Who is required to withhold Illinois Income Tax and register as an Illinois withholding agent?

Page Content

Generally, you must withhold Illinois Income Tax if you are required to withhold (or have a voluntary agreement to withhold) federal income tax from payments you make for

• employee compensation (i.e., wages and salaries, bonus, overtime, and commission pay) paid in Illinois usually reported to a payee on Form W-2;
• non-wage income such as pensions, annuities, employment income, and sick pay that you have agreed to voluntarily withhold, usually reported to a recipient on Form 1099;
• gambling or lottery winnings in Illinois paid to an Illinois resident or qualifying non-resident, usually reported to a payee on Form W-2G; or
• the purchase of the rights to Illinois lottery winnings, reported to the purchaser on Form 1099-MISC.

However, there are some situations that do not require you to withhold Illinois Income Tax. See "When am I not required to withhold Illinois Income Tax?" in Publication 130 for more information. We do not require a separate agreement for payments covered by a federal voluntary withholding agreement. If requested by a payee, you can enter into a voluntary agreement and withhold Illinois Income Tax on Illinois income such as individual retirement accounts (IRAs) or pensions. Note: If you agree to a voluntary withholding agreement then you are required to withhold Illinois income tax.

To register your business, you may choose one of the following options:

• Register electronically using MyTax Illinois.
• Complete and mail Form REG-1, Illinois Business Registration Application.
• Visit a regional office.

Note:  You may register for state tax withholding and unemployment insurance at the same time by registering electronically via MyTax Illinois, visiting a regional office, or completing both Form REG-1, Illinois Business Registration Application, and Form REG-UI-1, Report to Determine Liability Under the Unemployment Insurance Act.

Note:  The State of Illinois Business Page explains employers' requirements for unemployment insurance, workers' compensation, nondiscrimination, etc.

Answers others found helpful

If you have additional inquiries, you may submit them to the Questions, Comments, or Request form.