Current through Register Vol. 48, No. 38, September 20, 2024
a) Except as provided in this Section, or in
Section
100.7090
with respect to reciprocal withholding exemption agreements for employees
residing in certain states, withholding is required with respect to
"compensation paid in this State" under Section
100.3120.
b) Withholding from Nonresident Employees.
For taxable years beginning on or after January 1, 2020, in determining
compensation paid in this State under IITA Section 304(a)(2)(B) for purposes of
this Section:
1)
If an
employer maintains a time and attendance system that tracks where employees
perform services on a daily basis, then data from the time and attendance
system shall be used. (IITA Section 701(a-5)(1)) For purposes of this
subsection (b)(1), "time and attendance system" means a system:
A)
in which the employee is required,
on a contemporaneous basis, to record the work location for every day worked
outside of the State where the employment duties are primarily
performed (IITA Section 701(a-5)(1)(A)); and
B)
that is designed to allow the
employer to allocate the employee's wages for income tax purposes among all
states in which the employee performs services (IITA Section
701(a-5)(1)(B)).
2)
In all other cases, the employer shall obtain a written statement from
the employee of the number of days reasonably expected to be spent performing
services in this State during the taxable year. Absent the employer's actual
knowledge of fraud or gross negligence by the employee in making the
determination or collusion between the employer and the employee to evade tax,
the certification made by the employee and maintained in the employer's books
and records shall be prima facie evidence and constitute a rebuttable
presumption of the number of days spent performing services in this
State. (IITA Section 701(a-5)(2))
3) The provisions of this subsection (b) are
relevant only to the issue of whether or not the employer has withheld the
proper amount of Illinois income tax from the compensation of an employee. The
amount of an employee's compensation "paid in this State" for all other
purposes must be determined by using the actual working days within and outside
of this State.
c)
Deferred Compensation
1) Under deferred
compensation agreements, payments are made by an employer to an employee for
service rendered at an earlier date. In many agreements, the employee receiving
deferred compensation payments is not required to render any current service
whatsoever, whereas in others he may be required to hold himself available to
render advisory and consultative service, if called upon to do so, and to
refrain from competition, but in either case, the amount of compensation is
unrelated to any service being currently rendered. Payments made under that
kind of deferred compensation agreement will be deemed to meet the tests set
forth in Section
100.3120
for compensation paid in Illinois if paid to the individual while a resident of
this State. Conversely, payments made under that kind of agreement will not be
subject to withholding if paid to the individual while a nonresident. Amounts
paid to nonresidents under deferred compensation agreements may be allocated to
Illinois under IITA Section 302(a) in accordance with Section
100.3120
notwithstanding the fact that those amounts are not subject to
withholding.
2) This subsection (c)
may be illustrated by the following example:
EXAMPLE: A is a corporate executive. On January 1, 1965, A
entered into an agreement with B corporation under which A was to be employed
by B in an executive capacity for a period of 5 years. Under the contract A is
entitled to a stated annual salary and to additional compensation to be
credited to a bookkeeping reserve account and deferred, accumulated and paid in
annual installments of $5,000 on A's retirement beginning January 1, 1970. In
the event of A's death prior to exhaustion of the account, the balance is to be
paid to A's personal representative. A is not required to render any service to
B after December 31, 1969. During 1970, A is paid $5,000 while a resident of
Illinois. This amount will be subject to withholding, because A's prior service
will be deemed to have met one of the tests for compensation paid in
Illinois.
