Usually, the form is due quarterly, and unlike the federal government, Illinois does not require an annual reconciliation return.

You must make withholding tax payments electronically if you are assigned to the semi-weekly pay schedule. If you are unable to file 941 form electronically, you must complete form IL-900-EW to request a waiver.

Deadline to file Form IL-941

As form 941 falls due each quarter, the deadline to file Form IL-941 is on the last day of the month that follows the end of the quarter.

Reporting Period Due Date
January - March April 30th
April - June July 31st
July - September October 31st
October - December January 31st

If the due date falls on a Saturday, Sunday, or holiday, then filings can be made on the next business day.

Why choose PayWow as your payroll partner?

New Hire Reporting

Accurate & Automatic Payroll Software

Garnishments

Federal & State Tax Withholding

State tax Deposits

On-time Federal & State Tax Deposits

State tax Filing

On-time Federal & State Filings