Under H.B. 2119 and effective January 1, 2020, employers are required to withhold Oregon state income tax at a flat rate of 8% when employees have failed to submit Form W-4 or Form OR-W-4, Oregon Employee's Withholding Allowance Certificate. Under current law, the employer is instructed to calculate Oregon state income tax as single and zero allowances when an employee fails to provide Form W-4 or Form OR-W-4.

Background

For calendar year 2019, the Oregon Department of Revenue released new state Form OR-W-4, Oregon Employee's Withholding Allowance Certificate, in response to federal changes under the Tax Cuts and Jobs Act. Employers are not required to provide this form to employees, but it is strongly recommended by the Department. (EY Payroll Newsflash Vol. 20, #024, 1-23-2019.)?

Employees with an existing "Oregon only" federal Form W-4 do not need to submit Form OR-W-4 or change their allowances for Oregon unless they revise their federal Form W-4 after January 1, 2019. In addition, employees may still submit a separate federal Form W-4 for state withholding purposes, rather than Form OR-W-4, by writing "For Oregon only" at the top of the W-4.

The Department recommends that employers encourage their employees — particularly those who submitted a federal Form W-4 and don't have a separate form for their Oregon withholding — to make sure their withholding amount covers their estimated Oregon personal income tax liability. The Department released an online withholding calculator to make determining the appropriate amount of Oregon withholding easier.

For more information on the current rules governing Form OR-W-4, see Publication 150-211-602, W-4 Information for Employers.

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EY Payroll News Flash