Illinois Payroll, unique aspects of Illinois payroll law and practice

The Illinois State Agency, which oversees the collection and reporting of state income taxes deducted from paychecks, is:

revenue department

101 W Jefferson St

PO Box 19022

Springfield, Il 62794-9022

(217) 785-0970

(800) 732-8866 (in state)

Illinois requires that you use the Illinois form IL-W-4, Employee’s Illinois Withholding Allowance Certificate instead of a Federal W-4 Form for Illinois State Income Tax Withholding.

Not all states allow pay cuts under Section 125 of the Cafeteria Plans or 401(k) to be treated in the same manner as the IRS Code allows. In Illinois, cafeteria plans are: not taxable for calculating income tax; not taxable for unemployment insurance purposes when used to purchase medical life insurance. 401(k) plan deferrals are: not subject to income tax; taxable for unemployment purposes.

In Illinois, extra wages are taxed at a flat rate of 3.0%.

You must submit your Illinois W-2s on magnetic media if you have 250 or more employees and are required to submit your federal W-2s on magnetic media.

The Illinois State Unemployment Insurance Agency is:

Occupational safety department

401 S. Staatsstr.

Chicago, IL 60605-1289

(312) 793-5700

The Illinois taxable wage base for unemployment purposes is wages up to $9,800.00.

Illinois requires Magnetic Media to report quarterly payroll reporting if the employer has at least 250 employees reporting that quarter.

Unemployment records must be retained in Illinois for at least five years. This information generally includes: name; social security number; dates of employment, reinstatement and termination; wages by period; payroll periods and payment dates; Date and Circumstances of Termination.


The Illinois State Agency charged with enforcing state wage and hour laws is:

work department

Labor Enforcement

160 North LaSalle, Ste. C1300

Chicago, Il 60601

(312) 793-2800


The minimum wage in Illinois is $6.50 an hour.

The general Illinois provision for overtime pay from a non-FLSA employer is one and a half times the regular rate after a 40-hour week.

The Illinois new hire reporting requirement requires every employer to report all new hires and rehires. The employer must report the federally required elements of:

  • Name of the employee
  • address of the employee
  • Employee’s social security number
  • Name of employer
  • Employer’s Address
  • Employer’s Federal Employer Identification Number (EIN).

This information must be reported within 20 days of hiring or reinstatement.
Information may be submitted as W4 or equivalent by mail, facsimile or electronically.
There is a $15, $500 late reporting penalty in Illinois.

The New Hire Reporting Agency in Illinois can be reached at 800-327-4473 or online at []

Illinois does not allow mandatory direct deposit

Illinois requires the following information on an employee’s payslip:

  • itemized deductions
  • Illinois requires employees to be paid at least semi-monthly; monthly for FLSA-exempt employees; Union agreement can provide for different intervals.

    Illinois requires that the lag time between the end of the pay period and the payment of wages to the employee should not exceed 13 days in any semi-monthly period; weekly-7 days; monthly-21 days; daily-1 day.

    Illinois payroll law requires that involuntarily terminated employees be paid their final salary as soon as possible, otherwise by the next regular payday; next regular payday if suspended or laid off due to industrial action and that employees who have voluntarily terminated should be paid as soon as possible; if not, until the next regular payday.

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    Unpaid wages of the deceased employee must be paid if they would normally be paid to the person who owed funeral expenses, spouse or child, after an affidavit of small assets; Discount no more than $15,000.

    Escheat laws in Illinois require unclaimed wages to be paid to the state after five years.

    The Illinois employer is also required to keep records of wages forfeited and turned over to the state for a period of 5 years.

    Illinois payroll law dictates that no more than 40% of the minimum wage may be used as a tip credit.

    In Illinois, for mandatory rest or meal breaks, wage laws require workers to have 20 minutes during the first 5 hours of a 7.5-hour shift.

    Alabama law requires wage and hour records to be retained for a minimum period of five years. These records usually consist of at least the information required by FLSA.

    The Illinois agency responsible for enforcing child support orders and laws is:

    Child Support Enforcement Division

    Department of Public Aid

    509 p. 6th St.

    Springfield, Il 62701

    (800) 447-4278


    Illinois has the following provisions for child support deductions:

    • When to start withholding? 14 working days after sending the withholding order to the employer.
    • When should the payment be sent? Within 7 days after payday.
    • When to send notice of termination? “Instantly.”
    • Maximum management fee? $5 per payment.
    • retention limits? Federal rules under CCPA.

    Please note that this article is not updated for changes that may and will occur from time to time.