March 22, 2022
Oregon confirms state income tax rules for wages paid to remote workers
The Oregon Department of Revenue has issued guidance to assist employers in understanding the income tax withholding requirements that apply when employees are working remotely within the state.
Importantly, there is no exception to the rules contained in Oregon Administrative Rule (OAR) 150-316-0255 in consideration of the COVID-19 emergency. (See EY Tax Alert 2020-1939.)
- Oregon residents. Employers must withhold Oregon state income tax from all wages paid to Oregon resident employees working in Oregon (including teleworkers), regardless of whether they work out of the employer's physical location in Oregon or work/telecommute from their residence. An exception to this withholding requirement applies if the employer can demonstrate that the employee, will receive $300 or less in wages from the employer in a calendar year.
Oregon law does not require withholding from wages paid to Oregon residents if there are no employees working in the state; however, employers are asked to register and courtesy withhold for these employees.
- Oregon nonresidents. Employers must withhold Oregon income tax from all wages earned by nonresident employees for services performed in Oregon, unless the employee's earnings for the year are expected to be less than the standard deduction amount for the applicable filing status. Even if Oregon income tax is not withheld from the employee's wages, they must still be reported as Oregon-source income in Box 16 of the Form W-2. Nonresident employees with wages greater than their standard deduction amount are required to file an Oregon nonresident return.
The Oregon standard deduction amounts for tax year 2022 are:
- Single/married filing separately $2,420
- Head of household $4,840
- Married filing jointly $4,840
- Qualifying widower $4,840
Note that employees subject to Oregon income tax withholding who are hired on or after January 1, 2020 are required to submit Form OR-W-4. 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.
For more information on withholding and paying Oregon income tax and the state/local transit tax, see the Oregon Employer's Guide.
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