02 February 2018 Oregon 2018 state income tax withholding formulas and tables released, new statewide transit tax coming July 1, 2018 The Oregon Department of Revenue has released to its website the 2018 withholding tax formulas and wage-bracket withholding tables, effective with wages paid on or after February 1, 2018. The 2018 withholding tables have not yet been released, but should quickly follow the release of the withholding formulas. (Telephone conversation, representative, Oregon Department of Revenue, January 22, 2018.) As we previously reported, the Oregon Department of Revenue previously announced that due to the passage of the federal Tax Cuts and Jobs Act (the tax reform bill) it would delay its issuance of the 2018 income tax withholding tables. The updated Oregon Withholding Tax Formulas reflects changes to the inflation adjusted amounts (such as exemption credit, standard deduction, and federal tax subtractions). Employees may notice a change in the amount of Oregon tax withheld. Employees should be directed to Publication 150-206-643, Oregon Income Tax Withholding to assist them in completing Form W-4 for Oregon purposes. Employees can also fill out a federal Form W-4 marked for Oregon only. All personal exemption credits for taxpayers with federal adjusted gross income of more than $100,000 for single or married filing separately return, or more than $200,000 for married filing joint or head of household return are eliminated, effective January 1, 2014. (2013 HB 3601.) Employers may continue to use a 9.0% flat rate to figure withholding on 2018 supplemental wages that are paid at a different time than an employee's regular payday. Supplemental wages include bonuses, overtime pay, commissions, or any other form of payment received in addition to the employee's regular pay. As we previously reported, legislation enacted in 2017 created a new payroll tax on Oregon residents and nonresidents working in Oregon to fund state highway upgrades. (HB 2017.) — periodic payments made under ORS 316.189, not including retirement income paid to nonresidents from an Oregon source. The new statewide transit tax is calculated based on the employee's gross wages before any exemptions or deductions. Employees who aren't subject to regular income tax withholding due to high exemptions, wages below the threshold for income tax withholding, or other factors are subject to statewide transit tax withholding. The definition of "wages" excludes amounts paid to independent contractors and certain types of employees (ORS 316.162), as follows: — for active service in the Armed Forces of the United States as to which no withholding is required by the federal Internal Revenue Code (IRC) — To an employee of a common carrier to the extent that 49 U.S.C. 14503 and 40116 prohibit the remuneration from withholding for state income taxes — For domestic service in a private home, a local college club or a local chapter of a college fraternity or sorority. — To an employee whose services to the employer consist solely of labor in connection with the planting, cultivating or harvesting of seasonal agricultural crops if the total amount paid to such employee is less than $300 annually — To seamen who are exempt from garnishment, attachment or execution under title 46 of the United States Code — For services performed by a duly ordained, commissioned or licensed minister of a church in the exercise of the minister's ministry or by a member of a religious order in the exercise of religious duties required by such order, which duties are not commercial in nature — For services provided by an independent contractor. Self-employment income is not subject to this tax — To or on behalf of an employee, a beneficiary of an employee or an alternate payee under or to an eligible deferred compensation plan that, at the time of the payment, is a plan described in IRC Section 457(b) and that is maintained by an eligible employer described in IRC Section 457(e)(1)(A) An employer that fails to withhold and submit the new payroll tax will be held responsible for the payment of the tax in an amount equal to the amount required to be withheld from the employee's wages. Additionally, the employer will be subject to a penalty of $250 per employee, up to a maximum penalty of $25,000, if the employer knowingly fails to withhold and remit the tax. Out-of-state employers not doing business in Oregon are not required to withhold the new transit tax from Oregon residents' wages. Oregon residents that work for an out-of-state employer not doing business within Oregon will be required to report and pay the tax at the time and in the manner determined by the Department, or they may ask their out-of-state employer to voluntarily withhold the new tax. Employers will report the statewide transit tax on new quarterly returns separate from income tax withholding Oregon employers will be reporting the new statewide transit tax on a quarterly basis on a new quarterly return. Employers will not report the new transit tax on their quarterly income tax withholding return. A separate statewide transit tax annual reconciliation report, employee detail report, and payment coupon will also be used. Because employers will begin withholding the new transit tax on July 1, 2018, they will need to file a statewide transit tax return beginning for the third quarter 2018, due by October 31, 2018. Annual reconciliation reports will be due by January 31 each year. Agricultural employers will file returns and make payments for the new transit tax annually, as they do with their income tax withholding. Employers will be able to pay the statewide transit tax by cash, check, or money order using a new payment coupon. Employers may also pay the tax by EFT through a Revenue Online account. Cash payments will only be accepted at the Department's main office at 955 Center Street NE in Salem. The Department will continue to release information on its website as the July 1, 2018 effective date gets closer. Document ID: 2018-0250 |
