How to Fill Out Illinois Withholding Form IL-W-4 + FAQs

Illinois Form IL-W-4 is one of the most important state-issued tax forms for employees residing in Illinois. Correctly filling out this form lets your employer withhold the correct amount from your wages and ensures you avoid penalties or overpaying.

What is Illinois Form IL-W-4?

Illinois Form IL-W-4 , also known as the Employee’s and Other Payee’s Illinois Withholding Allowance Certificate, is a tax form issued by the Illinois Department of Revenue (IDOR). This form allows individuals employed in Illinois to calculate their withholding allowances.

Completing this form lets an employee inform their employer of the exact amount to withhold from their wages to cover the Illinois Income Tax. The withholding income tax rate in Illinois is 4.95% .

Do I Need to Fill Out an IL-W-4?

According to the IL-W-4 form instructions, you must complete Form IL-W-4 if you are an employee in the state of Illinois. It can include both Illinois residents and non-residents as long as their employer is based in the state.

Illinois residents working for out-of-state employers may also need to fill out an IL-W-4 for tax withholding purposes if they meet the following conditions:

• The Illinois resident works exclusively from home, or an Illinois-based location
• The duration of employment exceeds 30 days.
• The employer is located in a state without an income tax reciprocity agreement

How to Update Your IL-W-4 Form

If your personal or financial situation changes, you are required to update your allowances and issue a new Form IL-W-4 to your employer. Common examples of major life events requiring an IL-W-4 update include:

• Getting married
• Having a child
• Changes in income, such as receiving a pay raise, working an extra job, or obtaining an additional source of income

You should review your financial situation periodically to ensure the information on your IL-W-4 is current. If you determine you need to update your IL-W-4 information, follow these steps:

• Visit the Illinois Department of Revenue (IDOR) website and download the latest version of the IL-W-4 form from the Withholding Tax Forms portal .
• Review your current Form IL-W-4 for sections and details that are no longer up-to-date, such as your age, number of dependents, and additional allowances.
• Complete the new Form IL-W-4 with the updated information.
• Submit the new IL-W-4 to your employer’s relevant administrative section, such as your company’s HR department.
• Your employer will process your new IL-W-4 and adjust your income tax withholding accordingly.

Consequences for Failing to Update Your Form IL-W-4

If you do not update the information on your Form IL-W-4 despite a change in your personal or financial situation, there are two possible consequences: under-withholding and over-withholding.

Under-withholding

Outdated information on your Form IL-W-4 can cause your employer to withhold less than the amount you owe to pay Illinois income taxes, exposing you to underpayment penalties. According to IDOR Publication 103 (IDOR Pub-103), the penalty for underpaying your income taxes is called the late-payment penalty .

Page 8 of IDOR Pub-103 breaks down the penalty for underpayment. It is calculated based on the amount of unpaid taxes and the number of days over the deadline

• If you are between 1 and 30 days late, the penalty is 2% of your unpaid amount.
• If you are 31 days late or more, the penalty increases to 10% of your unpaid taxes.

The penalty may further increase to 15% of any unpaid amount if the state initiates a tax liability audit while you still have pending unpaid income taxes. If the audit or tax investigation concludes and you receive an audit-prepared amended tax return or Form IL-870, you have 30 days to sign the documents and pay the remainder with the penalty. If you fail to pay within these 30 days, the penalty increases to 20%.

Over-withholding

While there are no legal penalties for over-withholding on your IL-W-4, doing so may result in decreased take-home pay. You will not be able to recover over-withheld funds until you file your annual taxes and the state issues a tax refund.