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Version: 1.7.3

Illinois Payroll Tax Compliance

Employers in Illinois must meet three key payroll compliance obligations: state income tax withholding, unemployment insurance (UI), and new hire reporting.

Each requirement comes with its own forms, deadlines, and reporting rules established by state agencies. The sections below provide a clear overview of these obligations.

Illinois Withholding Tax Requirements​

Illinois employers are required to withhold state income tax from employee wages and file returns with the Illinois Department of Revenue (IDOR).

Forms required​

Form IL-501​
  • Used by employers to submit withheld Illinois income tax payments (deposit form).
  • Typically filed based on the employer's assigned deposit schedule.
Form IL-941​
  • Used to report Illinois income tax withheld from employee wages.
  • Filed quarterly by most employers.
Form IL-941​
  • Used by employers assigned to an annual filing frequency.
  • Reports total withholding for the entire year.

Illinois Unemployment Insurance (UI) Requirements​

Employers are liable for Illinois unemployment insurance taxes, administered by the Illinois Department of Employment Security (IDES).

The state requires reporting using the following forms:

Form UI-3/40​
  • Employer’s Quarterly Unemployment Insurance Return used to report wages and UI contributions.
  • Employers must file even if no wages were paid (zero wage reports).
UI Monthly Report​
  • Used to report employee wages and unemployment insurance contributions on a monthly basis, where applicable.
Note:

TaxBandits API supports the automation of Form UI-3/40. See how it works

Illinois New Hire Reporting​

  • Employers must report all newly hired and rehired employees to the Illinois New Hire Reporting Center. This reporting supports the enforcement of child support orders and the detection of fraud.

  • Employers must submit new hire reports within 20 days of the employee’s hire date.