Pub-130, General Information

1. Who is required to withhold Illinois Income Tax?
2. Who is an employer or payer?
3. Who is an employee or payee?
4. Must I register to withhold Illinois Income Tax?
5. What happens after I register?
6. What should I do if I move or change my business name?
7. What should I do if I sell or transfer ownership of my business?
8. What if I no longer have employees or payees from whom I withhold Illinois Income tax or my business has closed?
9. What if I am a seasonal employer?

Generally, you must withhold Illinois Income Tax from payments you make for

• employee compensation (i.e., wages and salaries including bonus, overtime, and commission pay) that is paid in Illinois and from which you are required to withhold federal income tax, 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 winnings greater than $5,000 from an Illinois casino or race track, including sports wagering winnings, from which you are required to withhold federal income tax, usually reported to a payee on Form W-2G,
• Illinois lottery winnings of $1,000 or greater usually reported to a payee on Form W-2G, or
• the purchase of the rights to Illinois lottery winnings, usually 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?” 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.

Note: As a withholding agent (person who withholds income tax), you are liable for the taxes that you are required to withhold and that you volunteer to withhold. Because we are required to collect taxes (and issue assessments when these taxes are not paid), Illinois law states that the amounts required to be withheld and paid to us (and any penalties and interest) are considered to be a tax on you.

You are an employer if you are any of the following:

• a person or organization who has an office or transacts business in Illinois for whom a worker performs a service as an employee and you are the person who is liable to withhold and pay federal income taxes to the Internal Revenue Service (IRS).
• a person or organization who has an office or transacts business in Illinois and who has control of the payment of wages for employee services, if the employer does not have control of the payment of wages.
• a payer who has an office or transacts business in Illinois and who makes payments from which federal income taxes are withheld (e.g., gambling or lottery winnings).

You are a payer if you are any of the following:

• a person or organization who pays non-wage income such as pensions, annuities, employment income, and sick pay, that you have agreed to voluntarily withhold;
• a person or organization that pays gambling or lottery winnings; or
• a person or organization who purchases the rights to lottery winnings.

See IRS Publication 15 Circular E, Employer’s Tax Guide, for more information.

An employee is either

• a person who performs services subject to the legal control and direction of an employer, or
• an Illinois resident who receives payments on which federal income tax is withheld by the employer.

A payee is a person who receives non-wage income, gambling or lottery winnings, or a lump sum payment for rights to lottery winnings.

See IRS Publication 15 Circular E, Employer’s Tax Guide, for more information.

If you are required to or voluntarily withhold Illinois Income Tax for your Illinois employees or payees, you must register with IDOR and tell us the date your Illinois payroll will begin. Exception: Household employers should refer to Publication 121, Illinois Income Tax Withholding for Household Employees.

To register your business you have the following options:

• register electronically with the online Illinois Business Registration Application on MyTax Illinois (registration confirmation generally available in 1-2 days) at tax.illinois.gov,
• complete and mail Form REG-1, Illinois Business Registration Application (registration confirmation generally available in 6-8 weeks) and any necessary schedules, or
• visit one of our regional offices.

You will receive a temporary tax account number unless you already have received your federal employer identification number (FEIN).

If you are a new registrant you are assigned to the monthly payer and quarterly return schedule. See Publication 131, Withholding Income Tax Payment and Filing Requirements. Visit our website at tax.illinois.gov for more information regarding our electronic options.

If your business name or address has changed from your last return without changing owners, check the appropriate box on Form IL-941, Step 1, and enter your new business name and address in Step 1. File your completed return (Form IL-941) by its due date. You also can make changes to your business name by completing and submitting Form REG-3-C, Business Information Update, and updates to your address on MyTax Illinois.

If you sell or transfer your business, you must file a final return (Form IL-941) at the end of the final filing period. You may also be required to file Form CBS-1, Notice of Sale, Purchase, or Transfer of Business Assets, at least 10 days prior to the sale.

If your business has permanently stopped withholding because it has closed or you no longer pay wages, complete Step 2, Line B, on Form IL-941, check the box to indicate that this is a final return, and enter the date you stopped paying wages. You also can cease your account on MyTax Illinois.

If you are a seasonal business and have ceased paying wages temporarily (e.g., you will be rehiring employees during the next year), continue to file your returns. Even if you do not pay any wages or withhold any tax, you still must file Form IL-941 and complete a Schedule P, Illinois Withholding Schedule, for each reporting period. If you had no withholding for the filing period, report zero on Line 2 of Form IL-941 and on the Schedule P, enter your business name, FEIN, and zeros in both the income and withholding columns.