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Summary of differences between federal and state regulations
Income tax withholding
Illinois Income Tax must be withheld by an employer if federal income tax is withheld from:
- Compensation (i.e., wages and salaries) is paid in Illinois.
- Gambling or lottery winnings are paid in Illinois to an Illinois resident.
- Any other payment to an Illinois resident where there is a voluntary withholding agreement that is executed with the employee. NOTE: A separate agreement for payments covered by a federal voluntary withholding agreement is not required.
Illinois Income Tax is not withheld from compensation paid to residents of Iowa, Kentucky, Michigan, and Wisconsin, due to reciprocal agreements with each of these states and from certain other types of compensation and payments.
An employer is any of the following:
- A person or organization who has an office or transacts business in Illinois for whom a worker performs a service as an employee and who is liable to withhold and pay both federal income and FICA taxes to the Internal Revenue Service (IRS).
- A person or organization who has an office or transacts business in Illinois and who has control of the payment of wages for employee services.
- A payer who has an office or transacts business in Illinois and who makes payments from which federal income taxes are withheld (e.g., gambling or lottery winnings).
An employee is either
- A person who performs services subject to the legal control and direction of an employer, or
- An Illinois resident who receives payments on which federal income tax is withheld by his or her employer.
An individual who has a proprietary interest in a business that he or she can legally sell, give away, or operate without hindrance of any other party is self-employed. These individuals are not subject to tax withholding requirements.
Employers who are required to file their federal withholding returns electronically must also file their Illinois withholding returns electronically. Employers who are required to file W-2 information electronically for federal purposes must also file their W-2 information with the Department of Revenue electronically.
Unemployment taxes
All states finance UC primarily through contributions from subject employers on the wages of their covered workers. In addition, three states (Alaska, New Jersey, and Pennsylvania) collect contributions from employees. These taxes are deposited by the state to its account in the UTF in the Federal Treasury, and are withdrawn as needed to pay benefits.
Many states have adopted a higher tax base than what is provided in FUTA. Hawaii's wage base is usually higher and changes periodically. In all states, an employer pays a tax on wages paid to each worker within a calendar year up to the amount specified in state law. In addition, most of the states provide an automatic adjustment of the wage base if federal law is amended to apply to a higher wage base than that specified under state law. As a result of the many variables in states taxable wage bases and rates, benefit formulas, and economic conditions, actual tax rates vary greatly among the states and among individual employers within a state.
Wages subject to unemployment tax in this state equal $9,800.
Minimum and maximum rates in this state are 0.9 and 8.6 %. Rates apply to experience rated employers only and do not include applicable surtaxes or penalties.
State
Contacts
Income tax withholding
Department of Revenue
Unemployment taxes
Department of Employment Security
Regulations
Income tax withholding
Title 86 Part 100 Income Tax
Unemployment taxes
Title 56, Illinois Administrative Code, Parts 2712-2960
Federal
ContactsInternal Revenue Service
Regulations Title 26 Code of Federal Regulations, Internal Revenue