Illinois payroll setup for your first hire

One MyTax Illinois flow covers withholding and unemployment insurance

Texas and Florida do not take state income tax from paychecks. Illinois does. IDOR collects that withholding. IDES collects state unemployment insurance (SUI). You register both through MyTax Illinois, the shared IDOR portal. IDOR’s business-registration page says you may also register with IDES in the same MyTax Illinois Business Registration Application (Form REG-1) flow.

IDES also accepts the paper Report to Determine Liability Under the Unemployment Insurance Act (Form REG-UI-1). A sales-tax number is not the unemployment-insurance account. A payroll login is not a MyTax Illinois account.

When you owe unemployment insurance: $1,500 in a quarter, or one person in 20 weeks

820 ILCS 405/205 is enough by itself for a regular shop in 1972 and after. You are an employer if you pay wages of at least $1,500 in any calendar quarter in the current or preceding calendar year. You are also an employer if you have at least one individual in employment on some portion of a day within each of twenty or more calendar weeks in the current or preceding calendar year. One of those two tests is enough.

Other employer definitions sit in the same section. Nonprofit organizations, agricultural labor, and domestic service use the other tests in § 205. A successor who takes a liable employer’s organization, trade, or business is covered. This scorecard is the regular-business path.

IDES wants the new employing unit on file within 30 days of start-up

IDES’s Are You a New Employer? page says a newly created employing unit must register with IDES within 30 days of start-up. That is an agency instruction. Register electronically through MyTax Illinois, or submit a completed and signed REG-UI-1.

IDES’s MyTax Illinois page says employers can complete unemployment-insurance tax processes on that portal. After IDES finds you liable, hold the seven-digit UI account number. Use that number on reports and payments. Do not substitute a federal EIN.

IDOR withholding starts before the first hire

Illinois withholds state income tax from paychecks. IDOR’s business-registration page says to register before you hire an employee. File REG-1 on MyTax Illinois. IDOR says MyTax Illinois processing is about one to two business days. Mail takes weeks.

Publication 130 (Pub-130) says that if you withhold Illinois Income Tax, you must register with IDOR and tell them the date Illinois payroll will begin. Employees use the Employee’s Illinois Withholding Allowance Certificate (Form IL-W-4). Returns are the Illinois Withholding Income Tax Return (Form IL-941). File IL-941 quarterly and electronically. Payments use the Illinois Withholding Tax Payment (Form IL-501). See Pub-130 for the deposit calendar.

The Employer’s Contribution and Wage Report (Form UI-3/40). Use the rate on the IDES notice.

Liable employers file the Employer’s Contribution and Wage Report (Form UI-3/40) each calendar quarter. The UI-3/40 instructions say the original report and the contribution payment are due no later than the last day of the month following the end of the quarter: April 30, July 31, October 31, and January 31. File even if you paid no wages. Employers with 25 or more employees must file electronically.

IDES’s 2026 EA-50 sets the taxable wage base at the first $14,250 of wages paid to a worker in calendar year 2026. Most new employers who became liable on or after January 1, 2024 pay the entry rate of 3.350%. That figure includes the 0.550% Fund Building Rate for 2026. New employers in NAICS sector 56 (Administrative Support and Waste Management) pay 3.450%. Use the rate on the IDES notice or Annual Contribution Rate Determination, not a number from a software page.

New hire is an IDES report, 20 days. It includes independent contractors.

The new-hire report is a list of who you just hired. It is not a box on the UI-3/40. 820 ILCS 405/1801.1 requires you to report a newly hired employee not later than 20 days after the hire. Electronic reporters send two monthly transmissions, 12 to 16 days apart, if needed. The same statute includes an individual under an independent contractor arrangement. A rehire after 60 or more consecutive days is a new hire again.

An employer that knowingly fails to report is subject to a civil penalty of $15 per unreported individual. That is the statute’s figure. File at the IDES New Hire pages. Form and fax options are on the IDES new-hire PDF. The New Hires Obligations page repeats that independent contractors belong on that report. A quarterly UI-3/40 does not satisfy that clock.

Workplace injury insurance is due when the first employee starts

This is the opposite of a four-employee wait. It is also the opposite of a private-employer choice. Illinois treats coverage as due from the first hire.

IWCC’s insurance page says employers must provide workers’ compensation for almost everyone hired, injured, or localized in Illinois. If you have one employee, even part-time, you must obtain insurance. Rare exceptions sit in Section 3 of the Act. There is no waiting period. Coverage is due from the moment the person is hired.

Knowing and willful failure can bring a fine of up to $500 for every day without coverage, with a minimum of $10,000. That is the floor IWCC publishes. Sole proprietors, partners, corporate officers, and LLC members may exempt themselves in some cases. Extra-hazardous and construction work has extra caveats. Keep that question on IWCC. Buy a policy from an authorized private carrier, or get IWCC approval to self-insure. A payroll login is not a policy.

How Gusto and Patriot describe Illinois

Confirm the live MyTax Illinois accounts with IDOR and IDES. Confirm workplace injury insurance on IWCC.

Gusto’s forms list says it files the Illinois Withholding Income Tax Return (Form IL-941), Schedule P, Form IL-501, an Illinois UI monthly wage report, the Employer’s Contribution and Wage Report (Form UI-3/40), Form IL-W-3, and an Illinois new-hire report. Gusto’s registration hub says Middesk (Gusto’s business-verification company) may register state income-tax withholding and state unemployment insurance. Confirm the live numbers on MyTax Illinois. Read Gusto’s forms list and Gusto’s registration hub. See Gusto on the directory.

Patriot’s tax table says Full Service files Illinois Unemployment Insurance (SUI) on Form UI-3/40, and on Form UI-3/40-MWR for employers with 25 or more employees. It files Illinois income-tax withholding (SIT) on Form IL-941 and the annual Form IL-W-3. The article does not claim Patriot opens MyTax Illinois accounts. Use the unemployment-insurance rate on your IDES notice, not a number from a software page. Read Patriot’s article. See Patriot on the directory.

What still sits on the employer

• Decide that the $1,500-quarter test, or the 20-week test, has been met. Household, agricultural, and nonprofit shops use other tests.
• Register with IDOR on REG-1 before you hire. Tell IDOR the date Illinois payroll will begin.
• Register the new employing unit with IDES within 30 days of start-up, on MyTax Illinois or REG-UI-1.
• Hold the seven-digit UI account number IDES issues. Do not substitute a federal EIN.
• Enter the rate from the IDES notice, not a marketing figure.
• File UI-3/40 each quarter, even if you paid no wages.
• Collect IL-W-4. File IL-941 electronically. Pay with IL-501.
• File the IDES new-hire report within 20 days, including independent contractors. A UI-3/40 does not satisfy that clock.
• Buy workplace injury insurance when the first employee starts. Payroll software does not issue that policy.
• Do not copy another state’s clock onto Illinois. Illinois withholds state income tax from paychecks.

Related guide: Can I do my own payroll? covers the federal payday that sits next to Form IL-941 and Form UI-3/40.

Related guide: Independent contractor vs employee is the federal label check. An IDES new-hire line for contractors is not that test.

Related guide: How to pay employees is the paycheck that still needs Form IL-W-4.

Related guide: How to run payroll is the federal payday that still needs Form IL-W-4 before Form IL-941.

Also forming a company in Illinois? Process Score compares registered agents there.