February 3, 2020 Oregon release of the 2020 income tax withholding formula; new requirements for state Form OR-W-4 The Oregon Department of Revenue has released to its website the 2020 withholding tax formulas and wage-bracket tables. Other withholding tax forms and publications are available here under the heading Combined Payroll. (Oregon Department of Revenue website.) Standard deductions and transit rates for 2020 2020 Standard deductions:
2020 Transit rates:
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. 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.) Supplemental withholding rate to decrease for 2020 As we reported, the Department announced that the supplemental withholding rate will decrease to 8% effective January 1, 2020, down from 9% for 2019 and previous years (EY Payroll Newsflash Vol. 20, #211, 12-13.2019). Employers may use the 8.0% flat rate to figure withholding on 2020 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. Oregon Form OR-W-4 required for 2020 The Department released for calendar year 2020 a revised state Form OR-W-4, Oregon Employee's Withholding Allowance Certificate. Effective beginning January 1, 2020, new employees, employees claiming exempt from state withholding and those making changes to their withholding allowances must submit the 2020 Form OR-W-4 to their employers. (Payroll tax news, emailed by the Department on December 5, 2019.) Also, employees who have submitted a 2019 or prior version of federal Form W-4 for Oregon (or marked as "Oregon only") and federal withholding purposes, AND who submit a 2020 or later version of the federal Form W-4 to change their federal withholding, must complete a new Form OR-W-4 for Oregon withholding. Existing employees who submitted federal Form W-4 for 2019 and prior and are not planning to change their federal or state withholding are not required to submit Form OR-W-4. Employers may continue to calculate state withholding based on the previously submitted federal Form W-4. For 2019, use of Form OR-W-4 was optional. The change to mandatory usage is made because the federal 2020 Form W-4 no longer includes the option of claiming personal allowances; however, personal allowances continue to apply for Oregon state income tax withholding purposes. (EY Payroll Newsflash Vol. 20, #211, 12-13.2019.) For more information on Form OR-W-4, see the Department's Publication 150-211-602, W-4 Information for Employers. Oregon law requires flat percentage of withholding for employees who fail to submit Form OR-W-4 As we reported previously, 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 previously submit Form W-4 or Form OR-W-4. Under previous law, the employer was instructed to calculate Oregon state income tax as "single" and "zero allowances" when an employee failed to provide Form W-4 or Form OR-W-4. (EY Payroll Newsflashes Vol. 20, #071, 6-6-2019; EY Payroll Newsflash Vol. 20, #211, 12-13-2019.) An election for exemption from state withholding, claimed by an employee by filing an exemption certificate with their employer expires on February 15 of the calendar year following the year of the election. This follows the federal rules for employees claiming exemption from federal withholding. If an employee is eligible to claim an election for exemption from state withholding for a subsequent tax year, the employee must provide a new Form OR-W-4 to the employer before February 15. If the employee doesn't provide a new Form OR-W-4 by February 15, the employer must withhold at a flat rate of 8%. If the employee provides a new Form OR-W-4 claiming exemption from withholding after February 15, the employer may apply the exemption to future wages, but should not refund taxes withheld while the exempt status wasn't in place. ———————————————
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