The Illinois Department of Revenue is reminding small businesses they can utilize the Minimum Wage Credit starting January 1, 2020. The new tax credit is designed to help small businesses offset the state’s minimum wage rate that will gradually increase to $15 an hour over the next six years. Businesses can claim now the credit on their quarterly Illinois Withholding Income Tax Returns.
Beginning this year, businesses and nonprofits with 50 full-time equivalent employees or less are eligible to offset a portion of the minimum wage increase cost from their withholding income taxes. The maximum credit amount allowed is 25 percent of the difference between the new minimum wage and what each employee was paid previously. The percentage allowed each proceeding year will decrease before sunsetting in 2026 for most small businesses.
Eligible businesses can claim this credit by filing Form IL-941, Illinois Withholding Income Tax Return, and a new schedule. Illinois’ minimum wage was last raised in 2010 (to $8.25). Raising the wage to $15 an hour is estimated to impact 1.4 million Illinoisans, according to the Illinois Economic Policy Institute at the University of Illinois.
Visit IDOR’s website tax.illinois.gov for information on how to calculate this credit, as well as additional resources, including IDOR’s withholding income tax Information Bulletin FY2020-13 and Frequently Asked Questions (FAQs).