Recently enacted Illinois SB 1437 (Public Act 100-0865) sets the basic standard exemption amount to $2,050, plus a cost of living adjustment, through December 31, 2023. According to the Illinois Department of Revenue, this results in a standard exemption amount of $2,225 for calendar year 2018, up from $2,000. (Illinois Publication FY-2019-04, August 2018.)

As a result, the Illinois Department of Revenue released a revised Publication IL-700-T, effective retroactively to January 1, 2018. Because the change is minor, employers were instructed to adjust their withholding amounts as soon as possible.

Supplemental withholding

The flat income tax withholding and supplemental rate remains at 4.95% for calendar year 2018.

2018 automated income tax withholding

If you use an automated payroll method to figure your withholding, use the following formula beginning August 2018:

.0495 x (Wages minus (IL-W-4, Line 1 allowances x $2,225) + (IL-W-4, Line 2 allowances x $1,000) divided by the number of pay periods in a year))

To determine how much to withhold using the automated payroll method formula, follow these steps:

Step 1 Determine the wages paid for the payroll period.

Step 2 Figure your employee's exemptions using the allowances claimed on Form ILW4.

a. Multiply the number of allowances your employee claimed on Form IL-W-4, Line 1, by $2,225.

b. Multiply the number of allowances your employee claimed on Form IL-W-4, Line 2, by $1,000.

c. Add your answers from Step 2a and Step 2b.

d. Divide the result of Step 2c by the number of pay periods from the table. The result is your employee's exemptions.

Step 3 Subtract the exemptions from the wages paid. The result is the taxable amount.

Step 4 Multiply the taxable amount by 4.95% (.0495). You must withhold this amount.

Step 5 Add any additional amount from Form IL-W-4, Line 3. This is the total amount you withhold.

According to FY-2019-04, the change will most likely be unremarkable, possibly resulting in the 2018 withholding amounts prior to the change to be slightly more than what is required. The change should result in a small decrease in the amount of Illinois income tax required to be withheld for the rest of the year.

Employees who are concerned with their withholding amounts for 2018 may complete a new Form IL-W-4, Employee's and other Payee's Illinois Withholding Allowance Certificate, to update their exemption amounts and their Illinois withholding.

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