What payroll deductions are employers required to withhold?

Payroll Tax Deductions Required for Employers in Illinois

In Illinois, employers must withhold specific payroll deductions to comply with state and federal requirements. Proper withholding ensures accurate tax reporting and helps maintain compliance with employment regulations.

Mandatory Payroll Deductions

• Federal Income Tax Withholding: Employers must withhold federal income tax based on the employee's W-4 form and IRS tax tables.
• Social Security Tax: Withhold 6.2% of the employee’s wages up to the annual wage limit as set by the Social Security Administration.
• Medicare Tax: Withhold 1.45% of all wages for Medicare tax. Additional Medicare tax of 0.9% applies to wages above the federal threshold and must be withheld accordingly.
• Illinois State Income Tax: Employers must withhold Illinois state income tax at a flat rate of 4.95% on employee wages.
• State Unemployment Insurance (SUI): While employers pay SUI taxes, employees are not subject to withholding for SUI in Illinois.

Additional Considerations

• Local Taxes: Illinois does not impose local income taxes, so no additional local withholding is required.
• Voluntary Deductions: Employers may also withhold voluntary deductions such as retirement contributions, health insurance premiums, and wage garnishments as authorized by employees or court orders.
• Recordkeeping: Maintain accurate payroll records of all withholdings for federal and state reporting and audit purposes.
• Reporting Requirements: Regularly report withheld taxes through federal forms (e.g., Form 941) and Illinois Department of Revenue filings.

As of 2026, employers should stay updated on any changes to tax rates or withholding regulations by consulting official IRS and Illinois Department of Revenue resources. Automation tools can help ensure timely and accurate payroll tax withholding and reporting.