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(35 ILCS 5/701)
(from Ch. 120, par. 7-701)
Requirement and amount of withholding.
(a) In General. Every
employer maintaining an office or transacting business within this State
and required under the provisions of the Internal Revenue Code to
withhold a tax on:
(1) compensation paid in this State (as determined
under Section 304(a)(2)(B) to an individual; or
(2) payments described in subsection (b) shall deduct
and withhold from such compensation for each payroll period (as defined in Section 3401 of the Internal Revenue Code) an amount equal to the amount by which such individual's compensation exceeds the proportionate part of this withholding exemption (computed as provided in Section 702) attributable to the payroll period for which such compensation is payable multiplied by a percentage equal to the percentage tax rate for individuals provided in subsection (b) of Section 201.
(a-5) Withholding from nonresident employees. For taxable years beginning on or after January 1, 2020, for purposes of determining compensation paid in this State under paragraph (B) of item (2) of subsection (a) of Section 304:
(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. For purposes of this paragraph, 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; 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.
(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 so 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.
(b) Payment to Residents. Any payment (including compensation, but not including a payment from which withholding is required under Section 710 of this Act) to a
by a payor maintaining an office or transacting business within this State
(including any agency, officer, or employee of this State or of any political
subdivision of this State) and on which withholding of tax is required under
the provisions of the
Internal Revenue Code shall be deemed to be compensation paid in this State
by an employer to an employee for the purposes of Article 7 and Section
601(b)(1) to the extent such payment is included in the recipient's base
income and not subjected to withholding by another state.
Notwithstanding any other provision to the contrary, no amount shall be
withheld from unemployment insurance benefit payments made to an individual
pursuant to the Unemployment Insurance Act unless the individual has
voluntarily elected the withholding pursuant to rules promulgated by the
Director of Employment Security.
(c) Special Definitions. Withholding shall be considered required under
the provisions of the Internal Revenue Code to the extent the Internal Revenue
Code either requires withholding or allows for voluntary withholding the
payor and recipient have entered into such a voluntary withholding agreement.
For the purposes of Article 7 and Section 1002(c) the term "employer" includes
any payor who is required to withhold tax pursuant to this Section.
(d) Reciprocal Exemption. The Director may enter into an agreement with
the taxing authorities of any state which imposes a tax on or measured by
income to provide that compensation paid in such state to residents of this
State shall be exempt from withholding of such tax; in such case, any
compensation paid in this State to residents of such state shall be exempt
All reciprocal agreements shall be subject to the requirements of Section
2505-575 of the Department of Revenue Law (20 ILCS
(e) Notwithstanding subsection (a)(2) of this Section, no withholding
is required on payments for which withholding is required under Section
3405 or 3406 of the Internal Revenue Code.
(Source: P.A. 101-585, eff. 8-26-19.)