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Illinois Income Tax Withholding Requirements

Filed under Payroll Taxes. Fact checked on February 8, 2013.

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Employers in Illinois must conform with these state rules relating to income tax withholding and administration.

General Withholding Requirement: Illinois income tax must be withheld from all compensation paid in Illinois to resident and nonresident employees. Compensation is paid in Illinois if:

  • the services are performed entirely in the state;
  • the services are performed both within and without the state, but the out-of-state services are incidental to the in-state services; or
  • some of the services are performed in state and either:
    1. the employer's base of operations is in Illinois or
    2. the employer's base of operations is not in any state where some of the services are performed and the employee is an Illinois resident.

Employee Withholding Exemption Forms: Illinois Form IL-W4 must be completed by each employee, to determine the appropriate level of state income tax to withhold from earnings. Of course, Federal Form W-4 also must be completed by each employee, to determine the appropriate level of federal income tax to withhold from earnings.

Reciprocal Agreements: Illinois has reciprocal agreements in effect with Iowa, Kentucky, Michigan, and Wisconsin.

Administration:

Illinois Department of Revenue
P.O. Box 19044
Springfield, Illinois 62794-9044
Telephone: 217-782-3336

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