| Employer News |
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| Federal Form 944 |
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In January 2006 the IRS implemented a new federal report form for small employers, the Form 944. Only employers with a FEDERAL employment tax liability of $1000 per year (about $4000 per year in payroll), or less are eligible to use the Form 944.
The use of this new form is effective for 2006. The IRS planned to inform the eligible employers who qualify to use the form by February 25, 2006. Employers who believe they qualify, but have not received notification from the IRS can contact them at 1-800-829-0115 to find out if they qualify.
There is a work group currently studying Form 944 and this work group will analyze the feasibility and effects of adopting the changes for the state combined reports.
Oregon does not currently allow employers who file a federal Form 944 to file and pay their state reports on an annual basis, unless they are otherwise allowed to do so under state law, i.e. domestic filers. If you have any other questions about Form 944, please go to the IRS website at http://www.irs.gov/businesses/small/article/0,,id=152104,00.html to read their article on this topic.
03/09/2006
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| Contractor or Employee? |
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The new web site providing general information about independent contractors or employees is now active. This web site answers questions and resolvs issues about businesses and people who might be considered either independent contractors or employees based upon the work they do.
Start your review of this timely topic at www.oregon.gov/IC. This home page allows you to review the concepts which determine whether an individual is truly independent or more correctly fits into the employee category.
You will also be able to link to sites created by several Oregon Departments which offer additional material demonstrating their focus on this subject.
1/11/06
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| Tax Rate Manipulation |
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A federal law requires states to enact laws that close loopholes which allow employers to avoid paying some unemployment insurance taxes. Oregon has now changed state law to comply with this federal mandate.
The Employment Department web site now has information available covering the tax rate manipulation issue. You will find this new web page at www.oregon.gov/EMPLOY/TAX/RateManipulation.shtml.
1/11/06
Oregon has business-friendly tax system, study shows
KATU.Com, February 28, 2006
EUGENE, Ore. - A new study says Oregon has one of the most business-friendly tax systems in the country.
The state ranked 10th nationally for the fiscal year starting last July, according to a report released Monday by the Tax Foundation, a nonprofit group that has been looking at government fiscal policies since 1937.
The study's authors say the lack of a sales tax gave Oregon a big boost. States that avoid a major tax, such as sales or income, will be able to "out-compete those states that levy every tax in the state tax collector's arsenal," they said.
The study weighed 123 factors in five main categories to arrive at its rankings.
Oregon also got high marks for the "wealth index" category, which measures taxes on wealth, such as property taxes.
Overall, the lack of a sales tax and the wealth index outweighed an average ranking for business taxes and relatively unfavorable rankings for individual income taxes and unemployment insurance taxes.
The study's purpose is to adivse state officials on how they compare to other states that may be competing with them for companies and jobs, said foundation spokesman Bill Ahern.
While taxes are not the only factor companies use in deciding where to locate, "we know tax burdens are important," Ahern said.
The study aims to zero in on factors that legislators have some control over, and to identify problem areas where some states have a significant advantage, he said.
One of the factors is business taxes, long a political issue in Oregon.
Critics contend companies do not contribute sufficiently to taxes for needed services. But others say the state's relatively favorable business-tax climate fosters economic development and growth.
Tax Foundation president Scott Hodge and economist Curtis Dubay said more jobs are lost by one state to another state than to another country.
Favorable taxes are often a reason, they said, citing Intel's decision last year to build a chip-making plant in Arizona.
But Hodge and Dubay were sharply critical of states that use tax abatements and exemptions to attract businesses - strategies that can backfire when a company fails to deliver the promised benefits, they said.
"The truth is, that if a state needs to offer such packages it is most likely covering for a woeful business climate plagued by bad tax policy," they said in their report.
Even enterprise zones "are typically not very effective at all," Dubay said in a conference call with journalists. "They are short-term boosts that don't make a state more competitive. They are a signal that a state's tax system is not competitive, that it needs to be made up for."
Oregon has an enterprise zone system that waives local property taxes for three to five years in designated industrial zones.
Generally, Hodge and Dubay said, the best tax systems are ones that have low, flat tax rates that apply to everyone.
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