Updated August 6, 2026 — registration steps, deadlines, and rates below were verified against official Illinois agency sources in August 2026. Confirm current figures with the agencies before filing.
Illinois employers register with two agencies: the Department of Revenue (income tax withholding) and IDES (unemployment insurance), and one MyTax Illinois REG-1 application can cover both.
Online registration through MyTax Illinois processes in about one to two business days, versus roughly six to eight weeks for the paper Form REG-1.
You must register with IDES within 30 days of starting up, and UI liability generally begins once you pay $1,500 in wages in a quarter or employ someone for 20 weeks in a calendar year.
Illinois withholds a flat 4.95% of employee compensation; new employers start on a monthly payment schedule with quarterly IL-941 returns filed electronically.
As of August 2026, the UI taxable wage base is $14,250 and most new employers pay a 3.350% contribution rate.
Every new hire, including independent contractors, must be reported to the Illinois New Hire Directory within 20 days of the first day on payroll.
Why Illinois requires payroll tax registration
The moment your startup puts its first Illinois employee on payroll, two obligations kick in. You must withhold Illinois income tax from wages and remit it to the Illinois Department of Revenue (IDOR), and you must pay state unemployment insurance (UI) contributions to the Illinois Department of Employment Security (IDES). Neither agency lets you simply start sending money; both require registered accounts first, and the deadlines are tighter than many founders expect. IDES requires newly created businesses to register within 30 days of start-up, and IDOR requires you to register and report the date your Illinois payroll will begin before you withhold.
Registering early matters for practical reasons too. Payroll providers cannot file returns on your behalf until your state account numbers exist, so registration is usually the first blocker when you are running payroll for the first time.
The two accounts you need and who issues them
Illinois keeps this simpler than many states because both accounts can be opened through one portal, but they are still distinct accounts held with distinct agencies:
Withholding income tax account (IDOR). Required for anyone who withholds Illinois income tax for Illinois employees. Illinois withholds a flat 4.95% of net income, a rate in effect since July 1, 2017 and unchanged as of August 2026.
Unemployment insurance account (IDES). Most for-profit employers become liable once they have paid $1,500 in wages in a single calendar quarter or employed one or more persons for 20 weeks in a given calendar year. Different thresholds apply to domestic, agricultural, and nonprofit employers.
There is no separate state disability or local wage withholding account to open for typical Illinois startups, which keeps the checklist short: one combined registration, two resulting accounts.
How to register step by step
Go to MyTax Illinois, the state's combined tax portal, and select "Register a New Business (Form REG-1)" from the homepage. The same application can also register you with IDES for unemployment insurance, so you do not need to file twice.
Complete the Illinois Business Registration Application. Have your federal EIN, legal entity details, and your Illinois payroll start date ready, since IDOR specifically asks when your Illinois payroll will begin.
Submit electronically. Registration confirmation is generally available in one to two business days. Mailing a paper Form REG-1 works too, but confirmation takes roughly six to eight weeks, which can delay your first payroll.
If you skipped the IDES portion or are only liable for UI later, you can register with IDES separately through MyTax Illinois or by submitting Form REG-UI-1, the "Report to Determine Liability Under the Unemployment Insurance Act." Details are on the IDES new employer page.
Once your certificate of registration is issued, you can retrieve it from your MyTax Illinois account, and most payroll software files these returns automatically once accounts exist.
Ongoing obligations after you register
Withholding payments. New registrants start on the monthly payer and quarterly return schedule. Monthly payments are due by the 15th of the month following the month tax was withheld. If you report more than $12,000 in withholding during the look-back period, or exceed $12,000 in any quarter, you move to a semi-weekly schedule: payments due Wednesday for amounts withheld the preceding Wednesday through Friday, and Friday for amounts withheld Saturday through Tuesday. Semi-weekly payers must pay electronically.
IL-941 returns. Form IL-941, the Illinois Withholding Income Tax Return, is due quarterly by the last day of the month following the end of the quarter, and all IL-941s must be filed electronically.
UI contribution and wage reports. Quarterly UI-3/40 Contribution and Wage Reports are due April 30, July 31, October 31, and January 31. Employers with 25 or more employees in the prior calendar year must also submit monthly wage reports electronically. As of August 2026, contributions apply to the first $14,250 of each worker's wages for 2026, and most employers who became liable on or after January 1, 2024 pay the new-employer entry rate of 3.350% (rates range from 0.750% to 7.050% for experience-rated employers).
New hire reporting. Report every new employee, including independent contractors, to the Illinois New Hire Directory within 20 days of the first day on payroll. You can file online, by fax, or by mail; the report includes the worker's name, address, Social Security number, date of hire, and your business name, address, and FEIN.
Most teams hand this cadence to payroll software once the accounts are open, but the legal responsibility for deadlines stays with the employer.
A note for remote and out-of-state employers
Illinois ties withholding obligations to Illinois employees, not to where your headquarters sits. IDOR defines a covered employer as one who has an office or transacts business in Illinois and for whom a worker performs services as an employee. If your Delaware C-corp based in Austin hires a remote engineer working from Chicago, you generally need both Illinois accounts before that person's first paycheck. The registration process is the same MyTax Illinois application.
FAQ
Can I register for withholding and unemployment insurance at the same time in Illinois?
Yes. The online REG-1 application on MyTax Illinois registers you with the Department of Revenue and, if needed, with IDES in a single submission. This is the fastest path, with confirmation generally available in one to two business days.
How much does Illinois unemployment insurance cost a new startup?
As of August 2026, most new employers pay 3.350% on the first $14,250 of each employee's annual wages for 2026. Employers in certain industry sectors pay a higher entry rate, and after roughly three years of experience your rate is recalculated annually based on your benefit charges.
When is my first IL-941 due?
IL-941 returns are due quarterly, by the last day of the month following the quarter's end, so a startup that first pays wages in August files its first return by October 31. The return must be filed electronically, separate from your monthly or semi-weekly withholding payments.