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Updated: May 19, 2023
With over 1,000,000 small businesses in Illinois, you’re not the first one trying to figure out payroll taxes. If sifting through timesheets, calculating withholdings, and sorting out deductions seem to take longer than the Cubs took to win their last World Series, today is your lucky day. Our Illinois payroll calculator is designed to help any employer in the Land of Lincoln save time and get payroll done right.
All you have to do is enter wage and W-4 information for each employee, and our calculator will process your gross pay, net pay, and deductions for federal taxes as well as Illinois state taxes. If you have any questions about how to use our Illinois payroll calculator, you can always find definitions and more detailed information in our guide to the payroll process. And keep in mind that we offer easy and affordable online payroll services if you ever want any outside help.
Calculate federal payroll taxes for Illinois employees
First of all, let’s calculate federal payroll taxes for your employees. You can use our Illinois payroll calculator to calculate all your employees’ federal withholdings, plus any additional taxes your business is responsible for paying.
Here’s a summary of all you need to know when you’re calculating payroll taxes for your hardworking Illinoisans! For a more detailed explanation of all of the steps below, check out our step-by-step guide.
- Gross wages, which is simply the amount of money an employee has earned during the last pay period.
- For hourly employees, multiply the number of hours worked by their pay rate — and make sure you don’t forget to take overtime into consideration.
- For salaried employees, divide each employee’s annual salary by the number of pay periods you have over the course of a year.
- Calculate any pre-tax withholdings. If your employees have 401(k) accounts, flexible spending accounts (FSA) or any other pre-tax withholdings, subtract them from gross wages prior to applying payroll taxes.
- Deduct federal income taxes, which can range from 0% to 37%. Further withholding information can be found through the IRS.
- Deduct and match any FICA taxes to cover Medicare and Social Security taxes:
- For Social Security tax, withhold 6.2% of each employee’s taxable wages until they have earned $160,200 in a given calendar year. Employers must match this tax.
- For Medicare tax, withhold 1.45% of each employee’s taxable wages. Employers also must match this tax. For employees who more than $200,000 per year, withhold an Additional Medicare Tax of 0.9% on the amount over $200,000. Employers are not responsible for paying the Additional Medicare Tax.
- Pay FUTA unemployment taxes, which is 6% of the first $7,000 of each employee’s taxable income. You can claim a tax credit of up to 5.4% for the state unemployment tax you pay. Only you as the employer are responsible for paying FUTA taxes.
- Subtract any post-tax deductions. You might need to withhold court-ordered wage garnishments, child support, post-tax contributions to savings accounts, elective benefits, etc. Take these into consideration as well.
Illinois (IL) Payroll Tax Rates in 2023
Now that we’re done with federal taxes, let’s look at Illinois state income taxes. You’ll also need to withhold state taxes before you’ll be ready to send your employees home with their paychecks.
How are payroll taxes calculated in Illinois?
The first step to calculating payroll in Illinois is applying the state tax rate to each employee’s earnings. According to the Illinois Department of Revenue, all incomes are created equal: Employers are responsible for deducting a flat income tax rate of 4.95% for all employees. No cities within Illinois charge any additional municipal income taxes, so it’s pretty simple to calculate this part of your employees’ withholding.
You’ll also need to consider each employee’s exemptions, which is $2,425 for the 2022 tax year.
Additional exemptions are allowed if the employee is over 65 years old and/or legally blind.
Taxes paid to the state of Illinois must be paid on an ongoing basis using these forms:
- Form IL-941: Withholding Tax Forms
- Frequently Used Forms and Publications
In addition, the state of Illinois provides Booklet IL-700-T which includes withholding tables and explains how to determine the amount of Illinois income tax employers should withhold.
How does Illinois unemployment insurance work?
Unemployment Insurance (UI) supplies funding for the Illinois Department of Employment Security (IDES), which pays benefits to the unemployed. The wage base is $13,271 for 2023 and rates range from .850% to 8.650%. If you’re a new employer, your rate is 3.950%
Newly registered businesses must register with IDES within 30 days of starting up. You can register electronically through the MyTax Illinois website.
New hire reporting in Illinois
For employers in the Illinois, be sure to report your new hires to the state within their first 20 days on the job. In addition, employers must report employees returning to work (who have been off the payroll) for 60 consecutive days or at the same company due to a: layoff or furlough, medical leave or separation from work. The state offers five different methods for reporting.
Here’s some frequently asked questions (with answers) the state provides too.
Now Write Those Paychecks!
You’re the boss of your business, and now you’re the boss of payroll! Once you’ve calculated each employee’s net pay by implementing deductions and withholdings, you’re good to cut those checks.
In addition to making sure your employees don’t have to wait any longer for their paychecks, make sure you set aside the amount of money your company needs to pay. FICA and UI payments can add up quickly, but if you fulfill them on time, you’ll be golden.
Federal tax filings are done through Forms 940 (annually) and 941 (quarterly), but taxes can be paid on an ongoing basis through the EFTPS payment system. Learn more about the IRS here.
More Illinois Payroll Tax Resources:
Here are some more helpful resources so you can become the payroll whiz your small business needs you to be!
- Illinois Department of Revenue: (800) 732-8866 or (217) 782-3336 | Withholding Payroll
- Illinois Payroll Tax: Questions & Answers
If calculating payroll taxes ever starts to feel like a burden, you might want to review our list of signs it’s time to outsource your payroll.
These rates are based on local legislation and can change at any time. Always consult a tax professional if you are unsure about your obligations.
Other calculators Illinois employers find useful
Illinois employers are invited to use the calculator at the top of this page to quickly calculate their employees’ gross pay, net pay, and deductions in a few clicks. But every now and then, employers run into situations that are a bit trickier. For example, do you occasionally reward your top performers with bonuses? Don’t forget to keep Uncle Sam in mind since he considers this type of payment to be supplemental wages and requires taxes to be withheld. Also, if you have a fluid workforce where people come and go, there may be times when you need to figure out final paychecks. So, if you can use a little more help managing the math, check out some of the calculators listed below.