Federal Income Tax

• Unless an employee submits a Form W-4 claiming exemption, the employer must deduct federal income tax. The Internal Revenue Service issues Publication 15, Employer's Tax Guide, each year, which contains tax tables employers can use to determine the proper amount of federal income tax to deduct.
  
  

Illinois State Income Tax

• If an employer must withhold federal income tax, or if the employee makes a voluntary request for such a deduction, the employer must deduct Illinois state income tax. As of 2011, the state income tax rate for Illinois is 5 percent of income after deducting for allowances the employee claims on IL-W-4. Employers can find the exact amount to deduct by consulting the tax tables in Booklet IL-700-T.
  
  

Social Security Tax

• Employers must withhold Social Security taxes from an employee's paycheck. The rate became 6.2 percent in 1990, but for 2011, the rate employers withhold is 4.2 percent. No reduction was made to the employer's portion, which remains 6.2 percent. Employers must deduct Social Security taxes on the first $106,800 in earnings each year. Even if an employee is exempt from federal income tax, the employer must still deduct Social Security taxes.
  
  

Medicare

• Employers in Illinois must deduct 1.45 percent from each employee's paycheck. Unlike Social Security, all earnings are subject to Medicare taxes. Employees who file for exemption from federal income tax must still have Medicare taxes withheld from their payroll checks.
  
  

Unemployment

• Illinois does not permit employers to deduct the cost of state unemployment taxes, or SUTA, from an employee's paycheck. The federal government does not permit employers to deduct federal unemployment tax, or FUTA, from employees in any state.