Illinois Reduces Tax on Nonresident Workers

Illinois eased income tax requirements for non-resident workers in-state for fewer than 30 days.

The State of Illinois enacted S.B. 1515 on 25 August 2019 making nonresident workers in Illinois liable for income tax only if they work there for 30 days or more during the calendar year. The law is effective for tax years ending on or after 31 December 2020.

Under prior law, Illinois taxed all income earned within the state.

In addition, the new law will apportion income to the state based on the number of days spent working in the state. The allocation compares number of days working in the state to number of days spent working for the employer. The employer will use data from its internal systems to determine the number of days the employee spent in Illinois and withhold accordingly.

This new law is similar, but not identical, to the Mobile Workforce Act, which is a proposed federal solution to the disparity between state laws on taxation of nonresident workers that has been pending in Congress for several years. Under that Act, states would be prohibited from imposing tax until a worker had been in the state for at least 30 days.

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How This Will Impact Mobility

Companies with employees who work temporarily in Illinois will need to reprogram their systems to ensure that Illinois tax is not charged until a worker has been in the state for an aggregate of 30 days.