Illinois Wage and Payroll Tax Facts
June 16, 2023
Having to comply with unique state taxes and wage laws can make processing payroll doubly daunting. Here’s everything you need to know about these rates and laws for the state of Illinois.
In addition to the state minimum wage rate being higher than the federally mandated rate, Cook County and the city of Chicago also use a different rate for employees in those areas. These two areas also have their own Paid Sick Leave programs guaranteeing time off for local employees.
When it comes to processing payroll, Illinois-based organizations must handle the following taxes in addition to those required by the federal government:
- Personal Income (a.k.a. State Income Tax)
- State Unemployment Insurance (SUI)
The below information was last updated June 16, 2023. It is not intended as legal or tax advice.
Illinois Minimum Wage Rates
|
Wage Type |
Illinois Rates |
Federal Rates |
|
Minimum Wage |
$13.00 |
$7.25 |
|
Tipped Minimum Wage |
$7.80 |
$2.13 |
|
Actual Tip Credit |
$5.20 |
$5.12 |
|
Wage Type |
Illinois Rates |
Federal Rates |
|
Minimum Wage |
$13.00 |
$7.25 |
|
Tipped Minimum Wage |
$7.80 |
$2.13 |
|
Actual Tip Credit |
$5.20 |
$5.12 |
|
Wage Type |
||
|
Minimum Wage |
$15.00 (4-20 employees) |
$13.70 |
|
Tipped Minimum Wage |
$9.00 (4-20 employees) |
$8.00 |
|
Actual Tip Credit |
$6.00 (4-20 employees) |
$5.70 |
|
Wage Type |
||
|
Minimum Wage |
$15.00 (4-20 employees) |
$13.70 |
|
Tipped Minimum Wage |
$9.00 (4-20 employees) |
$8.00 |
|
Actual Tip Credit |
$6.00 (4-20 employees) |
$5.70 |
Illinois State Income Tax (SIT) Rates
Illinois has a flat income tax rate of 4.95%, meaning all residents pay the same amount regardless of their income levels. Illinois also requires nonresidents who work in Illinois to pay state income tax unless they live in Wisconsin, Iowa, Kentucky, or Michigan since these states are granted reciprocity.
|
Additional Illinois SIT Details |
|
|
Valid Filing Statuses |
N/A |
|
Exemptions (rates) |
|
|
Form W-4 |
Form IL-W-4 |
|
Reconciliation Frequency |
Annually |
|
Additional Illinois SIT Details |
|
|
Valid Filing Statuses |
N/A |
|
Exemptions (rates) |
|
|
Form W-4 |
Form IL-W-4 |
|
Reconciliation Frequency |
Annually |
Illinois State Unemployment Insurance (SUI) Rates
SUI provides unemployment benefits to eligible workers who are unemployed through no fault of their own (as determined by state law) and meet the state’s eligibility requirements.
|
Illinois SUI Tax Details |
|
|
Taxable Wage Base |
$13,271 |
|
Employee Subject to Tax |
No |
|
Rates for Experienced Employers |
0.725% – 7.625% |
|
Rates for New Employers |
3.525% |
|
Effective Period |
Calendar Year |
|
Voluntary Contributions Allowed |
No |
|
Illinois SUI Tax Details |
|
|
Taxable Wage Base |
$13,271 |
|
Employee Subject to Tax |
No |
|
Rates for Experienced Employers |
0.725% – 7.625% |
|
Rates for New Employers |
3.525% |
|
Effective Period |
Calendar Year |
|
Voluntary Contributions Allowed |
No |
Illinois State Disability Insurance (SDI) Rates
SDI benefits are normally funded by employees through mandatory payroll deductions from each paycheck. Illinois, however, doesn't require employers to collect an SDI tax.
Miscellaneous Illinois Tax Information
Reciprocal Agreement(s)
Reciprocal agreements are when workers only pay taxes in the state where they live, not the state where they work. Illinois currently has reciprocal agreements with the following states:
- Iowa
- Kentucky
- Michigan
- Wisconsin
Residents of those states who work in Illinois aren't subject to Illinois SIT but must file a Form IL-1040.
Paid Sick Leave (PSL)
The state of Illinois doesn’t require employers to collect PSL taxes, but Chicago and Cook County do have programs providing such leave to eligible employees:
|
PSL Requirements |
Chicago PSL Details |
Cook County PSL Details |
|
Covered Employees |
Employees who work 80 hours within any 120-day period | Employees who work at least 2 hours in a 2-week period |
|
Covered Employers |
Employers that employ at least one "covered employee" in Chicago | Employers in Cook County municipalities that have not opted out of the ordinance |
|
Effective Date |
July 1, 2017 | July 1, 2017 |
|
Accrual Method(s) |
1 hour per 40 hours worked, or frontload 40 hours at the beginning of a 12-month period |
1 hour per 40 hours worked, or frontload 40 hours at the beginning of a 12-month period |
|
Carryover Maximum |
Half of all earned sick leave |
Half of all accrued, unused sick leave, unless frontloaded |
|
Yearly Accrual Maximum |
40 hours |
40 hours |
|
Accrual Use Cap |
40 hours |
40 hours |
|
Probationary Period |
None |
Yes; 120 calendar days |
|
Record Retention |
5 years |
3 years |
|
FAQ |
|
PSL Requirements |
Chicago PSL Details |
Cook County PSL Details |
|
Covered Employees |
Employees who work 80 hours within any 120-day period | Employees who work at least 2 hours in a 2-week period |
|
Covered Employers |
Employers that employ at least one "covered employee" in Chicago | Employers in Cook County municipalities that have not opted out of the ordinance |
|
Effective Date |
July 1, 2017 | July 1, 2017 |
|
Accrual Method(s) |
1 hour per 40 hours worked, or frontload 40 hours at the beginning of a 12-month period |
1 hour per 40 hours worked, or frontload 40 hours at the beginning of a 12-month period |
|
Carryover Maximum |
Half of all earned sick leave |
Half of all accrued, unused sick leave, unless frontloaded |
|
Yearly Accrual Maximum |
40 hours |
40 hours |
|
Accrual Use Cap |
40 hours |
40 hours |
|
Probationary Period |
None |
Yes; 120 calendar days |
|
Record Retention |
5 years |
3 years |
|
FAQ |
These programs offer the following coverages. Note, a "public health emergency" is an event defined as such by a Federal, State, or Local government, including a school district.
Chicago
- The illness or injury of a covered employee
- The medical care, treatment, diagnosis, or preventative medical care of a covered employee
- The illness or injury of a covered employee’s family member or to care for a family member receiving medical care, treatment, diagnosis, or preventative medical care
- If a covered employee or his or her family member is a victim of domestic violence or a sex offense
- The covered employee’s place of business is closed due to a public health emergency, or he or she needs to care for a child whose school or place of care is closed due to a public health emergency
Cook County
- The covered employee is ill or injured, or for the purpose of receiving medical care, treatment, diagnosis, or preventative medical care
- A member of the covered employee’s family is ill or injured, or to care for a family member receiving medical care, treatment, diagnosis, or preventative medical care
- The covered employee, or a member of his or her family, is the victim of domestic violence or is the victim of sexual violence or stalking
- The covered employee’s place of business is closed by order of a public official due to a public health emergency, or he or she needs to care for a child whose school or place of care has been closed by order of a public official due to a public health emergency
Illinois Employer Registration
The agencies below can help with your state-based employer registration, including best practices, account numbers, and unemployment information. Contact the Department of Revenue for withholding tax topics and the Department of Employment Security for unemployment tax topics.
|
Registration Details |
Department of Revenue |
Department of Employment Security |
|
Phone |
(217)-785-3707 |
(800) 247-4984 |
|
Online Registration |
https://mytax.illinois.gov/ | |
|
Registration Instructions |
Employers can register online or by phone. If registering online, your account number will be issued during registration. The same account number will be issued for Withholding and Unemployment. |
|
|
Employer Self-Service Login |
||
|
Registration Details |
Department of Revenue |
Department of Employment Security |
|
Phone |
(217)-785-3707 |
(800) 247-4984 |
|
Online Registration |
https://mytax.illinois.gov/ | |
|
Registration Instructions |
Employers can register online or by phone. If registering online, your account number will be issued during registration. The same account number will be issued for Withholding and Unemployment. |
|
|
Employer Self-Service Login |
||
Additional Illinois Payroll Tax Resources
- Illinois Department of Revenue Business Information Page
- Illinois Department of Labor
- City of Chicago Tax Page
- Cook County Tax Center
This information is provided as a courtesy and may be updated at any time. It is not intended as legal or tax guidance. If you have questions or concerns, we encourage you to seek the advice of a qualified CPA, Tax Attorney, or Advisor.
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