Hiring your first employee in Illinois

What do you have to register for before your first payroll?

Illinois runs one portal, MyTax Illinois, that serves both the Department of Revenue and the Department of Employment Security, so a single pass through Form REG-1 can open your withholding, sales tax and unemployment accounts. It is a shared front door, not one merged account: Revenue issues an Illinois Account ID and Employment Security issues a separate unemployment number with its own quarterly return. The trap is assuming the portal registered you for everything automatically. You have to tick the unemployment registration inside the application.

Does Illinois require income tax withholding?

Yes. You register with the Illinois Department of Revenue, before you hire an employee or make any sales in illinois.

If you must withhold federal income tax from someone's pay for work performed in Illinois, you must withhold Illinois income tax too, and you have to register in order to do it. Illinois uses a single flat rate rather than brackets, so there is no wage band table to interpret. Register before the first payday: a paper Form REG-1 takes four to eight weeks to process while the online route takes one to two business days.

What unemployment insurance does Illinois charge a new employer?

A new Illinois employer pays 3.35% on the first $14,250 each employee earns, so roughly $477 per employee in the first year. A new Illinois employer pays 3.35% on the first $14,250 of each worker's wages in 2026, and that entry rate already includes the 0.55% fund building rate, so do not add it a second time. Employers in administrative support and waste management pay a higher entry rate of 3.45%. You stay on the entry rate until you have three full calendar years of experience. Register within 30 days of starting up, which is a separate deadline from anything the Department of Revenue asks of you.

Do you need workers compensation insurance in Illinois?

Yes, from your first employee. Illinois sets no headcount to reach, so there is no free window before coverage is required.

• almost all employers with one or more employees, including part-time employees
• anyone whose employment is localized in Illinois, or who is hired or injured in Illinois

Illinois has no headcount grace period: one employee, even a part-time one, means you must carry coverage, and it reaches anyone hired in Illinois, injured in Illinois, or whose work is principally based there. Sole proprietors, partners, corporate officers and LLC members may exempt themselves, and the Commission confirms there is no opt-out form, so that is handled with your insurer rather than by a state filing. Going without is expensive in a way that scales: up to $500 for every day of noncompliance with a $10,000 minimum, personal liability for corporate officers, a work-stop order, and the loss of the Act's protection so an injured worker can sue you for unlimited damages.

How quickly must you report a new hire in Illinois?

Within 20 days after the date the employer hires the employee. Reports go to the Illinois Department of Employment Security.

Every Illinois employer must report each new hire within 20 days. Independent contractors count as newly hired employees under the statutory definition, and so does anyone you rehire after a separation of at least 60 consecutive days, which is the part most employers miss. Electronic filers may instead submit twice a month, spaced 12 to 16 days apart. The penalty is $15 per unreported person and applies only once the agency has notified you and you fail to respond within 21 days.

Does Illinois have paid family leave or state disability insurance?

No. Illinois runs no state paid family leave fund and no state disability insurance, so there is no payroll deduction of that kind and no extra account to open.

Illinois has no state paid family leave or disability insurance fund, so there is no payroll contribution to withhold. What Illinois does have is the Paid Leave for All Workers Act, an employer-funded mandate: workers accrue one hour of paid leave for every 40 hours worked, up to 40 hours a year, usable for any reason without explanation. That is a cost on your own payroll rather than a tax. Watch the local layer too, because Chicago and Cook County run their own paid leave ordinances with more generous terms.

Do you need a sales tax permit in Illinois?

Illinois calls the permit a Certificate of Registration and there is no registration fee. Note that monthly filers hold a certificate that expires after one year and renews automatically only if you are current on returns and payments, so a lapse in filing can cost you the registration itself.

Security deposits. The Department may demand a bond or other security before issuing the certificate, most often where an owner or officer was tied to another registrant that defaulted or was revoked in the past five years. It is capped by statute at the lower of three times your average monthly liability or $50,000.

Does a marketplace like Amazon or Etsy handle the tax for you?

Illinois has a marketplace facilitator law, and a facilitator that crosses the threshold is liable for the retailers' occupation tax on the sales it facilitates. If a platform is collecting for you, it carries the remittance duty on those sales. The catch is that this does not switch off your own obligations: sales through your own website still count toward your own threshold. Keep the two channels separated in your books so you can prove which tax was paid by whom.

If your sales drop, when can you stop collecting?

Illinois locks you in for a full year once you cross. You test your Illinois sales each quarter against the preceding twelve months, and if you meet the threshold you must collect and file for one year starting the first day of the next quarter, even if your sales collapse in month two. Only at the end of that year do you retest, and only then may you stop, at which point you must notify the Department electronically rather than simply going quiet. After that you keep retesting quarterly forever, so a single strong quarter pulls you back in for another twelve months.

Does Illinois charge a tax on revenue rather than profit?

Illinois has no general gross receipts tax, so there is nothing equivalent to Washington's B&O tax or Ohio's Commercial Activity Tax. Illinois taxes business profit rather than revenue. Do not read that as one tax bill though, because most Illinois businesses owe both income tax and a separate Personal Property Replacement Tax on the same income, and the replacement tax reaches partnerships, S corporations and LLCs that owe no corporate income tax at all.

Do you have to register your out-of-state company in Illinois?

$150 for a foreign LLC admission and $150 for a foreign corporation's application for authority. A foreign series LLC pays $400. Posted corporate fees exclude franchise tax, so a corporation should expect an initial franchise tax on top. Expedited service adds $100 and must be requested in person.

Qualifying a foreign entity is a separate step from registering for tax, and it is the one out-of-state employers most often skip. A foreign LLC must attach a certificate of good standing from its home state. Once admitted you inherit an ongoing $75 annual report, so treat this as a recurring cost rather than a one-off.

Where these figures come from

Every number on this page was read on Illinois's own agency pages, its statute, or a current-year official form, and this record was last reviewed on 2026-09-08. Where a state's explainer page disagreed with its statute or its current form, we followed the statute or the form and said so in the relevant section, because a state's consumer-facing pages are often the last thing updated when a figure changes.

Anything we could not confirm on a primary source is left blank rather than estimated. A missing figure on this page means we could not verify it, not that it is zero.

This is general information, not legal or tax advice. Rules change and your circumstances matter. Confirm anything you are about to act on with the agency named beside it.