Illinois employer payroll taxes, withholding and paid leave in 2026
An Illinois employer registers with the Illinois Department of Employment Security (IDES) for unemployment insurance (UI) tax and with the Illinois Department of Revenue (IDOR) to withhold Illinois income tax, files a quarterly return with each agency, and reports each new hire to the state. Two other duties sit beside the taxes, namely paid leave under the Paid Leave for All Workers Act and, for private employers with 100 or more Illinois employees, an Equal Pay Registration Certificate.
When does a business become liable for Illinois unemployment insurance tax?
As IDES states it, most for-profit employers are liable for Illinois UI contributions once they have paid $1,500 in wages in a single calendar quarter or employed one or more people for 20 weeks in a calendar year.
IDES lists separate tests for domestic work ($1,000 in cash wages in one calendar quarter), farm work, nonprofit organizations and local governmental organizations.
How do I register as an employer in Illinois?
IDES states that a newly created business must register with IDES within 30 days of start-up, and IDOR tells businesses to register with IDOR, which a business that withholds Illinois income tax for Illinois employees must do, before they hire an employee.
* IDES. Register online through MyTax Illinois or on a completed and signed Form REG-UI-1.
* IDOR. Register online in MyTax Illinois (Form REG-1), by mail on Form REG-1, or at an IDOR office.
What is the Illinois unemployment insurance wage base for 2026?
For 2026, Illinois unemployment insurance tax applies to the first $14,250 of each employee’s wages in a calendar year.
IDES’s Form EA-50 publishes the base, and as of November 2026 its historical rate chart shows $13,590 for 2024, $13,916 for 2025 and $14,250 for 2026. Wages above $14,250 per worker for the calendar year are reported on Form UI-3/40 as excess wages and are not taxed.
What unemployment insurance rate does a new Illinois employer pay in 2026?
For 2026, most Illinois employers that became liable on or after January 1, 2024 pay the entry rate of 3.350 percent, and new employers in NAICS sector 56 (administrative support and waste management) pay 3.450 percent; both include the 0.550 percent Fund Building Rate.
As of November 2026, IDES states that employers that became liable between January 1, 2024 and June 1, 2024 pay for 2026 the greater of 3.350 percent or a rate computed from their experience during July 1, 2024 through June 30, 2025.
Hypothetical example, rounded to the cent. An employee paid at least $14,250 in 2026 produces at most 0.0335 x $14,250 = $477.38 in contributions at the 3.350 percent entry rate, and at most 0.0345 x $14,250 = $491.63 at the 3.450 percent sector 56 rate.
How does Illinois set my unemployment insurance rate after the first years?
For 2026, experience-rated Illinois employers pay UI contribution rates from 0.750 percent to 7.050 percent, which include the 0.550 percent Fund Building Rate.
As of November 2026, IDES says an employer that has been liable in each of the three or more years immediately before 2026 qualifies for a rate based on its own experience, set in three steps.
1. Calculate the benefit ratio by multiplying benefit charges (Form BEN-118) by the 2026 Benefit Conversion Factor of 138.4 percent and dividing by taxable wages for the lookback period, which is July 2024 through June 2025 for three years of liability.
2. Multiply the benefit ratio by the 2026 State Experience Factor of 102 percent and round to the nearest one-tenth of one percent.
3. Add the 0.550 percent Fund Building Rate.
An experience-rated employer whose contribution rate is higher than 5.400 percent and whose total quarterly wages are under $50,000 pays contributions at 5.400 percent in that quarter. The limit does not change a new employer’s entry rate.
What is the Illinois income tax withholding rate, and what do I need from each employee?
The Illinois income tax withholding rate for 2026 is 4.95 percent.
As of November 2026, IDOR’s 2026 withholding tables page says to subtract any exemptions from the wages paid, then multiply the result by 4.95 percent, using the tables or the formula 0.0495 x (wages minus ((Line 1 allowances x $2,925 plus Line 2 allowances x $1,000) divided by the number of pay periods in a year)). An additional amount requested on Form IL-W-4 Line 3 is added.
Form IL-W-4 is the employer’s record of each employee’s allowances. Under Publication 130, if a completed IL-W-4 is not filed, or the employer must disregard it, the employer must withhold Illinois income tax with no allowances. Under the Form IL-W-4 instructions, a form takes effect for the first payment of compensation after it is filed when no IL-W-4 is on file, and an employer may apply a change at once but need not change withholding until the first payment after the first day of the next calendar quarter that falls at least 30 days after filing.
Do I withhold Illinois income tax for employees who live or work in another state?
An employer must withhold Illinois income tax when it withholds federal income tax from compensation paid in Illinois, which Publication 130 defines by where the employee’s services are localized, with exceptions for certain reciprocal-state residents and military spouses.
Compensation is paid in Illinois when all service is performed in Illinois, when service outside Illinois is incidental to service inside Illinois, or when the employee is an Illinois resident, neither of the first two situations applies and no other state’s tax is withheld. Where compensation is not localized to any state, an employee who performs significant non-incidental service in Illinois for more than 30 working days is subject to withholding on a portion equal to compensation multiplied by Illinois working days divided by total working days.
An employer is not required to withhold Illinois tax for a nonresident with fewer than 31 days of Illinois service whose pay is not localized in Illinois, a nonresident whose service is entirely in another state, or an Illinois resident whose service is entirely in another state and whose compensation is subject to withholding there.
Employers are also not required to withhold Illinois tax from residents of Iowa, Kentucky, Michigan and Wisconsin or certain military spouses, but the employee must complete Form IL-W-5-NR, and without it the employer must withhold Illinois tax. For a resident of any other state paid in Illinois, the employer must withhold Illinois tax and may be required to withhold for another state in which the employee works or resides.
When are Illinois unemployment tax reports and payments due?
Illinois UI wage reports (Form UI-3/40) and contributions are due on or before April 30, July 31, October 31 and January 31.
The 2026 UI-3/40 instructions say reports and remittances personally delivered or postmarked after the last day of the month following the quarter’s end are subject to penalty, interest or both. IDES prints October 31 for the third quarter, a date that fell on a Saturday in 2026, and the IDES schedule and the 2026 instructions print no weekend or holiday rule, so an employer whose date lands on a weekend confirms the treatment with IDES.
How do I file Illinois unemployment tax reports, and what if I need more time?
Employers with 25 or more employees in the prior calendar year must file the quarterly Form UI-3/40 and monthly wage reports electronically, and employers with fewer than 25 employees can still file paper Forms UI-3/40, per the IDES employer tax information page. IDES lists MyTax Illinois, the Fed/State Employment Taxes (FSET) program and, for larger employers, File Transfer Protocol (FTP) as the electronic methods for the quarterly report.
* Monthly reports. They cover the first and second months of each quarter, list only employee names, Social Security numbers and total wages, and carry no contribution payment. As of November 2026, IDES’s table gives the final date of a timely report without penalty, for example November 30 for the October report and December 31 for the November report.
* No wages paid. An employer that paid no wages in a quarter but has not permanently ceased being an employer files a report showing No Wages Paid This Quarter, which IDES says can be filed through MyTax Illinois with only the federal employer identification number (FEIN) and UI account number.
* Extensions. An employer unable to file on time may request a filing extension, which must be received on or before the filing due date. If granted, IDES allows an additional 30 days to file a quarterly report and an additional 15 days to file a monthly report.
When do I file Form IL-941 and pay Illinois withholding?
Form IL-941 is due quarterly by the last day of the month after the quarter ends, or the next business day when that date falls on a weekend or holiday, and Illinois does not have an annual reconciliation return.
As of November 2026, IDOR’s Publication 131-D lists the 2026 dates as Thursday, April 30; Friday, July 31; Monday, November 2 for the third quarter, because October 31 falls on a weekend; and Monday, February 1, 2027 for the fourth quarter, because January 31, 2027 falls on a weekend. An employer files the IL-941 even if no tax was withheld in the period, with a Schedule P showing zeros. All IL-941 returns are filed electronically through MyTax Illinois or the Federal/State Employment Taxes program unless IDOR approves a waiver.
IDOR assigns each employer a monthly or semi-weekly withholding payment schedule. An employer that reported $12,000 or less of withholding in the look-back period, and every first-time taxpayer, pays monthly, and an employer above $12,000 pays semi-weekly. The look-back period for 2026 is July 1, 2024 through June 30, 2025. An employer that exceeds $12,000 of withholding during a quarter must begin paying semi-weekly in the following quarter, the remainder of that year and the subsequent year, and Publication 131 sets the payment dates.
* Monthly. Payment is due by the 15th of the month after the month in which the tax was withheld, or the next business day when that date falls on a weekend or state recognized holiday.
* Semi-weekly. Payment is due by Wednesday for amounts withheld on the preceding Wednesday, Thursday or Friday, and by Friday for amounts withheld on the preceding Saturday, Sunday, Monday or Tuesday, and is made electronically.
How do I report new hires in Illinois?
Illinois requires employers to report each new and rehired employee to the State Directory of New Hires within 20 days of the employee’s first day on the payroll.
IDES treats the date of hire as the employee’s first day of work for pay. Employers report online, on the IDES New Hire Form by fax or mail, or by magnetic filing, and the report includes the employee’s name, home address, Social Security number and date of hire plus the employer’s name, address and FEIN. IDES’s reporting options say to report new hires, including independent contractors, and its employer obligations page says to report all new and rehired employees to the State Directory of New Hires by the due date.
What do I file with Illinois at year end?
At year end, an Illinois employer files Forms W-2 with IDOR electronically by January 31 of the following year, or the next business day, plus its fourth-quarter Forms UI-3/40 and IL-941, and Illinois has no annual reconciliation return.
As of November 2026, IDOR’s Publication 110 says 2026 Forms W-2 must be accepted by IDOR by February 1, 2027. IDOR says electronic filing of Forms W-2 and W-2c is mandatory, and Publication 110 says Illinois accepts no paper returns, PDFs or spreadsheets. A waiver is Form IL-900-EW, and failure to file electronically without a waiver can result in a $5 penalty per Form W-2, W-2c and W-2G.
What happens if I file or pay Illinois payroll taxes late?
Each agency assesses its own penalties and interest, with IDES charging 2 percent a month in interest on unpaid UI contributions and a late-filing penalty with a $50 minimum, and IDOR charging tiered late-payment and late-filing penalties plus interest.
* IDES interest. Interest on contributions not paid by the interest due date is 2 percent per month, computed at 12/365 of 2 percent per day, per the 2026 UI-3/40 instructions.
* IDES late-filing penalty. On reports filed after the penalty date, the penalty is $5 for each $10,000 or fraction of total wages or $2,500 per month, whichever is less, up to $10 for each $10,000 or fraction of total wages or $5,000, whichever is less, and it can in no instance be less than $50.
* IDOR late payment. Publication 103 sets 2 percent if the payment is 1 to 30 days late and 10 percent if it is 31 or more days late, with higher tiers for amounts still unpaid after an audit or investigation begins.
* IDOR late filing. The penalty is the lesser of $250 or 2 percent of the tax required to be shown due, reduced by timely payments and credits. A second tier, the greater of $250 or 2 percent of the tax shown due up to $5,000, applies if the return is still not filed 30 days after a notice of nonfiling, even if no tax is due.
* IDOR interest. As of November 2026, IDOR charges simple interest at a daily rate, and the rate is 7 percent for January 1, 2025 through December 31, 2026.
Publication 103 says a late-filing or late-payment penalty may be abated for reasonable cause on a detailed explanation of the delay with supporting documentation. An officer or employee with control, supervision or responsibility for filing and paying who willfully fails to do so can be personally liable under the rules of both agencies.
What does the Paid Leave for All Workers Act require of employers?
Under the Paid Leave for All Workers Act, employees earn one hour of paid leave for every 40 hours worked, up to 40 hours in a 12-month period, and can use it for any reason.
As of November 2026, the Illinois Department of Labor (IDOL) Paid Leave for All Workers Act page says employers may not require a basis for the request. Accrual begins at the start of employment, and employees can begin using accrued leave after 90 days. An employer can frontload all 40 hours at the start of the year or of employment, as long as employees can earn and use up to 40 hours a year.
IDOL’s FAQ says the Act applies to employers of all sizes and covers full-time, part-time, seasonal, temp-agency and on-call employees. It lists exemptions, including independent contractors generally and certain railroad and airline employees. IDOL says the Act does not apply where a Chicago or Cook County ordinance covers the employer, and an employer that such an ordinance does not require to provide leave is subject to the Act if the Act would require leave from that employer.
What policy rules, carryover and payout limits apply to Illinois paid leave?
An employer that already provides at least 40 hours a year of paid leave usable for any reason does not need to add leave or change its policy, and IDOL says it is likely already in compliance.
As of November 2026, IDOL’s FAQ sets these employer-policy rules.
* Usage policy. An employer may adopt a reasonable written policy, including blackout dates and operational-necessity denials applied equally, may require leave in increments of up to two hours, and may adopt a reasonable no-call, no-show notice policy.
* Reasons and documentation. An employer may not ask the reason for a request or require documentation or a replacement before the first 40 hours of leave are used.
* Attendance. Using paid leave cannot be counted as a negative factor in evaluating, promoting or disciplining an employee, or under a no-fault attendance policy.
* Carryover. An employer must allow employees to carry over unused accrued leave, need not carry over frontloaded leave, and need not let an employee use more than 40 hours in a year.
* Payout. Unused paid leave need not be paid out at separation unless it is part of a vacation or general PTO bank, in which case the Illinois Wage Payment and Collection Act can require payout. An employer and employee may instead agree in writing and annually to pay unused leave at year end in place of carryover.
Which notices does an Illinois employer have to post?
IDOL’s posters page lists the Paid Leave for All Workers Act Notice as required for all Illinois employers.
Under its heading for other state-required postings, IDOL lists the Unemployment Insurance Benefits Notice poster, which is available from IDES. IDOL’s posters page also lists further required postings and disclosures for Illinois employers.
The Act does not require the paid leave balance on pay stubs, but an employer must maintain records, including each employee’s paid leave balance, and provide them on an employee’s request.
Does my business need an Equal Pay Registration Certificate?
Illinois requires a private employer with 100 or more employees in Illinois to obtain an Equal Pay Registration Certificate from the Department of Labor and to recertify every two years.
As of November 2026, IDOL’s EPRC page says the requirement does not include the State or any governmental unit. The count is the total number of Illinois employees on December 31 of the calendar year before the reporting deadline, and IDOL’s FAQ defines Illinois employees as people who worked at the facility in Illinois plus 100 percent remote employees who report directly to Illinois management.
A submission includes entity information, a Compliance Statement signed by a corporate officer, legal counsel or authorized agent, each employee’s pay and demographic data for the prior year, and a $150 filing fee. IDOL says a covered business it has not contacted should fill out its business survey, and that IDOL’s failure to assign a date does not exempt a business. A business with 99 or fewer employees is exempt but, if it receives a notice, must file an exemption form.
IDOL may reject an application, suspend or revoke a certificate and impose a civil penalty of up to $10,000.
What changes for Illinois employers in 2027?
As of November 2026, IDES has not posted a 2027 State Experience Factor, entry rate, rate range or taxable wage base, and it lists each year’s EA-50 on its Unemployment Taxes & Reporting page.
IDOL’s Paid Leave for All Workers Act pages state no 2027 change, but IDOL’s EPRC FAQ says that as of 1/1/2027 IDOL will require businesses to use the revised pay-data CSV, which does not include “prefers not to identify” as an option for an employee’s sex or race.
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