Newly Hired Independent Contractor Reporting Requirements under Unemployment Insurance Act
The Unemployment Insurance Act (Act) requires all Illinois employers, including units of local government, to file a report with the Illinois Department of Employment Security (IDES) with certain information about “newly hired employees.” On July 28, 2023, Governor Pritzker signed Public Act 103-0343 into law (effective January 1, 2024) which expanded the Act’s definition of “newly hired employee” to also include an individual under an independent contractor arrangement who (i) has not previously been employed by the employer or (ii) who was previously employed by the employer but has separated from that prior employment for at least 60 consecutive days.
As of January 1st, all Illinois employers must report both newly hired employees and independent contractors that perform work for the employer under an IRS 1099 Form to IDES not later than 20 days after the date the newly hired employee or independent contractor operating under a 1099 form is employed or hired. Note that the new reporting obligation does not seem to extend to employees of vendors an employer contracts with for work performed by the vendor's own employees. Instead, the intent of the law is to capture those independent contractors who are not subject to reporting by their employers because they are self-employed and working under a 1099 form.
Each report should be made on an IRS Form W-4 or, at the option of the employer, an equivalent form, and transmitted by first class mail or electronically on the IDES website at this IDES link.
If an employer knowingly fails to report “newly hired employees,” including self-employed independent contractors, the Act imposes a civil penalty of $15 for each person that the employer failed to report. Also, the Act makes it a Class B misdemeanor and imposes a fine of $500 per employee for any person that knowingly conspires with a newly hired employee to cause an employer to fail to report or file a false or incomplete report regarding required newly hired employee information under the Act.
Post Authored by Eugene Bolotnikov, Ancel Glink
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