Illinois ~ Corporate, Personal Income Taxes: Withholding Tax Rate and Other Changes Discussed

The Illinois Department of Revenue (DOR) has issued an information bulletin that discusses personal income tax withholding changes, including the decrease in the personal income tax withholding rate effective beginning January 1, 2015, and the new filing deadline for taxpayers that are required to submit Form W-2s electronically. The Illinois income tax rate for individuals will drop from 5% to 3.75%, effective January 1, 2015. The new rate applies to withholding from:

— employee compensation (i.e., wages and salaries) paid in Illinois;

— unemployment compensation paid to an Illinois resident who has asked to have Illinois taxes withheld;

— gambling or lottery winnings paid in Illinois; and

— purchases of rights to Illinois lottery winnings.

Illinois withholding tax tables have been updated to reflect the rate change (TAXDAY, 2014/12/12, S.5).

The bulletin also summarizes changes that the DOR is implementing to improve the process of filing and paying withholding income tax. The Illinois withholding income tax return, Form IL-941, and instructions have been updated to explain what information is requested on each line and how to use credits. To prevent credits from being used erroneously, taxpayers will not be able to use a credit from a withholding overpayment on the taxpayer’s current IL-941 return until the overpayment has been approved by the DOR. Taxpayers will be notified in writing if the overpayment is verified and is approved as an available credit. Most overpayments will require the filing of an amended Illinois withholding income tax return, Form IL-941-X, to verify the credit.

According to the information bulletin, the DOR filed an emergency rule December 22, 2014, effective immediately, requiring taxpayers that must submit Form W-2s electronically to submit the forms by February 15 of the year following the year of the withholding. The deadline was previously March 31. Taxpayers that must transmit W-2 and W-2c returns to Illinois electronically include:

— payroll providers that file payroll returns and complete W-2s for employers of any size; and

— employers that are required to electronically transmit W-2s to the federal government.

Taxpayers that are granted a federal extension for information returns due on or before February 15 and that file W-2 information with the DOR on or before the federal extended due date will not be penalized.

Informational Bulletin FY 2015-08, Illinois Department of Revenue, January 2015, ¶402-897



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