Was Illinois income tax properly withheld from inmate payroll, and did the inmate have to prepare Form W-2?

Plain-English summary

Illinois withholding applied only if federal income-tax withholding applied to the compensation. The state regulation tied Illinois withholding to federal withholding under the Internal Revenue Code.

The letter did not determine whether this inmate payroll met the federal test; that was a federal-law question. It also distinguished income-tax withholding from FICA, which did not by itself trigger Illinois withholding.

Form W-2 was the employer's responsibility. The inmate did not prepare or file the employer's W-2 form.

What this means for you

Obtain the payroll classification and federal withholding basis before assessing Illinois withholding. Ask the employer for the required year-end wage statement.

Common questions

Q: Did the GIL conclusively approve the withholding?
A: No.

Q: Who furnishes Form W-2?
A: The employer.

Citations and references

• 86 Ill. Adm. Code 100.7000(a), 100.7200
• 35 ILCS 5/701, 702

Subject

Withholding – Other Rulings

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2011.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2011/it-11-0017.pdf

Original ruling text

IT 11-0017-GIL 08/22/2011 WITHHOLDING – OTHER RULINGS
General Information Letter: Illinois income tax must be withheld from wages paid in this
State from which federal income tax must be withheld.
August 22, 2011
Dear:
This is in response to your letter received by this office August 4, 2011, in which you request
information regarding Illinois income tax law. The nature of your letter and the information provided
require that we respond with a General Information Letter (GIL). A GIL is designed to provide general
information, is not a statement of Department policy and is not binding on the Department. See 86 Ill.
Adm. Code 1200.120(b) and (c), which may be accessed from the Department’s web site at
www.ILtax.com.
Your letter states as follows:
I write this letter of concern in hopes of discovering a solution to a financial dilemma that’s
been occurring throughout this incarceration. I have been told by the Business Administrator of
the CORRECTIONAL CENTER who is the power of attorney for all inmates of this facility, that
state tax is being taken out of every inmate’s payroll. We receive a payroll of different amounts.
My question is this. Is it legal for the institution to take state tax out of money we don’t receive
an actual check for? And if so can you send me something that explains the tax laws govern
I.D.O.C. inmates payroll. And if it is true that taxes have been deducted, how can I find out how
to file W2 tax returns at the end of the year?
Thank you for reviewing my letter of concern.
RULING
Department of Revenue Regulations Section 100.7000(a) states:
Every employer maintaining an office or transacting business within this State and required
under the provisions of 26 USC 3401 through 3404 to withhold and pay federal income tax on
compensation paid in this State (see Section 100.7010 of this Part) to an individual is required
to deduct and withhold from such compensation for each payroll period (as defined in 26 USC
3401), an amount computed in accordance with IITA Section 701 and 702. Illinois income tax
is not required to be withheld on any compensation paid in this State of a character which is
not subject to federal income tax withholding (whether or not such compensation is subject to
withholding for federal taxes other than income tax, e.g. F.I.C.A. (Social Security taxes). (As to
what constitutes “transacting business within this State,” see Section 100.7020 of this Part).
As this Section indicates, Illinois withholding is only required in respect of compensation subject to
federal income tax withholding. Whether or not federal income tax withholding is required is a
question of federal law.
Under Department Regulations Section 100.7200, the requirement to furnish and retain IRS Form W2 is imposed upon the employer. Therefore, you are not required to file a Form W-2.
As stated above, this is a GIL. A GIL does not constitute a statement of policy that applies, interprets

IT 11-0017-GIL
August 22, 2011
Page 2
or prescribes the tax laws, and it is not binding on the Department.

Sincerely,

Brian L. Stocker
Associate Counsel (Income Tax)