How to Do Payroll in Illinois

Last reviewed: July 2026

Running payroll in Illinois involves two state agencies, one federal one, and a handful of forms that all need to line up before the first paycheck goes out. None of it is complicated on its own. The trouble is the order: skip a step and you end up registering for tax accounts after you already owe tax on them. This guide lays out the process in the sequence you should actually follow, from your first federal filing through your first set of W-2s.

Step 1: Get a Federal EIN

Before Illinois will open any account for you, the IRS needs to issue your business an Employer Identification Number (EIN). Apply free at IRS.gov and you'll have the number in about fifteen minutes. Every state registration, tax deposit, and year-end filing you do afterward will reference this EIN, so get it settled first.

Step 2: Register With Illinois Agencies

Illinois splits employer registration across two separate agencies, and new employers often assume signing up with one covers both. It doesn't.

The Illinois Department of Revenue handles income tax withholding through its MyTax Illinois portal (mytax.illinois.gov). Register here to get a withholding account number, which you'll need before your first payroll runs. Separately, the Illinois Department of Employment Security (IDES) handles unemployment insurance through its TaxNet system. You become liable for IDES registration once you pay $1,500 or more in wages in a calendar quarter, or employ someone for 20 weeks in a year, and registration is due within 30 days of that point.

Do both registrations early. Waiting until you've already run a few payrolls means back-filing and, in some cases, interest on late contributions.

Step 3: Set Up IL-W-4 Withholding

Every Illinois employee fills out a Form IL-W-4, the state's own withholding certificate. It is separate from the federal W-4, and you cannot substitute one for the other. The employee reports allowances on the form, you subtract the allowance value from gross wages, and the remainder is taxed at Illinois's flat 4.95% rate. If someone never turns in an IL-W-4, withhold as if they claimed zero allowances.

You'll also collect a federal W-4 and a Form I-9 for every new hire, and report each new hire to the state within 20 days of their start date. Our new hire reporting guide covers the federal side of that requirement in detail.

Step 4: Understand Your SUI Account

Once your IDES account is active, you're assigned a state unemployment insurance rate. New employers pay the standard rate, currently 3.350% for 2026, which already includes a small fund-building surcharge. That rate applies to the first $14,250 of each employee's wages for the year; after that, no more SUI is owed on that person until the next calendar year. Your rate is recalculated after you've built about three years of claims history, and it can move up or down depending on how many unemployment claims your former employees have filed.

Step 5: Choose a Pay Frequency

Illinois's Wage Payment and Collection Act sets a floor, not a menu. Most employees must be paid at least semi-monthly, with wages due no later than 13 days after the end of the pay period they cover. Executive, administrative, and professional employees, along with anyone paid on commission, can be paid monthly instead. Weekly or biweekly schedules are both allowed as long as they meet or beat the semi-monthly minimum.

Final pay deserves its own attention. Illinois requires terminated or resigning employees to receive their last paycheck by the next regularly scheduled payday, whether they quit or were let go. Treat that deadline the same way you'd treat any other payroll date on the calendar.

Step 6: Run Payroll and Track Final Pay

With registrations complete and forms on file, running payroll itself is arithmetic: gross wages minus federal withholding, Social Security, Medicare, and Illinois withholding equals net pay. Use our paycheck calculator to check a sample check before your first live run, and lean on our W-4 helper if an employee needs help filling out their federal form correctly.

• Confirm gross wages and hours for the pay period
• Apply federal and Illinois withholding
• Subtract Social Security and Medicare
• Issue an itemized pay stub with each payment

Step 7: Deposit and File on Schedule

Federal deposits go through EFTPS on a schedule tied to your total tax liability. Illinois withholding deposits follow a similar tiered system: employers who withhold $12,000 or less per year deposit monthly, by the 15th of the following month, while larger employers deposit semi-weekly. Regardless of deposit frequency, Form IL-941 is filed quarterly, due April 30, July 31, October 31, and January 31, and IDES's UI-3/40 wage report follows the same quarterly calendar. See our federal Form 941 guide for the matching federal filing.

Step 8: Close Out the Year With W-2s

By January 31 each year, issue W-2s to every employee and transmit copies to the Social Security Administration and the Illinois Department of Revenue. Employers filing 250 or more W-2s must submit electronically through MyTax Illinois, and honestly, electronic filing is easier for most small employers regardless of headcount.

None of these steps are one-time tasks after your first year. Withholding, deposits, quarterly returns, and new hire reports repeat on their own schedule for as long as you have employees on payroll.

Frequently Asked Questions

Doing all of this by hand is possible, but most owners who try it for a full year switch to software before their next hire. A service like Gusto registers your withholding calculations against current Illinois rates, times your IL-941 and UI-3/40 filings to the right due dates, and prepares W-2s automatically at year-end, which removes most of the deadline-tracking described above.