check the box to USE Federal on the Employee, State = IL setup.

The Federal Status and exemptions need to be populated first, so make sure that in Setup, Employees that this information is populated on the Entry Info tab. This is information that is obtained from the Employees W4 form usually.

Currently, I have the employee set up on the Entry tab with Federal: S, Exemptions: 0. Work state: IL. On the State tab for IL, I tried marking the box "use Federal" but I'm getting the error that I haven't marked the status box on the State. So, I unmarked the "use Federal" and put in nothing in the status box and Personal exemptions = 0. Still get same error message.

Are there other Employee State records for this employee other than IL. Once you have selected USE FEDERAL the STATUS box should grey out when setting up an Employee for IL. There aren't any specific statuses for the state of IL when I click the LIST in the STATUS column, so I am not sure why you would get that message when USE FEDERAL is selected for IL unless there is another record for that employee.Did you seelct the Federal Status from the LIST on the employee setup, or did you TYPE it in?

Yes, he is set up for Nebraska as that is where he lives and typically works. We have him and 10 other guys working in Illinois for the rest of the year and I'm getting the same error on everyone of the guys. I just tried clearing the status on the Federal Status field and entered from the list and reprocessed his check and got the same error.

"Invalid status ILSWH Employee...from the Setup menu, select employees, and enter a valid status for this employee on the Entry Info tab and/or in the employee setup-state window. State withholding tax cannot be calculated for this employee until a valid status is entered.

Yes, he is set up for Nebraska as that is where he lives and typically works. We have him and 10 other guys working in Illinois for the rest of the year and I'm getting the same error on everyone of the guys. I just tried clearing the status on the Federal Status field and entered from the list and reprocessed his check and got the same error.

"Invalid status ILSWH Employee...from the Setup menu, select employees, and enter a valid status for this employee on the Entry Info tab and/or in the employee setup-state window. State withholding tax cannot be calculated for this employee until a valid status is entered.

Okay, so it sounds like you are getting the error when processing the check and not when trying to establish the employee state record. I will research this further and reply with further information once I have completed my research and testing.
Do you have any reciprocal agreements between IL and NE?

No, unfortunately, our guys have to pay for ILSWH. Our unemployment tax, is processed under the State of Nebraska, however.