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The Illinois Department of Revenue released the wage-bracket withholding tables for 2017 to its website. The income tax withholding rate remains at 3.75% and the standard exemption amount remains at $2,175. (Booklet IL-700-T.)

The 2017 booklet does not contain the warning that about the possibility that the state income tax rate may increase in order to resolve the state's budget shortfall created by the reduction to 3.75% effective January 1, 2015. The state has been embroiled in a budget impasse since July 1, 2015, operating on temporary stopgap spending plans in the interim. The budget impasse is expected to continue into 2017.

History

In January 2011, former Illinois Governor Quinn signed into law legislation that increased the state personal income tax rate for four years to 5.0%, effective through December 31, 2014. Under the legislation, the income tax rate decreased to 3.75% effective January 1, 2015, and to 3.25% effective January 1, 2025. (SB 2505, Public Act 96-1496, Laws 2011, passed and signed by the governor on January 13, 2011)

The legislation also increased the corporate income tax rate from 4.8% to 7.0% effective January 1, 2011. The corporate rate dropped to 5.25% effective January 1, 2015, and 4.8% as of January 1, 2025.

Forms W-2 for calendar year 2016 due to Department by February 15, 2017

All payroll providers who file payroll returns and complete Forms W-2 for employers of any size and all employers which are required to electronically transmit W-2s to the Social Security Administration (currently, those filing 250 or more Forms W-2) must file Forms W-2 electronically with the Illinois Department of Revenue by February 15. Electronic filing specifications for calendar year 2016 can be found here.

The Department does not accept Forms W-2 and W-2-C information submitted on paper, CDs, DVDs, tapes, or diskettes. These are not acceptable forms of transmission and will not be processed. Employers not required to submit Forms W-2 electronically may do so voluntarily. Employers must retain Forms W-2 information for at least three years and submit them upon the Department's request.

For calendar year 2016 Forms W-2, the deadline to file is February 15, 2017.

For further assistance, contact Department representative Joan Hartley by telephone at +1 217 558 9550 or by email at joan.hartley@illinois.gov.

Withholding tax filing changes effective for tax year 2017

As we previously reported, the Department announced that several changes are being made to the reporting requirements for state income tax withholding (FY 2017-07). Effective for withholding periods on and after January 1, 2017:

— Form IL-941, Illinois Withholding Income Tax Return, has changed. The form requires additional information to implement new legislation and provide better guidance to the taxpayer in calculating and paying withholding tax.

— All withholding taxpayers will be required to file quarterly returns. The annual filing option will no longer be available.

— All withholding taxpayers will be assigned to pay withholding income tax on a monthly or semi-weekly schedule. The annual payment option will no longer be available.

Changes to Form IL-941

Changes on the 2017 Form IL-941 include:

— Line C is added to Step 2 to verify compliance with the Illinois Secure Choice Savings Program Act once implemented (SB 2758). See the Illinois Secure Choice website for more information.

— Step 4 has been updated to include a section for entering required withholding information for each month of the quarter. Step 4 has entry lines for the amount of income tax withheld based upon the day the compensation was paid (payroll dates). Failure for withholding taxpayers to complete Step 4 could result in the assessment of penalties when the Department is unable to completely process the return. Refer to the Form IL-941 instructions for examples and more information.

— Step 5, Lines 3-5 were reorganized to be in the order in which they are applied to the withholding tax liability.

— Step 7 includes a line for tax preparers to enter their IRS-issued preparer tax identification number (PTIN). This is required per the State Tax Preparer Oversight Act (HB 5527), enacted in July 2016. Beginning on or after January 1, 2017, all paid income tax return preparers are required to include their PTIN on any tax returns they prepare and file under the Illinois Income Tax Act or on any claim for refund of tax imposed by the Illinois Income Tax Act. Failure to comply may result in assessment of a penalty on the preparer.

Failure to complete all required sections including new Line C once the program is implemented (now delayed to 2018 or 2019) and Step 4 of the Form IL-941 could result in assessment of penalties for filing a return that cannot be processed.

For an example of the new Form IL-941, go here.

All withholding taxpayers must file Form IL-941 quarterly in 2017

Effective with the first quarter 2017 (return due May 1, 2017), all Illinois withholding taxpayers will be required to file Form IL-941 returns quarterly. The annual filing option will no longer be available. Form IL-941 is due by the last day of the month that follows the end of the quarter. If the due date falls on a holiday or weekend, the return is due on the next business day.

Current annual filers will be notified of whether they will be monthly or semi-weekly payers in 2017

According to FY 2017-07, taxpayers that are currently an annual payer will be notified of their change to either a monthly or a semi-weekly payment schedule for 2017. A taxpayer's withholding tax payment due dates are determined by the payment schedule assigned by the Department, based on taxpayer liability and the day employees or others from whom tax is withheld are paid.

For the 2017 Illinois withholding tax payment and return due dates, go here.

For more information on withholding taxes in Illinois, see the Department's website.

Secure Choice implementation schedule delayed

Note that the Secure Choice website has been updated to display this notice:

Implementation Update: At its August 2016 meeting, the Secure Choice Board set a new implementation schedule for Secure Choice. Program enrolment will be phased-in over time, beginning with a phase one pilot program in 2018. Participating businesses will be made aware of the program rollout in advance, but many may not actually begin enrolment until later phases in 2018 or 2019.

An employer fact sheet can be found here and FAQs by employers can be found here.

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