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The Illinois Department of Revenue issued Publication IL-700-T, Illinois Withholding Tax Tables, to be used effective with wages paid on and after January 1, 2020.

The flat and supplemental income tax rate continues at 4.95% for 2020 and the state annual exemption amount per allowance is $2,325.

As we reported previously, 2017 Illinois Budget bill SB 9 (Public Act 100-0303) increased the flat personal income tax rate from 3.75% to 4.95% effective July 1, 2017. The tax increase was the result of the House of Representatives overriding Governor Rauner's veto of the budget bill, thus ending a two-year budget stalemate. (See Tax Alert 2017-1093.)

Form IL-W-4 update

New employees and those wishing to change their state withholding allowances are required to submit to their employer a Form IL-W-4, Employee's and other Payee's Illinois Withholding Allowance Certificate and Instructions in addition to federal Form W-4. Failure of an employee to submit Form IL-W-4 results in the employer withholding Illinois state income tax on the employee's total wages without allowing any exemptions.

Illinois voters to decide in 2020 whether there should be a graduated income tax system or if the flat rate method should continue

As we reported, Illinois Senate Joint Resolution (SJR) Constitutional Amendment 1, passed by the Illinois House and Senate, will place a referendum on the November 2020 ballot giving voters the opportunity to replace the current flat income tax with a graduated income tax. (See Tax Alert 2019-1270.)

Governor Pritzker signed into law SB 687 (PA 101-0008), which would establish a graduated income tax rate table, effective January 1, 2021, if the constitutional amendment is approved by voters. (News release, governor's office.)

The institution of a graduated income tax system is part of the governor's "fair tax" proposal, under which the governor expects that "97% of taxpayers will pay the same or less and only those making $250,000 will pay more." (News release, governor's office.)

2019 Forms W-2 must be filed electronically by January 31, 2020

Legislation enacted in mid-2017 (HB 0821, Public Act 100-0022) allowed the Department to require all withholding tax returns, including Forms IL-941, IL-941-X and Form W-2, be filed electronically. The law also allowed the Department to change the filing due date for Forms W-2 to January 31. Accordingly, regulations require all employers and payroll providers to file calendar year 2019 Forms W-2 electronically by January 31, 2020. (See Tax Alert 2017-1979.)

More information on the filing of Forms W-2 is available on the Department's website.

Go here for the 2019 electronic filing specifications.For questions regarding the electronic filing of Forms W-2, call the Electronic Commerce Division +1 866 440 8680 or +1 217 524 4767.

Upon petition by an employer or payroll provider, the Department may waive the electronic filing requirement if the employer or payroll provider demonstrates that it does not have access to the Internet or it is a hardship to file electronically. To request a waiver form, contact Taxpayer Assistance at +1 800 732 8866 or +1 217 782 3336. The Department will notify the requester of whether the waiver is approved.

For more on Illinois withholding tax, see the Department's website.

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