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[Webinar] Tax Insights: Illinois

2013-12-23 14:00:00

This webinar is a high-level overview with interesting facts about the Illinois state taxing authority and the various challenges that employers may face in the state. This session is designed to guide businesses through what the state would like all employers to know, and will also cover some recent accomplishments by ADP.

Lorraine Abate

Lorraine Abate
VP Government Affairs, ADP
Lorraine Abate is the government relations analyst responsible for ADP’s compliance and relationship with Illinois agencies. Lorraine has over 24 years of experience at ADP and is also responsible for government relations with the states of Arkansas, California, Nevada, New Mexico, and Texas.

Tax Credits and Incentives Can Help Lower Your Effective Tax Rate

Learn more about how you could leverage available tax credits and incentives with help from ADP, or watch the overview video below.

Lorraine Abate:

Hello, everyone, and welcome to today’s Webinar on Illinois.
My name is Lorraine Abate, the government relations analyst responsible for ADP compliance and relationship with Illinois agencies. I have over 24 years’ experience in ADP. And, as a government relations analyst, my state responsibilities also include Arkansas, California, Nevada, New Mexico, and Texas.
I hope you enjoy your presentation and encourage your feedback for future Webinars.
First, a little bit about ADP. We currently pay out of six employers (ph) in the country and move over $1 trillion each year. And it’s one of only four AAA-rated companies in the U.S. We have been in business over 60 years and have become one of the world’s leading providers of technology-based solutions for employers.
Today’s agenda. We will cover high-level overview which will include some interesting facts about the Illinois state taxing authority and the challenges employers may face in the state. We hope to guide you through what the state would like all their employers to know and some recent accomplishments by ADP.
A background on Illinois and the state government structures. There are two agencies currently responsible for collecting state payroll taxes for Illinois employers, the Illinois department of revenue, also known as DOR, is responsible for collecting withholding taxes on behalf of the treasurer of state. Withholding refers to income taxes held from wages by employers, who pay employees’ personal income tax. As an employer, you are required by law to withhold personal income tax from the wages of residents for all services performed either within or outside of the state; also, from the wages of non-residents for services performed in the Illinois.
Unemployment insurance taxes are collected by department of employment security, also known as the IDES. The IDES administers the unemployment insurance program, which provides temporary income assistance to workers who are unemployed through no fault of their own.
Here’s an interesting fact. When Illinois became a state in 1818, it had a population of 34,620 people. Illinois is now the sixth most populous state in the country with almost 11.5 million people. We hope that you find the following details will assist you to file all those taxes timely and accurate.
The DOR considers an employer to be any person, contribution, or organization for which an individual performs a service as an employee. An employer is responsible for registering online to collect state withholding taxes from employees who reside or who are employed in the state and remitting those taxes along with the appropriate electronic return on time. The DOR offers a secured Webpage application called MyTaxIllinois, the home page to obtain a tax account number from the DOR. Click the link below to start filing your Illinois business registration application form, our EG-1. You can visit MyTaxIllinois for business selection (ph) for the DOR Website at the link provided. In most cases, an account number is provided within one to three days.
ACH debit is the DOR’s preferred method of payment. This method of electronic transfer of funds requires the employer to provide the DOR with the bank account routing and account number. This account is where authorized payment will be withdrawn before the due date. The employer would authorize the DOR to make a withdraw (ph) from that account in the amount of the tax payment. ACH credit method requires the employers to initiate the bank to debit their bank account and credit the state agency account. The employers specify the dollar amount, settlement date, tax type, and tax period being paid, and the employer’s bank originates an ACH transaction. Employers complete the EFT-1 form only if they use ACH credit, the pay-by-phone debit method or the direct-filed debit method to pay amounts owed to the DOR, or are changing previously submitted information about one of the methods of payments listed above.
Here we have a filing and deposit schedule to keep you on track for making timely payments. As you can see, there are four different deposit schedules. The DOR establishes their look-back period to systematically review all employers’ deposit schedules for the prior 12 months of the current year to determine the filing and deposit frequency of the employer. The DOR accelerates the employer’s filing frequency appropriately if required, and all employers will be notified and required to begin reporting under the new frequency beginning January 1 of the new calendar year.
Semi-weekly payments; quarterly return. Semi-weekly payments are required to be made electronically. Payments are due three to seven days after every payroll.
Monthly payment; quarterly return. Employers who have been registered less than 18 months or have a compliance problem, like underpayment, missing return, et cetera, and reports $12,000 or less in withholding during the look-back period are assigned to a monthly payment and quarterly return schedule. You must pay all amounts withheld during the month by the 15th of the following month.
Monthly payment; annual return. Employers who have been registered, are in good standing, and reported more than $1,000 and less than $12,000 withholding are assigned the monthly payment and annual return schedule. You must pay all amounts withheld during the month by the 15th of the following month. If an employer exceeds $12,000 withholding during any quarter, your payments are required to be made electronic using the semi-weekly payment and quarterly return schedule in the following quarter, the remainder of the year, and the following year.
Annual payment; annual return. If (ph) employers reported $1,000 or less in withholding and are in good standing with the department are assigned to an annual payment and return schedule. Employers must pay all amounts withheld during the calendar year by the due date of January 31 of the following year. The DOR encourages employers to use electronic methods of payment when possible.
You are required to file an IL-941 return quarterly if you make a semi-weekly payment of withholding, have been registered for less than 18 months, or have had any unresolved compliance problems – unpaid balance, non-filed return, et cetera. Quarterly returns are due the last day of April, July, and October in the current calendar year and January of the following year.
Annual return filer. If you are assigned to an annual return schedule, your IL-941 is due by January 31 of the following year.
Unless you receive notification from the DOR that you are allowed to file an annual return, you must file a quarterly return.
The DOR also requires employers to electronically file a return, even if no tax is due. Your return must be electronically filed on or before the due date. Upon completion of your submission, you will receive a confirmation number with a date and time stamp, which constitutes proof of timely filing.
Employers who have 50 or more employees must provide DOR with the W-2s. This information must be filed with the DOR by the last day of March of the preceding year. A little bit of history on the W-2. Beginning January in 2009, payroll providers who prepare W-2s and W-2Cs for employers were required to register and electronically transmit to the DOR. In January 2010, in addition to the payroll providers, employers with 250 or more employees are required to electronically transmit W-2s and W-2Cs. All original W-2s must be accepted as filed by the DOR no later than March 31 of the following year. W-2Cs are due as soon as you discover a correction is needed.
The penalty for late payment is one-half of 1% of the unpaid tax shown on the return per month, up to a maximum of 25%. The penalty for failure to file a return by the due date is 1% of the balance due per month, up to a maximum of 25%.
Employers who do not comply with the requirements to file returns, make payments, or submit data to DOR in an electronic format are also subject to a penalty of up to $100 for each return, payment, or data transfer submitted incorrectly.
Here’s an interesting fact. The first skyscraper was built in Chicago in 1885.
Report increase to your tax due immediately to minimize penalties and interest. If your change decreases your tax due, file IL-941 no later than three years after the close of the calendar year in which the tax was filed or one year after the date the tax was paid. You may be assessed penalty and interest if your IL-941X is filed after the due date of your original return. If so, the DOR will send you a notice. Employers must complete steps one, two, and five to report changes previously reported on the IL-941. If the DOR agrees that you have a valid overpayment, it will first be applied to any outstanding liabilities and applied as you request on line three (unintelligible) IL-941s. Overpayments should all be applied to future payments whenever possible.
Let us now turn our attention to the IDES. Every newly created (unintelligible) shall file a registration UI-1 report either online, by mail, or fax within 30 days from start of business. An enrolling unit must file the report to determine liability even though it may not be liable for payment. As you can see, the turnaround time will vary, depending on the method of registration.
Employers who are subject to the Illinois Unemployment Insurance Act supply the funds to IDES uses to pay benefits to the unemployed. Most for-profit employers become subject to Illinois Unemployment Insurance Act and are liable for paying contributions as soon as 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 or have paid $1,000 in cash wages in one calendar quarter for domestic help or paid $20,000 in cash wages in one calendar quarter or employed 10 or more workers for 20 weeks in a given calendar year. A nonprofit organization will become liable for the year when it has employed four or more persons during each of 20 weeks in a given calendar year.
For experience-rated employers, those with three or four more years of experience, the contribution rate is based on a ratio called the benefit ratio, which is determined in such a way that employers with the higher unemployment activity will have a higher tax rate.
Nonprofit institutes and governmental entitles may elect to make payments in lieu of contributions to. These are equal to 100% of the regular benefit amount, including dependents’ allowance that are paid to beneficiaries.
Quarterly wage reporting and contributions are assigned by IDES. The annual contribution rate determination is mailed in December prior to the effective year of the new rate. If you disagree with your assigned rate, you may protest the new rate within 15 days from the date on the determination notice.
Employers must file their employment and wage detail report and pay contributions in full by each calendar quarter on or before due date, by April 30, July 31, October 31, and January 31, to avoid interest and penalties. Payments can be made using Illinois Tax Net, an electronic fund transfer, or a check. Employers who wish to use a credit or debit card should go to www.paybill.com/IDESforDetails.
The employer’s contribution and wage report, UI-340, are due the last day of the month following the end of the quarter. New reporting requirements effective in 2013. The Medical Reform Smart Act requires electronic, monthly wage report for certain employers meeting this requirement. Quarterly wage reporting and contributions are due a month after the close of each calendar quarter. Dates are listed on the slide. File your UI-340 to include your workers names, social security numbers, and wages paid, as well as the contribution amount due.
Penalties for late filing of a quarterly contribution and wage report can range from $50 to $5,000. Unpaid balances accrue interest at the rate of 2% per month. In some cases, the IDES director may waive payment of penalty and interest. You must apply for a waiver within 30 days of the date IDES mailed your notification that you are delinquent. Show good cause for your late filing, and pay the full amount of past-due contributions. Interest begins to accrue the day after the date payment is due through the date the payment is made.
Here’s another interesting fact. Des Plains, Illinois is the home of the first McDonald’s.
An employer may file a claim for adjustment refund no later than three years after the date upon which any contribution, interest, or penalties were paid erroneously. A separate form, UI-28, employer claim for adjustment refund, must be submitted for each calendar year. If you are adjusting individual workers’ wages not previously corrected, you must also complete a form UI-28B, employer’s correct report of wages paid to employers (ph), and submit it with your UI-28.
Let’s’ go over a few items that Illinois wants employers to know.
The DOR would like employers to use the most current forms to prevent a delay in processing.
Employers making corrections or wanting to correct an open error should make corrections to the next filing. For the closed year, submit an IL-941 and W-2C.
The IDES encourages employers to register and file online whenever possible.
The IDES would also like employers to apply overpayments or refunds to future filings.
Employers should comply with the monthly wage reporting requirement.
Now for some accomplishments – Team ADP in the state of Illinois.
In addition to the many in-depth conversations that occur throughout the year regarding upcoming changes and partnership opportunities, ADP also attends annual, in-person meeting in Illinois with executive-level contacts. Our partnership and relationship with Illinois includes frequently discussed and confirmation of agency requirements. These agencies regularly work with ADP to ensure smooth processing of our mutual clients. Some recent collaborations with DOR include securing a memorandum of understanding to allow employers’ data to be exchanged with the DOR office without requiring a power of attorney. DOR also has agreed to partner with ADP on a real-time data exchange. The DOR is the first agency to partner with ADP on this endeavor, allowing us to have immediate access to employer data.
ADP collaborates with IDES on the new monthly wage reporting process. As always, it is ADP’s intention to file complete and accurate information for our Illinois clients. ADP is partnering with IDES on electronic signature for power of attorney. This will help eliminate paper POA.
An additional resource in our blog at ADPComplianceInsights.com, where we archive all past Webinars and also post updates that we feel may be helpful to you. ADP also offers an online employer contribution and collaboration community for payroll, HR, and past professionals. The bridge is a new social working community that provides a unique peer-to-peer, online forum for sharing experience and knowledge on a worldwide range of human capital management topics and in a secure place for employers to interact, collaborate, and communicate. Join the conversation, and let’s make this community work for you. We hope that you have a chance to visit the new community and that you have enjoyed this presentation.
This concludes today’s Webinar. Thank you so much for attending. Have a fabulous day.

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