Key figures
Illinois payroll
2026, with sources
Registering and withholding
Withholding is registered with IDOR through MyTax Illinois. Illinois withholds a flat 4.95% and employees give you Form IL-W-4. New registrants start on a monthly payment and quarterly Form IL-941 schedule. Illinois has reciprocity with Iowa, Kentucky, Michigan and Wisconsin.
Unemployment insurance is a separate IDES account. For 2026 the taxable wage base is $14,250 and the standard new-employer rate is 3.35%, including the 0.55% fund builder (3.45% for administrative-support and waste-management employers). New hires, including independent contractors, are reported to IDES within 20 days.
Paid leave: state, Chicago and Cook County
The Paid Leave for All Workers Act gives every Illinois employee up to 40 hours of paid leave a year for any reason, accruing at one hour per 40 worked or frontloaded. It does not apply to employers already covered by a municipal or county paid leave ordinance.
Chicago’s ordinance, in force since July 1, 2024, is more generous: an employee who works at least 80 hours in 120 days in Chicago earns up to 40 hours of paid leave and 40 hours of paid sick leave a year, one hour per 35 worked each. Chicago’s minimum wage is $17.05 from July 1, 2026 for employers with four or more employees, against the state’s $15.00.
Suburban Cook County is a third layer. Its minimum wage ordinance sets $15.40 an hour from July 1, 2026 for employers with four or more employees, and its paid leave ordinance gives up to 40 hours a year; both apply only where the municipality has not opted out, so a hire in Evanston, Oak Park or Schaumburg needs that town’s status checked. Like Chicago’s, the county’s minimum wage moves every July 1, not every January.
Retirement: My Illinois Savings
Illinois Secure Choice is now called My Illinois Savings. Employers that had at least five Illinois employees in every quarter of the previous year, have been in business at least two years and don’t offer a qualified retirement plan must facilitate it through payroll deductions. There is no employer fee; the obligation is to register and remit.
Deadlines
- Last day of the month after the quarterQuarterly withholding return (new registrants pay monthly, file quarterly)Form IL-941
- Quarterly, through MyTax IllinoisUI contribution and wage report to IDES
- Within 20 days of the first day on the payrollNew-hire report to IDES, employees and independent contractors
The federal baseline
This page covers what Illinois adds. The federal rules underneath it apply here too.
Common questions
Our first hire is in Chicago. Which paid leave law applies?
Chicago’s. A Chicago employer is covered by the Chicago Paid Leave and Paid Sick and Safe Leave Ordinance, which gives up to 40 hours of paid leave and 40 hours of paid sick leave a year, accrued at one hour per 35 worked. Employers covered by a local ordinance like Chicago’s are outside the state Paid Leave for All Workers Act; everyone else in Illinois gets 40 hours under the state law.
Do we withhold Illinois tax for someone who lives across the border?
Only if the employee lives in Iowa, Kentucky, Michigan or Wisconsin. Illinois has reciprocal agreements with those four states, so you withhold for the home state instead (Illinois permits it but doesn’t require it). An employee living anywhere else who works in Illinois has Illinois tax withheld.
Payroll next door
- INIndiana payrollIndiana withholds 2.95% state tax plus a county tax fixed by the employee’s January 1 county; new employers pay 2.5% UI on the first $9,500, and the minimum wage is $7.25.
- IAIowa payrollIowa withholds a flat 3.8%, cut its 2026 unemployment wage base to $20,400 with a 1.0% new-employer rate, and requires new hires reported within 15 days.
- KYKentucky payrollKentucky payroll is 3.5% state withholding plus local occupational taxes where employees work, unemployment insurance at 2.7% on $12,000 for new employers, and workers’ comp from the first employee.
- MOMissouri payrollMissouri’s 2026 minimum wage is $15.00 with no inflation indexing after HB 567, and the Prop A sick leave mandate is gone. Kansas City and St. Louis add a 1% earnings tax.
- WIWisconsin payrollWisconsin withholds by bracket, charges new employers 3.05% UI on the first $14,000, keeps a $7.25 minimum wage, has no paid leave program and requires workers’ comp early.
How Illinois compares
- No tax on wagesStates with no state income tax on wagesIllinois: withholds state income tax. 9 of 51 states are on the list.
- Paid leave payrollStates with a paid leave or disability payroll programIllinois: no state program. 16 of 51 states are on the list.
- Local payroll taxStates with city, county or district payroll taxesIllinois: state-level only. 14 of 51 states are on the list.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- ComplianceFirst-year compliance calendar for a Delaware C-corpDelaware franchise tax, 1099s, the federal return, payroll filings, state annual reports and sales tax: the deadlines a young C-corp misses most, by month.
More of the Illinois guide
- AccountingAccounting and state tax in IllinoisCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in IllinoisSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in IllinoisPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- ComplianceCompliance and filings in IllinoisRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in IllinoisCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
- IDOR — Income tax rates
- IDES — Historical Rate Chart (includes 2026)
- Illinois Department of Labor — Minimum Wage Law
- City of Chicago BACP — Minimum wage information
- Illinois Department of Labor — Paid Leave for All Workers Act FAQ
- Cook County — Notice to Minimum Wage Ordinance (July 1, 2026)
- Chicago Office of Labor Standards — Paid Leave and Paid Sick and Safe Leave overview
- Illinois Department of Labor — Wage Payment and Collection Act FAQ
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.