2023 Illinois household employment tax and labor law guide - Care.com HomePay

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2023 Illinois household employment tax and labor law guide

Household employment requirements for families hiring a caregiver in Illinois

2023 Illinois household employment tax and labor law guide

Finding helpful Illinois  nanny tax information is not always easy. That’s why we’ve combined all the state and federal tax and labor law information you’ll need! Check out the information below that HomePay is here to help with.

Checklist for Illinois household employers

We know you’re busy so here’s a quick “to-do” list with links to extra details below.

Beginning of employment 

During employment 

Optional benefits for your employee

Ending employment

Beginning of employment 

Set up EIN & state tax account(s)

You must first apply for a EIN (Employee Identification Number) with the IRS. This will be used as your unique ID with both state and federal tax authorities. Then you can open an account with your state taxing authority.

Workers’ compensation

Household employers in Illinois are required to carry a workers’ compensation insurance policy if any number of household employees work a total of 40 or more hours per week for 13 or more weeks during the year. These policies pay for medical expenses and lost wages if an employee has a work-related injury or illness. You can obtain an instant quote and purchase a policy online, or by contacting our partner, Clarke White, at 804-267-1210 or wcnanny@allrisks.com.

Wage notice

Illinois household employers are required to provide their employee with a written wage notice at the time of hire and again if there are any changes to the employee’s wages or the employer’s information. The notice must include the employee’s rate of pay and the time and place of payment.

Chicago employment contract requirement

Household employers in Chicago are required to provide their employee with an employment contract at the time of hire that must be signed by both parties and a third party witness. It must at least include:

  • The employer’s workplace address.
  • The employee’s regular hourly work schedule.
  • The wages the employee will be paid.

Employment posters 

Families in Illinois are required to notify their employee of their rights by sharing these posters

During employment 

File returns, remit taxes and manage correspondence

  • File state employment tax returns throughout the year and remit state employer and employee taxes.
  • Remit federal employer and employee taxes via 1040-ES estimated tax payment voucher four times each year.
  • Each year end, prepare Schedule H and file with Form 1040; prepare and distribute Form W-2 to each employee; file Form W-2 Copy A/Form W-3 with the Social Security Administration (SSA).
  • Manage ongoing alerts and notices from the state (tax rates and labor law is subject to change at any time).

Minimum wage rates

  • Illinois state: $13.00/hour
  • Cook county: $13.35/hour (only applies to Wilmette Village and Glenview)
  • Chicago: $15.40/hour

Note: Whenever more than one rate applies, employers are required to pay the higher rate.

Illinois overtime requirements

  • Live-out employees must be paid 1.5x their hourly rate for all hours worked over 40 in a workweek.
  • Live-in employees are not required to be paid overtime. 
  • Overtime is not required to be paid when work is performed on a holiday. 

Day of rest requirement

Household employees in Illinois that work at least 20 hours per week must be granted at least one day off (24 consecutive hours of rest) each calendar week.

Household employers in Cook County, Illinois are required to provide up to 40 hours of paid sick time to their employees each year.

Note: The cities/villages of Arlington Heights, Barrington, Bartlett, Bedford Park, Bellwood, Bensenville, Blue Island, Bridgeview, Broadview, Buffalo Grove, Burnham, Burr Ridge, Country Club Hills, Des Plains, East Hazel Crest, Elgin, Elk Grove, Elmwood Park, Evergreen Park, Flossmoor, Forest Park, Glenview, Glenwood, Hanover Park, Harwood Heights, Hazelwood, Hickory Hills, Hillside, Hoffman Estates, Homewood, Justice, La Grange Village, Lynwood, Markham, Matteson, Maywood, Melrose Park, Merrionnette Park, Morton Grove, Mount Prospect, Niles, Norridge, North Riverside, Oak Forest, Oak Lawn, Orland Park, Palatine, Palos Heights, Palos Hills, Park Ridge, River Forest, Riverside, Rolling Meadows, Rosemont, Schaumburg, South Barrington, Streamwood, Summit, Tinley Park, Western Springs, and Wheeling have opted out of this law and do not need to comply.

Optional benefits for your employee 

Health insurance

Families with only 1 employee can make contributions toward their employee’s health insurance premiums and treat the amount as non-taxable compensation. In this scenario, neither the employee nor the employer are required to pay any taxes on that portion of the compensation.

Families with 2 or more employees have 3 options:

  1. Set up an Individual Coverage Health Reimbursement Arrangement (ICHRA).
  2. Set up a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA).
  3. Purchase a policy through SHOP (Small Business Health Options Program). 

Visit our health insurance page for more information about these options.  

Mileage reimbursements

The current federal mileage reimbursement rate is 65.5 cents per mile and only covers miles driven by your employee while on the job. Miles driven commuting are not eligible for reimbursement.

Ending employment 

Managing unused PTO 

Illinois household employers do not need to pay their employees for unused sick time, but are required to pay out any unused vacation time.

Close down your state employment tax account(s)

The state tax agencies expect you to file timely returns for as long as your tax accounts are open — even to report $0 in wages paid.

Maintain payroll records

Household employers are required to keep wage records on file for at least three years.

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