SALEM, Ore. - The Oregon Department of Revenue is urging Oregon employees to check their wage withholding to ensure enough is held back from each paycheck to cover their 2018 Oregon income tax liability. This is particularly important for anyone who filled out the 2018 federal Form W-4 and provided it to their employer.
Recent federal changes from the 2017 Tax Cuts and Jobs Act directly impact Oregon’s personal income tax, including changes to calculating withholding allowances for tax year 2018. These changes have caused a larger difference between how federal and Oregon income tax withholding is calculated.
Combined with Oregon’s dependence upon the federal form to determine state withholding, these changes have created a situation where taxpayers may not be withholding enough income taxes from their wages to cover their Oregon income tax liability. This may mean that more taxpayers have a tax to pay at the end of the year, or have more tax to pay than usual, leaving them with unexpected and difficult financial burdens, the agency warned.
The department has a withholding calculation worksheet available that has been updated to accommodate recent federal changes. It provides taxpayers with a way to check their withholding so they can make any necessary changes — including adjusting allowance numbers and opting to withhold additional funds from upcoming paychecks — before the end of the year to hopefully reduce the amount owed when they file their 2018 returns early next year. The worksheet (OR-WW, Oregon Withholding Worksheet) is available at www.oregon.gov/dor.
Oregon wage earners who use separate Form W-4s for federal and Oregon income tax withholding will have a new option for withholding documentation in 2019 with the release of the Oregon-specific Form W-4. With this form, employees will no longer need to complete a separate federal form W-4 and write “For Oregon only” at the top to designate their amount of state withholding. It will also give Oregon more flexibility in adapting to future federal tax law changes without unnecessarily burdening employees or employers.