Most states, including Illinois, send out a letter at the end of each year to employers, informing them of their new “Contribution Rate Determination”. As I’m receiving lots of questions about them this year, I figured I’d take a moment to explain what these are and how to update your Gusto payroll account with this info.
This year, IDES is distributing the letter electronically for all who have opted in, with an email stating:
You have received new electronic correspondence from the Illinois Department of Employment Security (IDES). Please log into MyTax Illinois to view your correspondence as some may require a timely response. Below is a list of the new correspondence you have received.
- Contribution Rate Determination (Mail Date: 11/30/2021)
If the notice you received has appeals rights, you must file your appeal according to the instructions stated on the notice. If you have questions, please call the IDES Employer Services Hotline: 800-247-4984.
For those who haven’t received a letter in the mail, you’ll want to log into MyTax Illinois to get your letter (or if you did get your letter in the mail, but want to download a pdf of it for your files).
Once you log into your company’s MyTax Illinois account (the same place you log into to make sales tax and corporate estimated tax payments), you’ll see a number next to the “Action Center”. Click on that and then click on the “View Letters” link.
Then click on the “View Letters” link.
And then click on the “Contribution Rate Determination” link to get your letter.
The letter will say “Rate Determination” at the top-left.
The new rate is listed at the end of the first row on the page, under where it says “Contribution Rate (New)”.
This rate is also known as your “experience rating” because it’s in part based on how many of your employees claimed unemployment over the past two years, compared with the total payroll for that same time period. (For 2020 and most of 2021 they paused this type of increase, because everyone was claiming unemployment due to the pandemic.) For 2021, the percentage will be between 0.200% and 7.625%.
You can see a list of the historical rates by year here: Annual Employer Contribution Tax Rates (illinois.gov)
If for some reason the wages, unemployment benefit claims, and rate don’t seem right, the next page in the letter allows you to contest it by sharing how your company records are different. The following page in the letter explains how the formula works, in case you’re not sure whether or not it deserves contesting.
Contesting a rate is rarely needed for small business owners, because we all have the option to contest individual claims when they happen. If a staff member quits/resigns, or if they are fired for dangerous behavior, then they don’t qualify to claim unemployment benefits — a notice for each claim is sent to the business owner and they have a short period in which they can dispute the claim. It’s important to do this to keep the IDES contribution rate down. Keep in mind that just this past year, they have stopped mailing claim letters, and business owners should check their MyTax Illinois account each month for these notices — see my blog post here for more: Illinois – No More Snail Mail for Unemployment Claim Notifications | The Dancing Accountant
In November, IDES sent out another round of reminders about this:
And on the final page they included an option to request a snail-mailed paper notification of claims:
So you’ve got your new rate — what does it mean and what should you do with it?
The rate will be multiplied against the first $12,960 of each employee’s wages (this increases slightly each year) and the resulting total will be paid as unemployment tax by the employer. That’s why you want as low a rate as possible. But if you don’t have a lot of employees, then even a high rate does not end up being a lot of money. Pretty amazing deal for how much our society depends on the unemployment safety net.
Provide the notice to your payroll provider to get the rate entered into your payroll system, or if you use Gusto, just update the rate yourself — it’s very easy, and this way you know it gets done! Log into Gusto and:
- Click the Taxes & compliance section and select Tax setup.
- Click Manage Taxes under the applicable State Tax section.
- Scroll to “State Tax Settings” and click edit next to SUI Rate.
The effective date for the new rate is the upcoming January 1st.
If you don’t update your payroll records asap, then you could end up paying in unemployment at a higher or lower rate than required. If it’s too low, you may end up owing penalties, and if it’s too high, then you have to file for a refund, which a lot of folks forget to do, leaving their money on the table in perpetuity.
One more reminder: anyone who received unemployment benefits in 2021 will be getting a 1099-G in January noting those amounts for tax purposes — see my blog post about this from last year here: Illinois IDES 1099-G Form For 2020 Unemployment: What You Need To Know | The Dancing Accountant
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
