Section 2920.18  Voluntary Withholding For Federal And/Or State Of Illinois Income Tax

a)         Whenever an individual voluntarily elects, pursuant to Section 1300 of the Act [820 ILCS 405/1300], to have monies withheld from his unemployment insurance benefits to cover possible federal and/or State of Illinois income tax liability, the amount of benefits subject to such income tax withholding is the sum of the individual's weekly benefit amount (WBA), following any of the mandatory deductions from unemployment benefits set forth in subsections (a)(1), (2), and (3), plus any spouse or dependents' allowance payable under the Act.  The following are the mandatory deductions:

1)         disqualifying income, including vacation pay, holiday pay, retirement pay, and workers' compensation, under Section 2920.10;

2)         wages for less than full time work payable to him with respect to such week which are in excess of 50% of his weekly benefit amount;

3)         one-fifth of the individual's WBA for each day that the individual was unable or unavailable for work as required by Section 402 of the Act.

b)         Whenever an individual has voluntarily elected, pursuant to Section 1300 of the Act, to have monies withheld for federal and/or State of Illinois income tax from his unemployment benefits for a period covered by a benefit check, the Department shall withhold 10% of the amount of benefits that are subject to withholding under subsection (a) when withholding for federal income tax, rounded (if not already a multiple of one dollar) to the nearest dollar and 3% of the amount of benefits that are subject to withholding under subsection (a) when withholding for State of Illinois income tax, rounded (if not already a multiple of one dollar) to the nearest dollar.  If the product is equally near 2 multiples of one dollar, it shall be rounded to the higher multiple of one dollar.  If the individual's benefits for the period, less amounts subject to recoupment under Section 2835.15 and less any involuntary deductions for child support pursuant to Section 2815.105, are less than the amount that would otherwise be withheld pursuant to this subsection (10% of the amount of benefits subject to withholding under subsection (a) if only federal income tax withholding is elected, 3% if only State of Illinois income tax withholding is elected or 10% plus 3% if both federal and State of Illinois income tax withholding is elected), the entire amount of the benefits remaining shall be withheld.  If the individual elects to have both federal and State of Illinois income taxes withheld and the amount remaining is insufficient to cover both taxes, the entire amount of State of Illinois tax shall be withheld before any federal tax is withheld.

1)         Example:  The individual elects both federal and State of Illinois income tax withholding.  The individual's WBA for each of the two weeks covered by the benefit payment is $251.  The individual receives a dependents' allowance of $81 for each week.   The amount of benefits subject to federal and State of Illinois income tax withholding for the two week period is the sum of $332 and $332, which equals $664.  The Department will deduct for federal income tax withholding 10% of $664 which equals $66.40, which, rounded to the nearest dollar, is $66. Additionally, the Department will deduct for State of Illinois income tax withholding 3% of $664, which equals $19.92, which, rounded to the nearest dollar, is $20.  Accordingly, the individual will receive $578 in benefits after having $66 deducted for federal income tax withholding and $20 deducted for State of Illinois income tax withholding.

2)         Example:  The individual elects both federal and State of Illinois income tax withholding.  The individual's WBA for each of the two weeks covered by the Department's payment of benefits is $129.  The individual receives a dependents' allowance of $42 for each week.

            For the first week of the payment period, the individual has $90 in disqualifying vacation pay, but in the second week the individual does not have any disqualifying vacation pay.

            The amount of benefits subject to federal and State of Illinois income tax withholding for the first week is $129 less $90 in vacation pay, which equals $39 plus his dependents' allowance of $42, which totals $81.  Because the individual did not receive any disqualifying vacation pay for the second week of the period, the amount of benefits subject to federal and State of Illinois income tax withholding attributable to the second week is $129 plus his dependents' allowance of $42, which totals $171.

            The amount of benefits subject to federal and State of Illinois income tax withholding for the two week period is the sum of $81 and $171, which equals $252.  The Department will deduct for federal income tax withholding 10% of $252, which equals $25.20, which, rounded to the nearest dollar, is $25.  The Department will deduct for State of Illinois income tax withholding 3% of $252, which equals $7.56, which, rounded to the nearest dollar, is $8.

            The individual will receive $219 for the period after having $25 deducted for federal income tax withholding and $8 deducted for State of Illinois income tax withholding.

3)         Example:  The individual's WBA for each of the two weeks covered by the Department's payment of benefits is $129.  The amount of benefits subject to federal and State of Illinois income tax withholding for each week of the two week period is $129.  The amount of benefits subject to federal and State of Illinois income tax withholding for the two week period is $258, the sum of $129 and $129.

            10% of $258 equals $25.80, which, rounded to the nearest dollar, is $26. 3% of $258 equals $7.74, which, rounded to the nearest dollar, is $8.

            In this example, assume that the individual has elected both federal and State of Illinois income tax withholding, that the individual is also subject to recoupment for both weeks in an amount up to 25% of his WBA, which amount is $32.25 for both weeks, and that the individual is subject to a withholding order of $100 for child support for the first week.

            For the first week, the Department will first recoup the entire amount of $32.25 due for that first week.  $129 minus $32.25 equals $96.75.  Because the individual does not have sufficient benefits to cover the full amount of child support due for that first week, the Department will deduct $96.75, the amount of benefits available for that week.  The individual's payment for the two week period will not include any benefits with respect to that first week.

            For the second week of the payment period, the individual is not subject to a withholding order for child support.  Accordingly, the individual is eligible to receive $96.75 for the second week, the difference between the benefits payable to him for that week ($129) and the amount recouped ($32.25). Because the individual has elected both federal and State of Illinois income tax withholding for the period covered by the payment, the Department will deduct $26 for federal income tax withholding and $8 for State of Illinois income tax withholding from the individual's benefits and pay the individual the remaining $62.75.

4)         Example:  Assume the same situation described in subsection (b)(3), except that the individual's withholding for court ordered child support is $90 for each week.  The amount of benefits subject to federal and State of Illinois income tax withholding for the two week period remains $258.  10% of $258 equals $25.80, which, rounded to the nearest dollar, is $26. 3% of $258 equals $7.74, which, rounded to the nearest dollar, is $8.

            The individual has sufficient benefits for the Department to recoup the maximum amount and to deduct for child support in full for both weeks.  If the individual had not elected to withhold federal and State of Illinois income tax, the individual would have received a check for $13.50, the sum of $6.75 and $6.75 for that two week period.  Because the individual has elected federal and State of Illinois income tax withholding for this period and because the benefits for the period after recoupment and child support are less than 10% plus 3% of the amount subject to withholding, the Department will deduct the entire $13.50 for income tax withholding ($8 for State of Illinois income tax withholding and the remaining $5.50 for federal income tax withholding) and not pay the individual any benefits for this  period.

c)         An individual's election and his revocation of his election to have monies withheld from his benefits for possible federal and/or State of Illinois income tax liability shall be prospective only.  Any decision made by the Department as to whether an individual has, under the Act, elected withholding or revoked a withholding election shall constitute a final administrative decision, subject to review under the Administrative Review Law [735 ILCS 5/Art. III].

            EXAMPLE:  Upon filing an additional claim during his benefit year, an individual elects to have federal and State of Illinois income tax withheld from his unemployment benefits.  His first benefit check covers the two-week period beginning January 8, 2006 and ending January 21, 2006.  His WBA is $250, and the amount subject to withholding for the period is $65 (10% and 3% of $500).  For each week, he is subject to recoupment of 25% of his WBA and a withholding order of $100 for child support.  Consequently, his benefit check for the two-week period is for $110.  When he receives his benefit check, he asks to revoke the elections, explaining he thought the income tax withholding would be based on a percentage of his WBA after recoupment and child support.  While the Department, if he desires, will revoke his elections to withhold with respect to a period that has not yet ended, it will not retroactively revoke his elections with respect to January 8 through January 21.  Elections and revocations can only operate prospectively.

(Source:  Amended at 30 Ill. Reg. 2357, effective January 31, 2006)