Illinois Salary Paycheck Calculator
While staying in compliance to run a successful business, the payroll process doesn’t need to be an overwhelming experience.
Whether you’re going it alone or considering using a qualified accountant for guidance, processing your Illinois payroll doesn’t need to be dark and dreary like Chicago winters.
Here are some general guidelines to have you prepared for processing payroll and remaining compliant with your salaried employees.
Illinois Payroll Taxes
Does Illinois have a personal income tax?
Illinois taxes its residents and some non-residents at a flat personal income tax rate of 4.95% for 2022.
What is a flat tax rate? It simply means all taxpayers pay the same income tax rate no matter how much they earn. In other states, taxpayers are commonly taxed progressively; the more you make, the higher your tax rates.
What form does my employee complete so I know how much to withhold?
Illinois resident employees should complete form IL-W-4 to record the number of allowances they are entitled to claim. If your employee fails to provide this form, you must withhold tax as if no allowances were claimed.
Illinois has reciprocal taxing agreements with some neighboring states. Employees residing in Iowa, Kentucky, Michigan, and Wisconsin should complete IL-W-5-NR to claim that they are a non-resident and are exempt from Illinois withholding.
Does Illinois have unemployment tax?
Most for-profit businesses in Illinois are subject to paying unemployment tax as soon as:
- You have at least $1,500 in employee wages in a calendar quarter, or employed at least one person for 20 weeks in a year; or
- You have paid $20,000 in cash wages in a quarter or employed at least ten workers for 20 weeks in a year for farm work; or
- You have paid at least $1,000 in employee earnings due to domestic work in a calendar quarter.
As of January 1, 2022, the Illinois unemployment tax rate ranges from 0.725% to 7.625%. Rates are based on several factors, including your industry and the amount of previous benefits paid to unemployed workers. The taxable wage base is $12,960 per employee for 2022.
You pay your unemployment tax quarterly via the Illinois MyTax portal or by mailing forms and payments to the Illinois Department of Employment Security.
What is the salary threshold in Illinois?
Because the state of Illinois doesn’t have its own salary threshold, it adheres to the federal salary threshold, which is now $684 per week (equivalent to $35,568 per year for a full-year worker). The Department of Labor permits employers to count some bonuses, commissions, and other incentive payments toward meeting the standard salary level (up to 10%). Employees who earn at least $107,432 per year may qualify as “highly compensated.” See this Department of Labor fact sheet for details.
What are important Illinois payroll tax laws for salaried employees?
Illinois employers can make salary deductions from their exempt employee’s earnings in compliance with federal or Illinois law. Some examples of salary deductions for Illinois salaried employees include:
- When required by law (taxes)
- Valid legal withholdings or wage garnishments
- Any written consent from the employee
- Any employee benefits sponsored by the employer (union dues, health, retirement, etc.)
You have up to 20 days after your new hire’s first day to report them to Illinois’s New Hire Directory.
Paychecks, including final paychecks
Exempt employees must be paid at least once a month. All non-exempt salaried employees must be paid at least semi-monthly.
If your salaried employee terminates employment (for whatever reason—voluntarily or involuntarily) with your business, the employee must receive their final paycheck no later than the next scheduled payday. The last paycheck should include all bonuses, commissions, vacation pay, and wages.
Requirements to obtain Workers’ Compensation vary by state, this table outlines some of these requirements. If you determine that your company is required to purchase Workers’ Compensation insurance in your state, learn how to sign up for this insurance with Gusto. Sometimes, companies get a request for a workers’ comp audit. Head to this article and click the workers’ comp audit reports dropdown for more information.
Federal payroll taxes
What federal taxes do I pay to the IRS?
Federal income tax
Employers must withhold federal income tax from employees’ pay, unless exempt. Each employee’s Form W-4 will differ based on their filing status and dependents, among other details—so the amount of income tax withheld will vary.
These forms do not need to be sent to the IRS, but should be kept for your recordkeeping.
The Federal Insurance Contributions Act, or FICA tax, is made up of the Medicare tax and the Social Security tax.In 2022, the Social Security tax requires employers and employees to each contribute 6.2% of wages up to $147,000. The Medicare tax requires each to contribute 1.45% of all wages. See the IRS webpage for details, like maximum thresholds.
Like the state, the federal government also has an unemployment tax. It’s called FUTA and it’s an annual tax employers pay on the first $7,000 of each employee’s wages. The FUTA rate for 2022 is 6%, but most employers only have to pay 0.6% each year.
Additional Medicare Tax
For employees that earn over $200,000 a year, 0.9% of earnings will need to be withheld for the Additional Medicare tax. Whether or not your employee owes this tax may depend on their filing status‚ but you must withhold the tax on wages greater than $200,000.
Write those paychecks
Now you can start calculating each employee’s net pay. Be sure to set aside money to pay the taxes when due. Both federal and state taxes can add up quickly, as do penalties for missing a due date.