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Taxes

Income tax withholding: Federal

Note: Be sure to also refer to the corresponding section in this handbook for Oregon income tax withholding information.

Refer to the Internal Revenue Service for information on the following:

  • Who must comply?
  • Seasonal farm workers
  • Calculating tax withholdings
  • Depositing taxes

Technical assistance

Internal Revenue Service
Forms Distribution Center
Rancho Cordova, CA 95743-0001
Phone 800-TAX-FORM (800-829-3676)
Fax 703-368-9694
Web irs.ustreas.gov/formspubs

  • Publication 51, Circular A Agricultural Employer’s Tax Guide
  • Publication 15, Circular E Employer’s Tax Guide
  • Publication 493, Alternative Tax Withholding Methods and Tables
  • Form 8109, Federal Tax Deposit Coupons
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Income tax withholding: Oregon

Who must comply?

You must withhold tax for employees who plant, cultivate, or harvest seasonal agricultural crops once they earn $300 in a calendar year from you. When the amount exceeds $300, the entire amount is subject to withholding tax.

All Oregon employers (including farmers and ranchers) must withhold tax from employee wages at the same time employees are paid.

Definition

Employee

An employee is defined as anyone who performs services for another person, business, or organization. The key criterion used in deciding whether a person is an employee is the employer’s authority to direct the way the services are performed. Individuals recognized by the federal government as independent contractors may be regarded by the state as employees.

Web oregon.gov/ic/Pages/index.aspx

Wages subject to withholding

Wages subject to Oregon withholding tax include salaries, commissions, bonuses, wages, fees, tips, or any item of value paid to an individual for services as an employee. Taxable items include merchandise (such as a freezer of beef), stocks, room, board, or other considerations given in payment for the employee’s services. An employer must withhold tax on wages paid when an employer-employee relationship exists between a husband and wife, and on wages paid to minors for bona fide personal services rendered to their parents. The value of meals or lodging furnished for the convenience of the employer is not taxable.

You must withhold tax on all wages of regular farm employees, even though part of their work involves planting, cultivating, or harvesting. You must withhold tax on all wages paid for seasonal activities, such as canning or other food processing, logging, and sheep shearing, that are not connected with planting, cultivating, or harvesting seasonal agricultural crops.

Exempt wages

Certain wages are exempt from Oregon withholding law. The most significant agricultural exemption relates to seasonal employees. Wages paid to a seasonal farm laborer whose total annual income from a single employer is less than $300 are exempted from withholding law. When a worker’s annual income from one employer is more than $300, the entire amount, including the first $300, is subject to withholding tax. 

This exemption is only for planting, cultivating, or harvesting seasonal agricultural crops. Seasonal agricultural crops mature in one year or less.

Seasonal crops include the following:

  • Field and forage crops
  • Grass, cereal grain, vegetable crops, and flower bulbs and tubers of vegetable crops
  • Any vegetable or fruit used for food or feed
  • Holly cuttings harvested annually for Christmas sale

Note: Christmas trees are not considered seasonal agricultural crops.

Labor connected with the following is not exempt from withholding tax:

  • Forest products
  • Landscaping
  • Nursery stock as defined in, ORS 571.005 unless planted, cultivated, and harvested within an annual period
  • Raising, shearing, feeding, caring for, training, or managing livestock, bees, poultry, fur-bearing animals, or wildlife
  • Christmas trees

Employers must register with the Oregon Department of Revenue using the Combined Employer’s Registration report. You should register before you issue your first paychecks.

Web oregon.gov/DOR​

Figuring withholding taxes

For a seasonal farm employee, you may choose to withhold 2 percent of the total wages without considering any withholding exemptions. Otherwise, use the withholding tables in the Oregon Withholding Tax Tables to find out how much state income tax to withhold from the employee’s pay. Use the number of exemptions claimed by the employee on IRS Form W-4, Employee’s Withholding Allowance Certificate. If an employee has not filed a Form W-4, use 0 (zero) exemptions.

You may also use the percentage formula in computer payroll systems.

Payment due dates

Due dates for paying Oregon withholding tax are the same as due dates for paying federal withholding tax.

Quarterly filing

All employers, except agricultural employers who qualify for annual filing, must file withholding returns quarterly using Form OQ, Oregon Quarterly Combined Report.

Quarter

Ending

Due Date

1st: Jan-Mar

Mar 31

Apr 30

2nd: Apr-Jun

Jun 30

Jul 31

3rd: Jul-Sep

Sep 30

Oct 31

4th: Oct-Dec

Dec 31

Jan 31

Annual filing

If you file IRS Form 943, Employer’s Annual Tax Return for Agricultural Employees, you can also file your Oregon withholding annually using Form WA, Oregon Annual Withholding Tax Return for Agricultural Employees. It is due by January 31. Tax payments are due the same day as your FICA or federal tax payment.

Annual report

All employers must file Form WR, Oregon Annual Withholding Reconciliation Report, by March 31. The Department of Revenue mails Form WRs to registered employers.

Technical assistance

Oregon Department of Revenue
PO Box 14725
Salem, OR 97309
Phone (Salem) 503-378-4988
Phone (toll free from an Oregon prefix) 800-356-4222
TTY 800-886-7204
TTY is for hearing or speech impaired only. These calls are answered by machine and returned by a DOR representative
Web www.oregon.gov/dor
Email questions.dor@state.or.us


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Property tax special assessment

Exclusive farm use (EFU) zones and nonexclusive farm use (non-EFU) zones

Oregon law recognizes that agriculture and related land uses are important to Oregon’s character and economy. The legislature finds that providing the means for agriculture to continue and prosper is in the interest of all Oregonians who benefit directly or indirectly from agricultural production, and stewardship of farmlands and ranchlands.

Land, with or without a homesite, that qualifies for farm use special assessment is assessed at its farm-use value, exclusive of values related to urban influences or speculative purposes. County assessors value and assess any land and homesites qualifying for farm use special assessment.

Definitions

Exclusive farm use (EFU) zone

Land in areas zoned EFU is specially assessed at farm-use value upon discovery that the land is used exclusively for farm use.

Nonexclusive farm use (non-EFU) zone

Farmland that is zoned non-EFU can still qualify for special assessment if you apply to your county assessor’s office. To qualify for and maintain the special assessment, the land must be used for farm use and meet minimum gross farm income requirements. The minimum income is $650 for farms of 6.5 acres or less. If the land is more than 6.5 acres but less than 30 acres, the required minimum is $100 per acre (or fraction of acre). For farms over 30 acres, the requirement is $3,000 of gross farm income.

Homesite

Homesite refers to the land, including all tangible land improvements, that is customarily provided in conjunction with a dwelling. Land improvements necessary to establish a homesite include, but are not limited to, items such as grading, fill, drainage, wells, water supply systems, septic systems, utility connections, extension of utilities to any structures, retaining walls, landscaping, and graveled driveway areas.

Farm use (ORS 308A.056)

Farm use means that the current use of land is primarily to profit by raising, harvesting, and selling crops; feeding, breeding, managing, or selling livestock, poultry, fur-bearing animals or honeybees; dairying and selling dairy products; stabling or training horses; and raising, cultivating, maintaining, or harvesting aquatic birds and animals allowed by the Oregon Fish and Wildlife Commission. Farm use includes land growing cultured Christmas trees and certain hybrid cottonwood or hardwood timber for paper pulp production. Farm use also includes the preparing, storing, or disposing of products or by-products raised on farmland for human or animal use.

Farm use also includes:

  • Land subject to any farm-related government program.
  • Land currently crop-free for one year as a normal and regular requirement of sound agricultural practice, or lying idle for no more than one year because of an injury to or illness of a farmer or farmer’s immediate family member.
  • Land planted in orchards or other perennials prior to maturity.
  • Dry or water-covered wasteland in or adjacent to EFU land.
  • Land under buildings supporting accepted farming practices, including processing facilities or establishments of 10,000 square feet or less that process at least 25% of the farm product from the farming operation.
  • Farm-water impoundments lying in or adjacent to and in common ownership with farm use land.
  • A woodlot of up to 20 acres contiguous to and owned by the owner of land specially valued for farm use

Disqualification

In an EFU zone, the land will be disqualified from special assessment if:

  • The land is no longer used as farmland
  • The land is removed from an EFU zone
  • Approval is requested for a non-farm dwelling or parcel under ORS 215.236

In a non-EFU zone, land will be disqualified from special assessment if:

  • The owner notifies the assessor in writing to remove the land from special assessment
  • The owner sells or transfers the land to an ownership making the land exempt from property tax
  • The land is no longer used for farming, or does not meet the farm income requirement
  • The land is platted and a subdivision recorded, although the land may re-qualify after payment of an additional tax

Upon disqualification, land may qualify for a different special assessment and, in some cases, avoid additional taxes. Check with your county assessor for information about changing special assessments.

Additional taxes levied against disqualified farmland

If your farmland loses its special assessment and does not change to another special assessment, it will be assessed at market value, or maximum assessed value, and you may be charged additional tax.

The additional tax is based on the difference between the tax you paid and the tax you would have been paying if your land had not received the farm use special assessment. This tax difference is based on the number of years the land received farm use special assessment up to a maximum of five years, or 10 years in EFU zones that are outside of an urban growth boundary.

You will be charged additional tax if you change the use of the property so that it is incompatible with its return to farm use. These additional taxes will be added to your next property tax statement unless you choose to pay them sooner.

Note: If the land is idle or is used in a way compatible with returning it to farm use, the additional tax will be deferred. If the land is used for residential development or commercial, industrial, or other uses then the additional taxes will not be deferred.

Additional taxes waiver

Additional taxes may be waived (abated) on disqualified non-EFU properties that have difficulty meeting the minimum gross income requirements if the land continues to be farmed after being disqualified. For each continuous year the land continues limited farming, the oldest year of additional taxes is waived until there are no years of potential additional taxes remaining.

Technical assistance

To find out in which zone your farmland is located, contact the planning office or county assessor’s office in which the land is located.

Oregon Department of Revenue
Phone (Salem) 503-945-8278
Phone (toll free from an Oregon prefix) 800-356-4222
Fax 503-945-8738
TTY 800-886-7204
TTY is for hearing or speech impaired only. These numbers are answered by machine and returned by a DOR representative.
Web oregon.gov/DOR
Email questions.dor@state.or.us

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Self-employment tax

Social Security self-employment tax is part of a system that provides farmers and other self-employed individuals with Social Security and Medicare insurance coverage. If you engage in farming or ranching as a business, you probably have to pay self-employment tax. Refer to the Social Security Administration or Internal Revenue Service for information regarding the following:

  • Tax rate
  • Employing family members
  • Items included and not included in earnings
  • Requesting benefit statements
  • Payment

Technical assistance

Social Security Administration
Web ssa.gov/pubs/10022.html

Publications

Internal Revenue Service
Forms Distribution Center
Rancho Cordova, CA 95743-0001
Phone 800-TAX-FORM (800-829-3676)
Fax 703-368-9694
Web irs.ustreas.gov/formspubs

  • Publication 533, Self-Employment Tax
  • Publication 225, Farmer’s Tax Guide
  • Publication 505, Tax Withholding and Estimated Tax
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Social Security tax

Refer to the Social Security Administration or Internal Revenue Service for information regarding the following:

  • Who must comply?
  • Tax rates
  • Depositing taxes

Technical assistance

Social Security Administration
Web ssa.gov/SSA_Home.html

Internal Revenue Service
Forms Distribution Center
Rancho Cordova, CA 95743-0001
Phone 800-TAX-FORM (800-829-3676)
Fax 703-368-9694
Web irs.ustreas.gov/formspubs​

Publications

  • Publication 51, Circular A Agricultural Employer’s Tax Guide
  • Publication 15, Circular E Employer’s Tax Guide
  • Form 8109, Federal Tax Coupons
  • Publication 937, Employment Taxes
  • Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees
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Unemployment tax: Federal

Refer to the Internal Revenue Service for information regarding the following:

Who must comply?

  • Tax rate
  • Compliance
  • Filling annual FUTA tax returns
  • Family employees

Technical assistance

Internal Revenue Service
Forms Distribution Center
Rancho Cordova, CA 95743-0001
Phone 800-TAX-FORM (800-829-3676)
Web irs.ustreas.gov/formspubs

Publications

  • Publication 51, Circular A, Agricultural Employer’s Tax Guide
  • Publication 15, Circular E, Employer’s Tax Guide
  • Form 940, Employer’s Annual Federal Unemployment
  • Form 8109, Federal Tax Deposit Coupon
  • Publication 225, Farmer’s Tax Guide
  • Publication 583, Starting a Business and Keeping Records
  • Publication 15-A, Employers Supplemental Tax Guide

Telephone help

You can call the IRS with your tax questions 24 hours a day, seven days a week. Check your telephone book for the local number or call 800-829-1040.

Help for people with disabilities

Telephone help is available using TTY equipment. You may call 800-829-4059 with your tax question or to order forms and publications.

Calendar for filing and paying FUTA

January: file Form 940
March: calculate first quarter FUTA
April: pay first quarter FUTA
June: calculate second quarter FUTA
July: pay second quarter FUTA
September: calculate third quarter FUTA
October: pay third quarter FUTA
December: calculate total FUTA


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Unemployment tax: Oregon

Note: Refer to the corresponding section in this handbook for federal information.

Who must comply?

Agricultural employers are subject to unemployment taxes if they meet one of the following thresholds:

  • Have $20,000 or more cash payroll in a calendar quarter in either the current or preceding calendar year
  • Have 10 or more people working for 20 days, each day being in a separate calendar week during the current or preceding calendar year

Non-cash remuneration, such as room and board, is not included in the payroll calculations to determine subjectivity. However, wages paid in other states for the same entity, and corporate officer wages, even if excluded under the family officer provision, are included.

Once an agricultural employer becomes subject to Employment Department Law, they become subject for the entire current calendar year and all of the next calendar year, as long as employment exists. This is true even if the payroll is less than $20,000 in those quarters.

Employers are responsible for registering with the Employment Department by completing and filing a Combined Employer’s Registration.

Web oregon.gov/DOR/BUS/Pages/forms-payroll.aspx

When coverage of agricultural employment ceases

An agricultural employer may request that their account be closed when the following conditions are met:

  • The employer notifies the Oregon Employment Department that they have not had qualifying payroll in the preceding calendar year.
  • The employer does not anticipate having qualifying payroll in the current calendar year.

The notification must be made in writing to:

Oregon Employment Department
Tax Section, Room 107
875 Union St NE
Salem, OR 97311-0030

The employer’s account will cease to be subject beginning the first day of the calendar quarter in which the request is filed. The exclusion doesn’t go into effect until you receive written approval. This cannot be retroactive.

Definitions

Employee

Includes any person employed for pay under any contract for hire unless the services are specifically excluded from coverage under the law. You should check with your local Employment Department Tax Office to determine whether the services performed by your workers are excluded from coverage.

Family employees

Family employees are exempt from unemployment tax for services performed by the owner’s (as a sole proprietor) parents, spouse, and children under the age of 18.

Farm workers supplied by contractors

Farm workers supplied by farm labor contractors are considered employees of the farm operator unless any of the following are true:

  • The contractor holds a valid federal Certificate of Registration under the Federal Migrant and Seasonal Agricultural Worker Protection Act.
  • Substantially all the workers supplied by the contractor operate or maintain tractors, harvesting or crop-dusting machines, or other machines provided by the contractor, and the contractor meets standards set for independent contractors under other sections of Employment Department law.

Tax calculation

Unemployment tax rates are assigned in accordance with Oregon law. New employers are assigned a “base rate” until they have had sufficient “experience” to qualify for an “experience rate” based tax rate. This usually takes about three years. The Oregon Employment Department sends out notifications to employers asking for specific information when Unemployment Insurance (UI) claims are filed. If requested, a timely response is not only required, but may help mitigate the effect of unemployment claims on an employer’s future UI tax rate.

All employers are notified of their rate and the maximum taxable wages for each employee for the next calendar year by November 15.

Filing

Employers must pay their unemployment taxes and file a combined tax report on a quarterly basis. The forms are mailed to employers at the beginning of each year.

Quarter

Ending

Due Date

1st: Jan-Mar

Mar 31

Apr 30

2nd: Apr-Jun

Jun 30

Jul 31

3rd: Jul-Sep

Sep 30

Oct 31

4th: Oct-Dec

Dec 31

Jan 31

Information required on reports includes the following:

  • Number of workers at mid-month in each month of the quarter
  • Subject and taxable payroll
  • Each employee’s Social Security number, name, number of hours worked in the quarter in which service was performed, and wages paid in the quarter

Tech​nical assistance

Oregon Employment Department
875 Union St NE, Room 107
Salem, OR 97311
Phone 503-947-1488
Email taxinfo@emp.state.or.us
Web oregon.gov/employ/tax

Oregon Business Information Center
255 Capitol St NE, Suite 151
Salem, OR 97310-1327
Phone 503-986-2200
Web filinginoregon.com

Publications

How to Start a Business in Oregon
Employer’s Guide for Doing Business in Oregon
Web www.filinginoregon.com


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