Current through Register Vol. 48, No. 38, September 20, 2024
a) In general. On or before the date on which
an individual commences employment with an employer, the individual shall
furnish the employer with a signed Illinois withholding exemption certificate
relating to the number of withholding exemptions he or she claims, which in no
event shall exceed the number to which he or she is entitled. If an individual
has claimed total exemption from federal income tax withholding for the current
taxable year under 26 CFR 31.3402(n) -1, i.e., if the individual has furnished
his or her employer with a federal exemption certificate stating that he or she
incurred no federal income tax liability for the preceding taxable year, and
the individual anticipates that he or she will not incur a federal income tax
liability for the current taxable year, then the individual may, solely on that
basis, claim total exemption from Illinois income tax withholding for the
current taxable year on a signed Illinois withholding exemption certificate. If
an employee attempts to claim total exemption from withholding on the Illinois
certificate but does not simultaneously file or have on file with his or her
employer a federal certificate claiming total exemption from federal
withholding, or if the employee subsequently files a federal certificate that
does not claim total exemption, then the employer shall disregard the Illinois
certificate as invalid and shall withhold Illinois income tax at the full rate
from the employee's total compensation until a valid certificate is furnished
by the employee. The employer is required to request a withholding exemption
certificate from each employee, but if the employee fails to furnish the
certificate, the employee shall be considered as claiming no withholding
exemptions. If the employee is a resident of a state with which Illinois has
entered into a reciprocal agreement, he or she may file an IL-W-5, Employee's
Statement of Non-Residence in Illinois, to claim an exemption from Illinois
withholding. See 86 Ill. Adm. Code
100.7120.
b) Form and content. Form IL-W-4, Employee's
Illinois Withholding Exemption Certificate, is the form prescribed for the
certificate required to be filed under this Section. A withholding exemption
certificate on Form IL-W-4 shall be prepared in accordance with the
instructions applicable to that form, and shall set forth fully and clearly the
data required in the form. An alteration of or unauthorized addition to a
withholding exemption certificate shall cause the certificate to be invalid. An
alteration of a withholding exemption certificate is any deletion of the
language by which the employee certifies or affirms the correctness of the
completed certificate, or any material defacing the certificate. An
unauthorized addition to a withholding exemption certificate is any writing on
the certificate other than the entries requested (e.g., name, address, and
number of exemptions claimed). Form IL-W-4 will be supplied to employers upon
request to the Department. In lieu of the prescribed form of certificate,
employers may prepare and use a written form the provisions of which are
identical to those of the prescribed form. Alternatively, an employer may use
any software application that will allow employees to prepare the IL-W-4
electronically, provided that any such electronic system meets the requirements
of 26 CFR 31.3402(f)(5) -1(c) and requires the production and retention of the
same information required on the written Form IL-W-4.
c) Change in status that affects the current
calendar year.
1) Decrease in the number of
exemptions.
A) Employee notification. If, on
any day during the calendar year, the number of withholding exemptions to which
an employee is entitled is less than the number of withholding exemptions
claimed on a withholding certificate then in effect, the employee must, within
10 days after the change occurs, furnish the employer with a new Illinois
withholding exemption certificate relating to the number of withholding
exemptions the employee then claims, which must in no event exceed the number
to which the employee is entitled on the day the form is submitted.
B) Internal Revenue Service notification. If
an employer receives a notice from the Internal Revenue Service relative to a
particular employee's withholding exemption certificate that necessitates the
employer disregarding an employee's claim to total exemption or to the full
amount of exemptions shown on the Form W-4 under 26 CFR 31.3402(f)(2) -1(g) or
31.3402(f)(2) -1 T(g), then the employer shall withhold Illinois income tax
from the employee as follows:
i) if the
employee's Form IL-W-4 claims total exemption from Illinois withholding, on the
basis of the maximum number of exemptions specified by the Internal Revenue
Service in the notice; or
ii) if
the employee's Form IL-W-4 claims a certain number of exemptions, on the basis
of the number of exemptions claimed by the employee or on the basis of the
maximum number of exemptions specified by the Internal Revenue Service in the
notice, whichever is less.
2) Increase in the number of exemptions. If,
on any day during the calendar year, the number of withholding exemptions to
which an employee is entitled is more than the number of withholding exemptions
claimed on the withholding exemption certificate then in effect, the employee
may furnish the employer with a new Illinois withholding exemption certificate
on which the employee must in no event claim more than the number of
withholding exemptions to which he or she is entitled on that day.
3) Change in circumstances relative to a
total exemption from Illinois income tax withholding.
A) Change entitling the employee to a total
exemption. If, on any day during the calendar year, the employee furnishes his
or her employer with a new federal withholding exemption certificate for the
current taxable year claiming total exemption from federal income tax
withholding under 26 CFR 31.3402(n) -1, then the employee may also furnish the
employer with a new Illinois withholding exemption certificate claiming total
exemption from Illinois income tax withholding for the current taxable
year.
B) Change depriving the
employee of a total exemption. If, on any day during the calendar year, the
employee furnishes his or her employer with a new federal withholding exemption
certificate withdrawing his or her claim of total exemption for federal income
tax withholding for the current taxable year under 26 CFR 31.3402(n) -1, then
the employee must simultaneously furnish the employer with a new Illinois
withholding exemption certificate specifying the number of withholding
exemptions he or she claims.
d) Change in status that affects next
calendar year.
1) Increase or decrease in the
number of exemptions. If, on any day during the calendar year, the number of
withholding exemptions to which the employee will be, or may reasonably be
expected to be, entitled to for the taxable year that begins in, or with, the
next calendar year is different from the number to which the employee is
entitled on that day, the following shall apply:
A) If the number is less than the number of
withholding exemptions claimed by the employee on an Illinois withholding
exemption certificate in effect on that day, the employee must, on or before
December 1 of the year in which the change occurs, unless the change occurs in
December, furnish his or her employer with a new withholding exemption
certificate reflecting the decrease. If the change occurs in December, the new
certificate must be furnished within 10 days after the change occurs.
B) If the number is greater than the number
of withholding exemptions claimed by the employee on an Illinois withholding
exemption certificate in effect on that day, the employee may, on or before
December 1 of the year in which the change occurs, unless the change occurs in
December, furnish his or her employer with a new withholding exemption
certificate reflecting the increase. If the change occurs in December, the
certificate may be furnished on or after the date on which the change
occurs.
2) Change in
circumstances relative to the total exemption. If an employee, having in effect
a federal withholding exemption certificate claiming total exemption from
federal income withholding, furnishes his or her employer with a new federal
withholding exemption certificate stating a specific number of withholding
exemptions for the taxable year beginning with or including the following
January 1, then the employee must also have on file with the employer, not
later than the date on which the new federal withholding exemption certificate
was submitted, an Illinois withholding exemption certificate stating a specific
number of Illinois withholding exemptions not to exceed the total number to
which the employee is entitled under IITA Section 702 and Section
100.7100
of this Part.
e) Annual
determination. On or before December 1 of each year, those employees whose
Illinois withholding exemption will change in the succeeding year should file a
new Illinois withholding exemption certificate (IL-W-4) reflecting the
change.
f) Effective date of
exemption certificate. An Illinois withholding exemption certificate furnished
an employer, when no previous certificate is in effect for the employee, shall
take effect as of the beginning of the first payroll period ending, or the
first payment of compensation without regard to a payroll period, on or after
the date on which the certificate is so furnished. In any case in which an
Illinois withholding exemption certificate is in effect for an employee, the
furnishing of a new withholding exemption certificate shall take effect with
respect to the first payment of compensation made on or after the first status
determination date (January 1, May 1, July 1 and October 1 of each year) that
occurs at least 30 days after the date on which the new certificate is
furnished. However, at the election of the employer, except for Illinois
withholding exemption certificates provided under subsection (d) of this
Section, the certificate may be effective with respect to any earlier payment
of compensation made after the certificate is furnished.
g) Period during which withholding exemption
certificate remains in effect.
1)
Certificates claiming total exemption. An Illinois withholding exemption
certificate that claims total exemption from Illinois income tax withholding
remains in effect for the same period as the federal withholding exemption
certificate on which it is based. This period is defined in 26 CFR
31.3402(f)(4) -1(c).
2)
Certificates claiming a specific number of withholding exemptions. An Illinois
withholding exemption certificate that claims a specific number of withholding
exemptions and that is in effect pursuant to this Section shall continue in
effect until another withholding exemption certificate takes effect.
h) Employer referral of certain
Illinois withholding exemption certificates to the Department.
1) When required.
A) Any Illinois withholding exemption
certificate meeting all of the following criteria must be referred by the
employer to whom it is submitted to the Department of Revenue not later than
the day on which the next quarterly return of withholding is due. The criteria
for referral are:
i) that the certificate
claims more withholding exemptions than the simultaneously effective federal
withholding certificate;
ii) that
the certificate claims in excess of 14 exemptions; and
iii) that the employer has no obligation to
submit a simultaneously effective federal certificate to the Internal Revenue
Service under 26 CFR 31.3402(f)(2) -1(g).
B) In addition to the foregoing, an Illinois
withholding certificate must be referred by the employer to the Department of
Revenue as directed in a written notice to the employer from the Department or
as directed in published guidance. A notice to the employer may relate either
to one or more named employees; to one or more reasonably segregable units of
the employer; or to withholding exemptions under certain specified criteria.
Employers may also be required to submit copies of withholding exemption
certificates under certain specified criteria when directed to do so by the
Department in published guidance. "Published guidance," in this case, includes
but is not limited to Department of Revenue bulletins, circulars, publications
and form instructions.
C) Referral
under this subsection (h) shall be accomplished by mailing or delivering a copy
of the certificate to be referred to:
Illinois Department of Revenue
Taxpayer Correspondence Section
Post Office Box 4565
Springfield, Illinois 62708
Alternatively, upon notice from the Department, the employer
must make withholding exemption certificates received from one or more named
employees, from one or more reasonably segregable units of the employer, or
from employees who have furnished withholding exemption certificates under
certain specified criteria available for inspection by a Department employee
(e.g., a compliance check).
2) Results of referral.
A) The withholding exemption certificate
remains effective even though it has been referred to the Department under this
subsection (h), unless and until the Department notifies the employer in
writing:
i) that the certificate claims
exemptions in excess of the number to which the employee is entitled, in which
case the notice shall specify either the number of exemptions to which the
employee is entitled if that number can be determined or, if that number cannot
be determined, that the employee is not entitled to any exemptions;
or
ii) that the Department has
attempted to verify the certificate by correspondence with the employee but has
been unsuccessful, in which case the employer shall withhold Illinois income
tax from the employee as though no certificate were on file, i.e., as though
the employee claimed no exemptions.
B) As part of this notice, the Department may
advise the employer of the reasons why it has determined that the certificate
should not be effective.
3) Employer's action in response to the
Department's notice rendering a certificate ineffective. The employer shall
promptly furnish the employee who files the certificate, if still in his or her
employ, with a copy of the written notice received from the Department under
subsection (h)(2) relative to the certificate. The employer shall withhold
amounts from the employee on the basis of the maximum number of exemptions
specified in the notice. If the employee files a new certificate after the
employer has received the notice relative to an earlier referred certificate,
the employer shall withhold on the basis of that new certificate only if it
does not claim a number of exemptions in excess of the maximum number specified
in the notice. The employer shall disregard any new certificate from the
employee that does claim exemptions in excess of the maximum number specified
in the notice. The employer shall not submit such a new certificate to the
Department under this subsection (h) and the employer shall continue to
withhold amounts from the employee on the basis of the maximum number of
exemptions specified in the notice. However, the employee may detail, in a
written statement attached to the new certificate, any circumstances of the
employee that have changed since the date of the Department's notice and that
justify or support the number of exemptions claimed by the employee on the new
certificate. The employee may then submit that new certificate and written
statement either to the Department at the address indicated in subsection
(h)(1)(C), or to the employer who must then promptly submit a copy of the new
certificate and the attached written statement to the Department at the address
indicated in subsection (h)(1)(C). Even though the employer has submitted the
new certificate to the Department, the employer shall continue to disregard the
new certificate and shall continue to withhold amounts from the employee on the
basis of the maximum number of exemptions specified in the notice unless and
until the Department, by a second written notice, advises the employer to
withhold on the basis of the new certificate.
