Illinois Expense Reimbursement Law: Rules, Claims, and Penalties

The Illinois expense reimbursement law, Section 9.5 of the Illinois Wage Payment and Collection Act, requires your employer to pay you back for all necessary expenses you incur doing your job, as long as those costs primarily benefit the business. You have 30 calendar days to submit an expense with documentation, and if the employer refuses, damages of 5% of the unpaid amount accrue every month until it’s paid.¹²

The law reaches essentially every private employer in Illinois with no minimum size, and it covers local governments and school districts. State and federal government employees are not covered, and the protection runs to employees, not independent contractors.¹

What Counts as a Necessary Expense

The statute uses the phrase “all necessary expenditures or losses” incurred within the scope of employment and directly related to services performed for the employer. In practice, an expense is necessary when it is reasonable, required for you to do the job, and primarily benefits the employer’s business rather than you personally.¹

The Illinois Administrative Code lays out how regulators weigh whether an expense primarily benefits the employer. No single factor decides it:

Whether the expense is required for the employee to perform their duties.
Whether the employee reasonably expected reimbursement when incurring the cost.
Whether the employer receives something it would otherwise have to pay for.
How long the employer benefits from the expenditure.

Common reimbursable costs include business travel and mileage on your personal vehicle (the IRS standard rate for 2026 is 72.5 cents per mile),⁴ cell phone and data plans when your employer expects you to be reachable, internet service for remote work, specialized software or equipment, and professional development tied to specific job duties. If you’re required to work from home, a proportional share of your internet bill falls within the mandate.

What the Employer Doesn’t Owe

The statute carves out three categories: losses caused by the employee’s own negligence, losses from normal wear and tear on personal items, and losses from theft unless the theft resulted from the employer’s negligence.¹ Drop your personal laptop and crack the screen, and your employer doesn’t owe you a replacement. If a lax workspace led to your equipment being stolen, that changes.

The employer also has to have authorized or required the expense. Buying something the employer never asked for and that your job doesn’t require doesn’t create a reimbursement obligation just because it happens to relate to work.¹

Spending Caps and Written Policies

Employers may set reasonable limits on reimbursable amounts through a written expense policy. If a policy establishes spending guidelines for specific categories, the employer generally isn’t liable for costs above those limits.¹ The statute draws a firm line, though: a policy cannot offer “no reimbursement or de minimis reimbursement.” Token amounts don’t satisfy the law.⁵

There’s a practical wrinkle worth knowing. If a company’s written policy caps a category at one amount but the employer routinely pays above that cap in practice, the employer becomes liable for the higher amount. Under the Administrative Code, actual practice overrides the written limit.³

Submitting a Reimbursement Request

You have 30 calendar days after incurring an expense to submit it with supporting documentation, unless your employer’s written policy gives you longer.¹ Missing this window can cost you the reimbursement, so treat it as a hard deadline.

Your documentation should establish the date, vendor, amount, and a description of what was purchased. Add the business purpose: which project, client, or task the expense supported. A bare credit card slip usually isn’t enough if the purpose isn’t obvious.

Lost a receipt? The law doesn’t leave you stuck. You can submit a signed statement describing the expense in place of the missing documentation.¹ Many employees don’t know about this, and it stops employers from denying legitimate expenses on a technicality.

Follow your employer’s submission process, whether that’s a digital portal, an emailed form, or paper delivered to a manager. Keep proof of when you submitted. If your employer has a written expense policy, you must follow its procedures; failing to comply is a valid basis for denial.¹

Penalties When Employers Don’t Pay

Illinois treats unpaid expense reimbursements the same as unpaid wages, and the penalties escalate. An employer who fails to reimburse owes the full expense plus 5% of that amount for every month the reimbursement remains unpaid, with no cap.² On a $2,000 unreimbursed expense, that’s $100 a month; a year of delay turns a $2,000 obligation into $3,200.

If you win in a civil lawsuit instead of through the Department of Labor, the employer also pays your attorney’s fees and court costs. Employers ordered to pay by the Department who ignore the order beyond 15 calendar days face an additional 20% penalty paid to the Department plus 1% per day paid to the employee.²

For employers who willfully refuse to pay when they have the ability to do so, the consequences turn criminal. Unpaid amounts of $5,000 or less are a Class B misdemeanor; amounts above $5,000 are a Class A misdemeanor. A second conviction within two years becomes a Class 4 felony.²

If you leave a job with unreimbursed expenses still pending, those amounts become part of your final compensation. The employer must include them in your last paycheck.³

Filing a Claim if Your Employer Refuses

If your employer denies a reimbursement request or ignores it, either response counts as a denial under the Administrative Code, and you can file a claim with the Illinois Department of Labor.³ You have one year from the date the reimbursement was due to file, and the Department can investigate claims going back up to three years from the filing date.⁶

You have a choice between filing with the Department and filing a civil lawsuit, but not both.² The Department route costs nothing to start and doesn’t require an attorney. The lawsuit route lets you recover attorney’s fees if you win, which often makes it the better path for larger amounts.

Employers must keep records of reimbursement policies, employee requests, approvals or denials, and actual payments for three years.³ If your employer can’t produce records showing a denial was justified, that works in your favor.

How Reimbursements Are Taxed

Whether your reimbursement shows up as taxable income on your W-2 depends on how the employer structures its plan. Under an IRS “accountable plan,” reimbursements are tax-free: they’re excluded from your wages and no income, Social Security, or Medicare tax is withheld. To qualify, the arrangement must meet three requirements:⁷

The expense must relate to work you performed as an employee.
You must substantiate the expense with documentation showing amount, date, place, and business purpose.
If your employer advances or reimburses more than the actual expense, you must return the difference within a reasonable period (the IRS generally treats 60 to 120 days as reasonable).

If any one of these fails, the arrangement is a “nonaccountable plan” and the employer must include the reimbursement in your taxable wages on your W-2.⁷ Illinois’s 30-day documentation rule aligns with the IRS’s substantiation requirements, so following the state procedure generally satisfies the federal standard as well.

Federal Minimum Wage Backstop

The Fair Labor Standards Act requires employers to pay wages “free and clear,” meaning your effective hourly pay cannot drop below the federal minimum wage after accounting for unreimbursed business expenses.⁸ For most Illinois workers earning well above minimum wage, this federal rule won’t come into play; Illinois’s own law provides far broader protection. For lower-wage workers whose unreimbursed costs eat into thin margins, the FLSA opens an additional enforcement path through the U.S. Department of Labor.

1
Justia Law. Illinois Code 820 ILCS 115 – Illinois Wage Payment and Collection Act
2
Illinois General Assembly. Illinois Compiled Statutes 820 ILCS 115/14 – Penalties
3
Illinois General Assembly. Illinois Administrative Code Section 300.540 – Reimbursement of Expenses
4
Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents per Mile
5
Illinois General Assembly. Illinois Compiled Statutes 820 ILCS 115/9.5 – Reimbursement of Employee Expenses
6
Illinois Department of Labor. Filing a Claim – FAQs
7
Internal Revenue Service. Publication 463 – Travel, Gift, and Car Expenses
8
eCFR. 29 CFR 531.35 – Payment of Wages