Illinois payroll tax guide

US Payroll Tax Guide: Illinois

Managing payroll in Illinois? Read our state-by-state guide to US payroll taxes to learn what you must withhold and deduct from employee wages.

Shannon Hodgen
Written by Shannon Hodgen
August 4, 2023
Need help onboarding international talent?
Try Deel

Key takeaways

  1. Illinois state payroll taxes, including unemployment insurance, personal income tax, and workers’ compensation, are required in order to comply with local regulations.
  2. No matter how many employees a company has in Illinois, they are required to offer workers’ compensation insurance.
  3. Payroll service providers like Deel can assist in streamlining payroll processes and maintaining compliance with Illinois state tax requirements.

Employers have to navigate a variety of regulations and requirements to ensure proper payroll withholding in each US state. This guide serves as an introduction to what employers need to pay and withhold from payroll in Illinois, including unemployment insurance, personal income tax, and workers’ compensation. 

Paying unemployment insurance (UI)

The US Department of Labor administers the unemployment insurance program, which aims to offer temporary financial aid to individuals who are jobless due to no fault of their own. As an employer in Illinois, it is your responsibility to pay for unemployment insurance on behalf of your employees.

To manage your Illinois unemployment insurance, you can utilize the convenient online portal provided by the state. By accessing the MyTax Illinois portal, you can easily handle your UI obligations. See the Illinois Department of Employment Security for more information on the process and requirements.

Withholding personal income tax (PIC) from your Illinois employee

Personal income tax, also known as individual income tax or state income tax, is a tax levied on the income of Illinois residents. As an employer, you are required to withhold the appropriate amount of PIC from your employee’s wages and remit it to the state.

The process of withholding PIC from your employee’s pay can be completed through the same online portal used for unemployment insurance. To ensure accurate compliance with PIC requirements, refer to the Illinois Department of Revenue.

Paying your Illinois workers’ compensation (WC)

In addition to payroll taxes, you are also obligated to provide workers’ compensation insurance for your employees in Illinois. This insurance coverage protects employees in the event of work-related injuries or illnesses.

Even if you have just one employee in the state, you must ensure they are covered by workers’ compensation insurance. You can find qualified commercial carriers offering this insurance through the Illinois Workers’ Compensation Commission’s website. Verifying that your chosen insurance policy complies with the state’s regulations is crucial to avoid any potential penalties.

Simplify US payroll tax compliance with Deel

While this guide provides essential information on Illinois payroll taxes, payroll compliance and state requirements extend beyond what is covered above. To streamline the process and ensure full compliance, companies can turn to Deel. 

Deel offers a comprehensive solution for managing US and international payroll, including payments, taxes, worker classification, and more. Speak with an expert today to see how you can streamline your US payroll processes and ensure compliance with state regulations.

Disclaimer: This article is provided for general informational purposes and should not be treated as legal or tax advice. Consult a professional before proceeding.

Deel makes growing remote and international teams effortless. Ready to get started?






Legal experts