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Navigating Illinois Payroll Taxes
While federal payroll tax obligations are essential, staying compliant with state-level requirements is equally important for
your business.
This guide covers everything you need to know about Illinois payroll taxes, including essential forms, filing deadlines, and reporting procedures.
Illinois New Hire Reporting
Employers in Illinois are required to report newly hired and rehired employees to the Illinois New Hire Directory, administered jointly by the Illinois Department of Employment Security (IDES) and the Illinois Department of Healthcare and Family
Services (HFS).
New hire reporting helps the State of Illinois support child support enforcement, reduce public assistance fraud, and maintain accurate employment data as mandated under state and federal law.
Who must report
All employers in Illinois must report newly hired and rehired employees.
This requirement applies to:
- All public, private, and nonprofit employers
- Employers of all sizes
- Multi-state employers (Illinois participates in the national reporting program; employers may choose Illinois as their reporting state)
- Out-of-state employers with employees working in Illinois
This reporting rule is required under the Illinois Unemployment Insurance Act and the federal Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA).
What to report
According to the Illinois New Hire Directory, employers must report:
- Employer Information: Employer name, Employer address, Federal Employer Identification Number (FEIN)
- Employee Information: Full name, Address, Social Security Number
- Hire Date: Date the employee was hired or rehired
When to report
- Illinois requires employers to report all new hires within 20 days of the employee’s start date.
- Employers who submit reports electronically must transmit data at least twice each month, with reports no more than 16 days apart.
- Failure to meet these timelines may result in penalties under federal and state law.
How to report
Illinois provides multiple methods for submitting new hire reports.
1. Online (Recommended):
The most efficient and state-preferred method is online reporting through the Illinois New Hire Directory Portal.
- Visit the Illinois New Hire Reporting Portal.
- Register with your FEIN and contact details.
- Complete and submit the new hire form.
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2. Fax:
Employers may fax the completed New Hire Reporting Form to the state.
3. Mail:
Employers may mail the completed New Hire Reporting Form to:
Illinois New Hire Directory
P.O. Box 19473
Springfield, IL 62794-9473
Using trackable mail is recommended for record-keeping and compliance.
4. Magnetic Filing (For High-Volume or Automated Reporting Systems)
- Illinois offers a magnetic media option, primarily intended for large employers or payroll processors who submit high-volume new hire data.
- Employers must follow the state’s required record layouts and data standards posted on the magnetic filing page.
For detailed information on magnetic filing file formats and reporting requirements, click here.
New Hire Reporting Penalties
While Illinois does not publish a separate state-specific penalty table on IDES’s site, employers are subject to federal PRWORA penalties, including:
- Up to $25 per newly hired employee for failure to report
- Up to $500 per employee for a conspiracy between employer and employee to avoid reporting
These penalties apply when employers do not file timely, complete, or accurate reports.
New Hire Corrections
If an employer reports incorrect information (such as a wrong name, SSN, hire date, or employer details), the state requires employers to:
- Submit a corrected report through the Illinois New Hire Directory Portal, or
- Re-submit the New Hire Reporting Form with updated information
Illinois Withholding Tax Form (IL-941)
Employers in Illinois use Form IL-941 to report Illinois income tax withheld from employees (or others) during a calendar quarter.
Who Must File
All employers who withhold Illinois Income Tax from employees, payees, or others are required to file Form IL-941, Illinois Withholding Income Tax Return. This requirement applies whether you are a business, nonprofit organization, government agency, or other entity with workers subject to Illinois Income Tax withholding.
Employers with an active Illinois withholding tax account must file Form IL-941 even if no tax was withheld, as stated in the official instructions.
What to Report
Form IL-941 requires employers to report:
- Employer Information: Business name, Address, FEIN, Illinois withholding account ID
- Withholding Details: Total Illinois taxable wages paid, Total Illinois Income Tax withheld, Credits (if applicable), Payments previously made for the quarter
- Adjusted Tax Due or Overpayment
Form Types
Illinois uses a combination of quarterly returns and payment vouchers for withholding:
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Form IL-941 — Illinois Withholding Income Tax Return Quarterly return used to report:
- Total Illinois withholding for the quarter
- Payments made
- Credits claimed
- Tax due or overpayment
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Form IL-501 — Withholding Income Tax Payment Voucher
Used only when mailing withholding payments instead of paying electronically.
Employers on a semi-weekly or monthly payment schedule may need to submit Form IL-501 with mailed payments.
What Schedules Are Required
- Schedule P – Illinois Withholding Schedule: Must be attached to IL-941 to report details of withholding.
- Schedule WC – Withholding Income Tax Credits: Attach if you are claiming credits.
When to File
The filing and tax deposit deadlines are as follows:
Filing Due Date:
Form IL-941 is filed quarterly with the due dates as follows:
- Quarter 1 (Jan-Mar) the return is due by April 30
- Quarter 2 (Apr-Jun) by July 31
- Quarter 3 (July-Sep) by October 31
- Quarter 4 (Oct-Dec) by January 31 (of the following year)
Tax Deposit Due Date:
The deposit frequency depends on your assigned schedule: monthly or semi-weekly.
- For the monthly deposit schedule, payments are due by the 15th day of the month following the month in which tax was withheld.
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For semi-weekly deposit schedule:
- Wednesday for amounts withheld the preceding Wednesday, Thursday or Friday
- Friday for amounts withheld the preceding Saturday, Sunday, Monday or Tuesday
- If you exceed $12,000 in withholding during the look-back period or during a quarter, you must switch to the semi-weekly deposit schedule.
Illinois generally does not offer a quarterly deposit schedule. All employers are monthly or semi-weekly payers — but all must file Form IL-941 quarterly.
How to File
You have several filing options to file Form IL-941:
Online (Preferred):
- All Forms IL-941 must be filed electronically. If you are unable to file electronically, you may request Form IL-900-EW, Waiver Request, through Taxpayer Assistance Division.
- The waiver request must be completed and submitted back to IDOR. You will be notified if the waiver request is approved or denied.
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If filing on paper:
-
Mail IL-941 to the address specified below:
ILLINOIS DEPARTMENT OF REVENUE
PO BOX 19001
SPRINGFIELD IL 62794-9001 -
If mailing with a payment attached, mail to the address specified below:
ILLINOIS DEPARTMENT OF REVENUE
PO BOX 19447
SPRINGFIELD IL 62794-9447
Using trackable mail is recommended for record-keeping and compliance.
How to Pay
- Payments are made electronically or with Form IL-501 on either a monthly or semi-weekly payment schedule.
- Electronic mandates for Illinois Withholding Income Tax: You must make withholding tax payments electronically if you are assigned to the semi-weekly payment schedule.
Illinois Withholding Penalties
Employers in Illinois must file and pay withholding taxes on time using Form IL-941. Failing to do so can can lead to penalties.
Late-Filing (or Non-Filing) Penalty
- The first tier rate: the lesser of $250 or 2% of the tax required to be shown due on the return (after timely payments or credits are applied).
- The second tier (if you still fail to file within 30 days after a notice of non-filing): the greater of $250 or 2% of the tax required to be shown due (without regard to timely payments), up to a maximum of $5,000.
Late-Payment Penalty
- If payment is 1-30 days late: penalty is 2% of the tax required to be shown due.
- If payment is 31 or more days late: penalty is 10% of the tax required to be shown due.
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If the payment is made after initiation of an audit or investigation on your liability:
- 15% penalty of any amount not paid until audit or investigation is initiated.
- 20% penalty of any amount not paid within 30 days after issuance of an audit-prepared amended return or waiver of restrictions (or if paid under protest or with a subsequent refund/credit claim) also applies.
Corrections
If you filed an IL-941 with errors such as incorrect withholding amounts, payments, adjustments, or credits, you must file Form IL-941-X to amend the return.
Form IL-941-X – Amended Illinois Withholding Income Tax Return
Use IL-941-X to correct:
- Withholding amounts
- Reported payments
- Credits claimed
- Incorrect wage or withholding entries
- Overpayment or underpayment errors
File a separate IL-941-X for each quarter you are amending. Clearly state the reason for the amendment.
- If additional tax is due, pay it with IL-501 or through MyTax Illinois.
- If you are owed a refund, the credit or refund will be applied based on your IL-941-X filing.
Submitting Payments with Corrections
If your amended IL-941-X results in tax due:
- Pay electronically via MyTax Illinois or
- Mail a payment using Form IL-501 (payment voucher)
IDOR does not provide a separate “correction voucher.” IL-501 is used for all mailed withholding payments, including those related to IL-941-X.
Illinois Unemployment Insurance (UI) Reporting — Form UI-3/40
Illinois employers use Form UI-3/40 to report quarterly wages and pay unemployment insurance (UI) contributions to the Illinois Department of Employment Security (IDES).
This ensures the Illinois UI Trust Fund is properly funded to support workers who lose their jobs through no fault of their own.
Who Must File
All Illinois employers with one or more workers in covered employment are required to file Form UI-3/40 each quarter. This includes businesses of all sizes, nonprofits, government agencies, and any employer with an active Illinois UI account.
You must file Form UI-3/40 even if no wages were paid or if no UI contributions are due for the quarter.
Taxable Wage Base & Rates
Illinois assigns UI tax based on each employee’s taxable wages and the employer’s experience rating.
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Annual Wage Base (2025)
For 2025, the Illinois unemployment insurance taxable wage base is $13,590 per employee. Wages above this amount are not subject to UI withholding.
-
Contribution Rates (2025)
Illinois assigns rates annually based on the employer’s experience rating.
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New Employers (2025):
3.125% standard new-employer UI contribution rate (except construction and mining industries, which have industry-specific new-employer rates)
-
Experienced Employers (2025):
Varied based on experience, ranging approximately: 0.525% – 7.35% (rate varies depending on benefit charges, taxable payroll, and fund balance adjustments)
-
What to Report
Employers must include the following on Form UI-3/40:
- Employee Wage Information: Total wages paid in the quarter and taxable wages (up to the wage base)
- Employer Details: Legal name, UI Account Number, FEIN, and reporting quarter
- Quarterly Contribution Data: Taxable wages × employer UI contribution rate (plus fund-building rates or adjustments, if applicable)
When to File
Form UI-3/40 must be filed quarterly. The deadlines are as follows:
- Q1 (Jan-Mar): Due April 30
- Q2 (Apr-Jun): Due July 31
- Q3 (Jul-Sep): Due October 31
- Q4 (Oct-Dec): Due January 31 of the following year
How to File
You have several filing options to file Form UI-3/40:
1. Online (Recommended):
File electronically through MyTax Illinois, IDES’ online filing portal:
- Log in or create a MyTax Illinois account
- Enter quarterly wage and contribution data
- Submit Form UI-3/40 electronically
- Pay contributions through the online payment system
If the employer has 25 or more employees, then Form UI-3/40 must be filed electronically.
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2. Mail:
- Download Form UI-3/40 from the IDES website
- Complete all employer and wage details
-
Mail the completed form to:
Illinois Department of Employment Security
P.O. Box 19300
Springfield, IL 62794-9300
Tax Payments
Payments for UI contributions must be made separately—they do not accompany the paper Form UI-3/40.
You can pay via:
- Electronic Funds Transfer (EFT)
- MyTax Illinois Online Payment
- Check or money order (if mailing)
Payments must be submitted by the quarterly due date to avoid penalties.
Illinois Unemployment Insurance Penalties
Employers must file Form UI-3/40 and pay UI contributions on time. Failing to do so results in penalties under
IDES rules (820 ILCS 405).
Late Filing Penalty
If Form UI-3/40 is filed after the due date:
- $50 per month, up to a maximum of $250 Or
- 5% of the total contributions due, whichever is greater
Late Payment Penalty
If payment is not made by the due date:
- Late payment penalty: $5 or 5% of the UI contributions due, whichever is greater
- Interest accrues daily at the rate set annually by the Illinois Department of Revenue (IDOR)
UI-3/40 Corrections
If you discover an error on a previously filed Form UI-3/40:
- File a supplemental or amended UI-3/40 report through MyTax Illinois
- Update incorrect wages, taxable amounts, or contribution calculations
- Pay any additional contributions, penalties, or interest
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- New Hire Reporting
- Form IL-941
- Form UI-3/40 Reporting
Beyond State Payroll Filing: Simplifying All Your Tax Needs
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Frequently Asked Questions
How and when must I report a new hire in Illinois?
Report every newly hired or rehired employee to the Illinois New Hire Directory within 20 calendar days of the employee’s first day on the payroll. You may report online via the Illinois New Hire Portal, by fax, by mail, or by approved bulk/magnetic transmissions.
What is the penalty for failing to report a new hire in Illinois?
Under the Illinois Unemployment Insurance Act, an employer who knowingly fails to report a newly hired employee or independent contractor can be fined $25 per individual. If the employer conspires with the employee to cause non-reporting, that can be a Class B misdemeanor with a fine of up to $500 per individual.
Who must file Form IL-941, and when are the quarterly IL-941 due dates?
Any employer who withholds Illinois income tax must file Form IL-941 quarterly, even if no tax was withheld. The due date to file Form IL-941 is April 30, July 31, Oct 31, and Jan 31 for each quarter, respectively.
What are the payment schedules (monthly vs semi-weekly) for Illinois withholding, and when must semi-weekly
payers deposit?
IDOR assigns employers a monthly or semi-weekly deposit schedule (based on look-back withholding amounts). Semi-weekly depositors follow the federal-style schedule: deposits due Wednesday for taxes withheld Wednesday to Friday, and Friday for taxes withheld Saturday to Tuesday. Semi-weekly payers are generally required to pay electronically.
What is a UI 3-40 form in Illinois?
The Employer's Contribution and Wage Report, IDES Form UI-3/40, must be filed quarterly by each employer subject to the Illinois Unemployment Insurance Act.
Can I correct an underpayment or overpayment on UI-3/40, and how do penalties apply?
Yes, you should file a corrected or amended UI-3/40 report. According to UI-340 instructions, at Line 6C, you enter the “Previous Underpayment + interest”; at Line 6D, you enter “Previous Overpayment.”
If there was underpayment and you include that amount plus interest with your corrected report, you'll still owe the late-payment interest (2% monthly) and possibly a late-filing penalty if the correction is late.
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