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General information

Oregon statute of limitations on refunds

Oregon law limits the time you have to claim a refund  of Oregon tax. The allowable time depends on your circumstances. Some examples are listed below.

Withholding and estimated tax refunds

You must file your original return within three years of the due date to claim a refund of tax withheld or estimated tax payments. The due date does not include extensions. If you file more than three years after the due date, the excess tax withheld or estimated tax payments cannot be refunded or reduce tax you owe for another year.

Amended returns
If your original return was filed within three years of the due date, you may amend (change) your return and file for a refund within:
  • Three years of the due date of your original return, or
  • Three years of the date you filed your original return, or
  • Two years of the date you paid your tax or paid any part of your tax, whichever is later.

If you file your amended return after three years, but within two years from the date you paid tax, your refund cannot be more than the amount of tax you paid during that two-year period.

Example:  Bob filed his 2010 Oregon return and paid $300 tax due on time. In March 2013, he discovered he had forgotten to report some interest income. He amended his return. He paid $220 additional tax on April 1, 2013. On August 4, 2014, Bob discovers he failed to claim a large charitable contribution he made in 2010. Bob must amend his 2010 return by April 1, 2015. His refund will be limited to $220, the additional tax he paid within the last two years. 

If the Oregon Department of Revenue adjusted items on your return and your right to appeal has expired, you cannot use the above rules. You cannot claim a refund for those items.

Federal corrections or other state corrections to tax returns
Sometimes when the IRS or another state corrects your return, the changes will affect your Oregon return, resulting in a refund. You have two years from the date of the correction to amend your Oregon return and claim a refund. This is true even if the three-year statute of limitations has expired. See the Amended returns section below for more information.

Net operating loss carryback
You may claim a refund from a net operating loss (NOL) carryback within three years after the due date (including extensions) of the return that showed the net operating loss. Be sure to check the NOL box on your amended schedule.

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Interest

Interest rates are the same for taxes owed and refunds. Interest is charged on tax only and is paid on tax only. Interest is not charged on penalty. We do not charge compound interest. The following table shows interest rates since 2002. For interest rates before 2002, contact us. The dates listed below are when the interest rates were adjusted each year.



Interest percentage rates

Interest dates

Annual

Monthly

Daily

February 1, 2002

8%

.6667%

.0219%

February 1, 2003

7%

.5833%

.0192%

January 1, 2004

6%

.5%

.0164%

January 1, 2005

5%

.4167%

.0137%

January 1, 2006

7%

.5833%

.0192%

January 1, 2007

9%

.75%

.0247%

January 1, 2009

6%

.5%

.0164%

January 1, 2010

5%

.4167%

.0137%

January 1, 2013

4%

.3333%

.0110%

  

The annual interest rate is 4 percent for interest periods beginning after January 1, 2013. The interest rate may change once a calendar year, and has not changed for 2014.


How to figure interest on tax you owe

You must figure interest on the amount of tax not paid by the due date of your return. 

An interest period is each full month, starting with the day after the due date of the original return. For example, April 16 through May 15 is one interest period. 

Interest is figured daily for a fraction of a month, based on a 365-day year.

Interest owed on income tax starts the day after the due date of your original return and goes to the date of your payment. Even if you get an extension to file, you still owe interest if you pay after the return’s original due date. An extension to file is not an extension to pay. 

If you file an amended return or if your taxable income changed because of a federal or state audit and you have tax to pay, you will be charged interest starting the day after the due date of the original return until the date of your payment.

If the interest rate changes in the middle of an interest period (each full month), use the interest rate in effect at the beginning of the interest period for that entire period. Use the new rate starting at the beginning of the next interest period.

Example: You filed an amended income tax return for tax year 2010 on February 20, 2013. Your original 2010 return was due April 18, 2011. You paid additional tax with your amended return. Here’s how to figure the interest periods and the interest rate for each period:

April 19, 2011–January 18, 2012
     9 full months = 9 interest periods at a rate of .4167%
January 19, 2012–January 18, 2013
     1 full year = 1 interest period at a rate of 5%
January 19, 2013–February 18, 2013
     1 full month = 1 interest period at a rate of .3333%
February 19, 2013–February 20, 2013
     2 days at a daily rate of .0110%

Example: You filed an amended income tax return for tax year 2010 on March 23, 2013. Your original 2010 return was due on April 18, 2011. You paid additional tax of $500 with your amended return. Here is how you figure the interest you owe on the additional tax:

April 19, 2011–January 18, 2012
     .004167 × $500 × 9 months.............................=$18.75
January 19, 2012–January 18, 2013
     .05 × $500 × 1 year..........................................=$25.00
January 19, 2013–March 18, 2013
     .003333 × $500 × 2 months..............................=$3.33
March 19, 2013–March 23, 2013
     .000110 × $500 × 5 days....................................=$0.28
Total interest $47.36


Two-tiered interest on deficiencies and delinquencies
Additional interest of one-third of 1 percent per month (4 percent yearly) will be charged on deficiencies or delinquencies if:

  • You have filed a return showing tax due (a self assessed tax liability) and do not pay the tax due within 60 days after you file your return, or
  • The Department of Revenue has assessed an existing deficiency, and you do not pay the assessment within 60 days after the date on the Notice of Assessment.

If you appeal to the Department of Revenue (or, in a hardship situation, to the Oregon Tax Court) without paying the tax, the increased interest rate will start with interest periods beginning 61 days after:

  • The date of the department’s written objection decision, or
  • The date of the department’s conference decision letter (CDL), or
  • The date the Magistrate Division enters its decision, or
  • The date the Tax Court or the Oregon Supreme Court enters its judgment.

How to figure interest on refunds for personal income tax
Interest is paid on refunds due to you if the department does not issue your refund by the 45th day after receiving your return. If you file your return before the due date, it is considered received on the due date. If the department issues your refund before the 45th day after receiving your return, you will not be paid interest.

Interest on net operating loss carrybacks is computed starting on the 45th day after the filing date or due date of the return of the loss year, whichever is later.

Example: You filed an amended income tax return for tax year 2011 on May 23, 2014. Your original 2011 return was due on April 17, 2012. You filed your original 2011 return on March 19, 2012. You are due a refund of $1,000 from the amended return. Here is how we figure the interest due to you on your refund:

April 18, 2012 – May 30, 2012…………………0 interest
May 31, 2012 – January 30, 2013,
     .004167 x $1,000 x 8 months … …………… =$33.34
January 31, 2013 – January, 30, 2014,
     .04 x $1,000 x 1 year………………………… =$40.00
January 31, 2014 – April 30, 2014,
     003333 x $1,000 x 3 months… ………….… =$10.00
May 1, 2014 – May 23, 2014
     .000110 x $1,000 x 23 … ……………………=$2.53
Total interest……………………………………..… $85.87

Two-tiered interest on refunds
The interest rate will increase if we are unable to issue a refund within 60 days from the date of a Tax Court or Supreme Court judgment. The rate will increase by one-third of 1 percent per month (4 percent yearly) for interest periods that begin 61 days after the date the judgment is entered.

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Penalties

5 percent failure-to-pay-penalty
You must pay a penalty if you do not pay your tax by the original due date. This is true even if you have an extension of time to file. The failure-to-pay penalty is 5 percent of your unpaid tax.

You will not be charged the 5 percent failure-to-pay penalty if you meet all of the following requirements:

  • You file federal Form 4868, Extension of Time to File U.S. Individual Income Tax Return (the automatic extension of time to file), or the Oregon Extension Form 40-EXT according to current Oregon income tax return instructions, and
  • You pay at least 90 percent of your tax after credits by the original due date, and
  • You file your return within the extension period, and
  • You pay the balance of tax due when you file your return, and
  • You pay the interest on the balance of tax due when you file your return or within 30 days of the date of the bill you receive from the department.
If you file with a valid extension but did not pay 90 percent of your tax by the original due date, you will be charged the 5 percent failure-to-pay penalty.

20 percent failure-to-file penalty
You must pay a penalty if you do not file your return within three months after the due date (including extensions). The penalty is 20 percent of the unpaid tax. The failure-to-file penalty is in addition to the 5 percent failure-to-pay penalty.

Example: Rosa filed her 2013 return on July 21, 2014. Her return was due April 15, 2014. She did not have an extension. She paid the tax due of $2,000 with the return. Here is how she figures her penalty:
Penalty (failure-to-pay)
     .05 × $2,000 tax......................................................$ 100
Penalty (failure-to-file)
     .20 × $2,000 tax........................................................ 400
Total penalties............................................................. $ 500

Note:
Rosa will also owe interest for late payment of tax.

You will not be charged the 20 percent failure-to-file penalty if you:
  • File federal Form 4868, Extension of Time to File U.S. Individual Income Tax Return (the automatic extension of time to file), or
  • File the Oregon Extension Form 40-EXT according to current Oregon income tax return instructions, and
  • File the return within three months after the due date (including extensions).

100 percent failure-to-file penalty

If you do not file returns for three consecutive years by the due date of the third year’s return, including extensions, you must pay a 100 percent failure-to-file penalty on the tax due for each year.

100 percent intent to evade penalty
If you file a return with the intent to evade tax, you must pay a penalty of up to 100 percent of the tax due. In addition, you could be charged with tax evasion, a
class C felony. You could be fined up to $125,000, serve a jail sentence, or both.

Total penalties
The total of these penalties cannot be more than 100 percent of the tax due. Exceptions: Penalties for substantial understatement of income, frivolous return, post amnesty, and abusive tax avoidance transactions may be in addition to other penalties.

20 percent substantial understatement of income penalty
If we determine that you have substantially understated your income on your return, you must pay a 20 percent penalty. A substantial understatement of income is more than $25,000 for C corporations and $15,000 for all others. Substantially understated income includes income attributable to an abusive tax shelter, even if fully disclosed.

This penalty is in addition to all other penalties provided by law.


$250 frivolous return penalty
If you file a frivolous return that is meant to deliberately delay or block the administration of tax laws, you must pay a $250 penalty. “Frivolous” includes, but is not limited to:
  • An argument, without any good basis, that there has been a violation of your constitutional rights.
  • Reliance on a “gold standard” or “war tax” deduction.
  • An argument that wages or salary are not taxable income.
  • An argument that the 16th Amendment to the U.S. Constitution was not properly adopted.
  • An argument that “unenfranchised, sovereign, freemen, or natural persons” are not subject to tax laws.

Post amnesty penalty

If we determine that you were eligible for the tax amnesty program offered in 2009 and you didn’t participate, you must pay an additional 25 percent penalty. This penalty only applies to tax years 2007
and before.

Abusive Tax Avoidance Transactions (ATAT) penalties
Penalties can be imposed on abusive tax avoidance transactions (ATAT), including:
  • A penalty of 60 percent of a listed transaction understatement. This penalty is in addition to and not in lieu of any other penalties.
  • Failure to report a reportable transaction will result in penalties of $3,300 on individuals and $16,700 on corporations.
  • Failure to report a reportable transaction on a listed transaction will result in penalties of $33,000 on individuals and $66,000 on corporations.
  • A promoter of tax shelters may be assessed a penalty of 100 percent on gross income derived from promoting the shelter. This penalty is in addition to and not in lieu of any other penalties. 
In addition to these penalties, the statute of limitations is increased to nine years if the department finds that a return involves use of a listed transaction. ack to Top

Extensions of time to file

If you file a federal extension, Form 4868, and expect to get a refund for Oregon, DO NOT file an Oregon extension, Form 40-EXT. Oregon allows you the same extension you have for your federal return. Check the extension box on your Oregon tax return when you file and keep a copy of your federal extension in your records. You aren’t required to send us a copy of your federal extension, though we may request one at a later date.

In some cases, you will need to file the Oregon extension form, Form 40-EXT. The following instructions will help you file for an Oregon extension properly:

  • If you did not file a federal extension but need more time to file for Oregon only and you expect an Oregon refund:
    • File Oregon Form 40-EXT. Enter -0- in the payment amount box on Form 40-EXT, Automatic Extension for Individuals. Mail the Form 40-EXT to: Extension Clerk, Oregon Department of Revenue, PO Box 14950, Salem OR 97309-0980.
    • Check the extension box on your Oregon tax return when you file your return.
    • Keep a copy of your extension in your records; we may request one at a later date.
  • If you need more time to file for Oregon and you need to make a tax payment to Oregon:
    • Complete the tax payment worksheet on Form 40-EXT.
    • Make your payment. To make a payment by credit or debit card see the Payment Options section. If you pay by credit or debit card DO NOT send an Oregon Extension, Form 40-EXT. You will indicate when making your payment that it is for an Oregon extension. Alternatively, you may send a check or money order along with an Oregon extension, Form 40-EXT, to: Extension Clerk, Oregon Department of Revenue, PO Box 14950, Salem OR 97309-0950.
    • Check the extension box on your Oregon tax return when you file your return.
    • Keep a copy of your extension in your records; we may request a copy at a later date.


An extension does not mean more time to pay!
You must pay any tax you expect to owe with your extension form by April 15, 2014. If you do not pay all the tax due with your extension, you will owe interest on the unpaid balance after April 15, 2014, until the date it is paid. To avoid penalty and interest charges, include enough payment with your extension to cover your tax liability. If you discover you have overpaid, you will receive a refund. The current interest rate is 4 percent per year. If the tax is not paid within 60 days of our bill, the interest rate increases to 8 percent per year.

Were you stationed in a designated combat zone?
Did you receive additional time to file your federal return and pay your federal tax? If so, Oregon allows the same additional time to file and pay. Write “combat zone” in blue or black ink at the top of your return when you file it.

Do you live in an area affected by a national disaster?
Did you receive additional time to file your federal tax return and pay your federal tax? If so, you may qualify for additional time to file your Oregon return and pay your Oregon tax. Please call us for information and instructions on filing or visit our website.


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Amended returns

ORS 314.380

Reasons to file an amended return

  • An IRS audit (or other state audit) resulted in a change to your original return that affects your Oregon return.
  • You amended your federal (or other state) return and the changes you made affect your Oregon return.
  • You have a net operating loss (NOL) and will carry back the NOL to a prior year.
  • You need to correct the income or deductions you originally reported. 

What form to file to amend a return

The Amended Schedule is used to amend (or correct) returns for all tax years. Generally, you will use the same form (Form 40, 40P, or 40N) and instructions you used to file your original return to complete your amended return. However, if you are changing your residency status (for example, from full year resident to part-year resident), use the appropriate form for your corrected residency status.
Complete the Amended Schedule and attach it to your amended return (Form 40X is no longer accepted). Visit our website to download the Amended Schedule and instructions, or call us to order a copy.

When to file an amended return
Refund. Generally, you must file a claim for a refund (an amended return showing a refund) within three years from the due date of your original return, or the date you filed your original return, whichever is later.

Example: Hazel, a full-year Oregon resident, filed her
original 2012 return on April 15, 2013. In February
2014, she discovered she failed to claim her Schedule
A charitable contributions on her original 2012 return.
Hazel must file her amended 2012 return no later than
April 15, 2016, to claim her refund of overpaid taxes.

There are exceptions for filing an amended return after the three-year statute of limitations has expired. These exceptions are explained in the instructions for Oregon Amended Schedule.

Tax to pay
. If you need to file an amended return because you owe more tax, do it as soon as possible. Pay the tax and interest due when you file the amended return. Interest will be charged from the day after the due date of the original return to the date you pay the tax.

For amended return processing updates, please visit our website or call us.

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Injured spouse/RDP refund claim

ORS 314.415 (7)

Are you filing a joint return with your spouse or RDP, who is separately liable for a debt to a state agency? If so, you may request that your joint refund be apportioned.

When your return is processed, we will notify you of our intent to apply the joint refund to any debts owed to the state of Oregon. When you receive our notice, send us a request to divide the refund.

Use federal Form 8379 and fill in the Oregon refund numbers or make your own worksheet. Please respond within 30 days of the date of our notice. 

Separate your withholding, tax payments, and items of income. Income from jointly held property must be split evenly, including interest earned on joint bank accounts.

If the debt is owed to another state agency (not for state taxes), address your refund request to:

Attention: Other Agency Accounts
Oregon Department of Revenue
955 Center Street NE
Salem OR 97301-2555

If the debt is owed for Oregon state taxes (i.e., any tax program administered by the Department of Revenue), address your refund request to:

Oregon Department of Revenue
955 Center Street NE
Salem OR 97301-2555

For additional information, visit our website and click on “Have filing questions? Read through the Personal Tax FAQ", then click on “Refund".

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Electronic filing for Oregon

Electronic filing is a fast, efficient, and accurate way to file an Oregon income tax return. Electronically filed returns require fewer manual steps to process compared to paper returns.

Practitioners are automatically approved for Oregon electronic filing after the IRS acceptance of Form 8633, Application to Participate in the Electronic Filing Program. There is no separate registration required for Oregon.

Paid preparers who meet the requirements of the federal e-file mandate must also e-file Oregon personal income tax returns. For information on waivers of this requirement, visit our Tax Professionals page, then click on “FAQs” under “Current Topics.”

The copy you provide to the client must be an exact copy of the tax return you submit to us.

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2-D barcode filing for Oregon

2-D barcode filing is an alternative way to file a paper Oregon return. Oregon-approved tax software packages are required to print a 2-D barcode on forms 40, 40N, and 40P. The 2-D barcode on the tax return is a “picture” of the information on the return, which is printed on the return’s front page. A machine reads the barcode information so it doesn’t have to be entered manually into our computer system. 

If changes are made to the return after it has been printed, the entire return must be re-printed so that the barcode will reflect the correct information.

The copy of the return you provide to your client must be an exact copy of the tax retun you submit to us.

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Payment Options

Electronic payments from your checking or savings account

You can pay your prior year income taxes, current year income taxes, and 2014 estimated income taxes directly from your checking or savings account. There is no fee for this. Go to our website for more information.

Credit card payments

You can pay your current-year balance due, make estimated tax payments, and pay prior year taxes with your American Express, Discover, MasterCard, or Visa credit card. This option is available to both electronic and paper filers.

To pay your taxes by credit card, contact Value Payment Systems, Inc. You may use their toll-free telephone number or visit their website. 

The service provider will charge you a convenience fee based on the amount of your tax payment and will indicate the amount of the fee during the transaction. You will have the option to either continue or cancel the transaction after entering your credit card information. 

If you accept the credit card transaction, you will get a confirmation number. Keep this confirmation number as proof of payment.


Value Payment Systems, Inc.

Call toll free 1-888-972-9673 or visit their website. They accept American Express, Discover, MasterCard, and Visa.

Check or money order

  • Make your check or money order payable to "Oregon Department of Revenue."
  • Write your daytime telephone number and the tax year to apply the payment on your check.
  • Use blue or black ballpoint ink. Do not use red or purple ink or gel pens.
  • Do not send cash or a postdated check.
  • Include the appropriate payment voucher, form 40-V or 40-ESV, with your payment. Form 40V is available in our tax booklets and both forms are available for download on our website.
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Direct deposit of refund

Your income tax refund can be deposited directly into your account at a bank or other financial institution, including credit unions.

You can also have your refund deposited directly into an Oregon 529 college savings network account. You may choose up to four accounts. See our full-year and part-year/nonresident booklets for more information.

If you are filing a joint return, both you and your spouse must sign the tax return. Without both signatures, we can't deposit the refund directly into your account.

Note: Some banks may not accept direct deposits into accounts that are payable through another bank. Also, some banks do not permit the deposit of a joint refund into an individual account.

Contact your bank to make sure your deposit will be accepted. Make sure you have your correct routing number and account number. See sample below.

Direct deposit check example

  • Routing numbers are nine digits and must begin with 01 through 12, 21 through 32, or 61 through 72.
  • Account numbers can be up to 17 characters, both numbers and letters. Include hyphens, but do not include spaces or special symbols. If your account number is fewer than 17 characters, leave the unused boxes (on your return) blank.

It is your responsibility to make sure your bank information is correct. The department cannot correct deposits made to an incorrect bank account approved by you. The department cannot direct deposit a refund if the final destination is a foreign bank account.

The Oregon Department of Revenue is not responsible when a bank rejects a direct deposit. If the direct deposit is rejected, the department will issue a check and send it to the mailing address shown on your return.

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Refund processing

When will I get my income tax refund this year?

Processing time for your return will depend on how and when you filed your return. The chart below will help determine when you should get your refund.

After we begin processing returns, allow:

Refund processing times

Amended returns may take longer to process. You should allow six to eight months for refund requests on amended returns.

Also, your refund may be delayed if your return needs additional review.

Refund delays

Several things might delay processing of your tax return or your refund:

  • Change in name. If you have a different name in our records from a previous filing, special handling will be required.
  • Change in Social Security number.
  • Application for an individual taxpayer identification number (ITIN).
  • Failure to attach forms W-2, 1099, or a similar form as proof of Oregon withholding.
  • Failure to attach a copy of your federal return.
  • Claiming a working family child care credit. These refundable tax credit claims are reviewed manually and generally take an additional eight weeks to process.
  • Claiming a mobile home park closure credit.
  • Unidentified other subtractions, other additions, and/or other credits. The numeric codes are shown in this publication along with the text for each other addition, other subtraction, and other credit. We also provide a list of the numeric codes in the appendix.
  • Debt to other agencies. If you and/or your spouse or RDP owe money to other agencies (for example: student loans, parking tickets, or back child support), your refund might be delayed or used to offset your debt.
  • Incorrect bank account information. Verify your bank account information for direct deposit refunds. If your bank information is incorrect, the department must wait for the bank to return the funds before issuing a refund check.
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Residency

ORS 316.027

General rule. Oregon taxes residents on all sources of income. Oregon taxes nonresidents on income earned from Oregon sources.

Residents

An Oregon resident is someone who is domiciled in this state. "Domicile" is defined below.

An Oregon resident may also be someone who is not domiciled in Oregon, but:

  • Maintains a residence in Oregon, and
  • Spends a total of more than 200 days in Oregon during the taxable year.

A fraction of a day is considered a whole day when figuring the 200 days. We will not consider you a resident if you are in Oregon for a temporary purpose. The burden of proof is on you to show your stay here is only temporary.

Consider both your domicile and the place where you live to determine how you are taxed.

Domicile. Domicile is a tax-law concept. It is the place you consider to be your home and where you plan to return after an absence. Domicile is not the same as home, abode, or residence. Intent is the deciding factor when you determine your domicile. The law assumes you have a domicile somewhere. It also assumes you have only one domicile.

Home. If you have one home, your domicile is generally where that home is located. If you have two homes, your domicile follows your center of activity.

To determine your center of activity and your domicile, consider:

  • Physical characteristics of the place.
  • Time you spend there.
  • Things you do there.
  • People and property there.
  • Your attitude toward the place.
  • Your intent to return to the place when you are away.

Family relations. Generally, spouses/RDPs living together have the same domicile. The domicile of minor children is determined by the domicile of the person who has legal custody of them.

When living apart, a husband and wife each may establish their own domicile if they meet the requirements for a change of domicile.

Change of domicile. Intent is the most important factor in determining a change of domicile. If intent relies on uncertain events, you have not changed your domicile. Once domicile is established, it is never lost until all of the following happen:

  • You intend to abandon the old domicile, and
  • You intend to acquire a specific new domicile, and
  • You are physically present in the new domicile.

The important points are (1) physical presence at a new dwelling and (2) the intent to make the new dwelling a home.

Special-case Oregon residents (Oregon residents not living in Oregon). While domiciled in Oregon, you will be taxed as a nonresident if you meet all of the following requirements:

  • You do not maintain a permanent residence in Oregon for yourself or your family during any part of the year, and
  • You maintain a permanent residence outside Oregon during the entire year, and
  • You spend less than 31 days of the year in Oregon.

Oregon residents living in a foreign country. Certain Oregon residents living in a foreign country may be taxed as foreign nonresidents.

To qualify as a nonresident, you must meet one of these two tests:

  1. The "physical presence" test, or
  2. The "bona fide residence" test.

In general, you're considered a nonresident if you claim a foreign earned income or housing exclusion under federal law. In addition, you may be an Oregon nonresident if you are in the civil service or military. This is true even though you cannot claim the exclusions.

Physical presence test. To meet the requirements of the physical presence test:

  • Your tax home must be in a foreign country, and
  • You must be present in a foreign country or countries for 330 full days out of any consecutive 12-month period.

"Tax home" is generally your regular place of business, the location where you work, regardless of where you live. For more information on tax home, please refer to Internal Revenue Service Publication 17--Your Federal Income Tax for Individuals.

The 12-month period may begin on any day of the calendar month. The period ends with the day before the corresponding calendar day 12 months later. For example, a period beginning July 1 would end June 30 of the next year.

A full day means a period of 24 consecutive hours beginning at midnight.

Any period of 12 consecutive months may be used. The 330 days must fall within that 12-month period.

Example 1: Juan arrives in England on April 24, 2012, at noon. He establishes his tax home in England and remains there until 2 p.m. on March 21, 2014. Juan is present in a foreign country for 330 full days during two different 12-month periods:

  • One 12-month period starts on his first full day in England, April 25, 2012, and ends April 24, 2013.
  • The other 12-month period starts on March 21, 2013, and ends on his last full-day day in England, March 20, 2014.

Juan meets the physical presence test using either of these 12-month periods.

Juan qualifies for nonresident treatment for the months he was out of the country during 2012, 2013, and 2014. He should file Oregon part-year returns for 2012 and 2014 and a nonresident return for 2013.

Example 2: Use the facts in Example 1, but change Juan's arrival date to June 23, 2013.

Juan will not qualify for the nonresident treatment because he was not out of the country for 330 days. He will file a full-year resident return for 2013 and 2014.

Bona fide residence test. To meet the requirements of the bona fide residence test, you must:

  • Establish, to the satisfaction of the Secretary of the U.S. Treasury, bona fide residence in a foreign country, and
  • Maintain a bona fide residence for an uninterrupted period that includes a full tax year.

Example 3: Sandra is a calendar-year taxpayer. She establishes bona fide residence in Russia on November 12, 2013. She is transferred back to the United States on December 11, 2014. She does not meet this test. The period of bona fide residence does not include a full tax year. (Although Sandra does not qualify for the bona fide residence test, she would qualify for the physical presence test.)

Example 4: Use Example 3, but Sandra continues to work in Russia until 2015. She would now qualify under the bona fide residence test. Her residence was established for a full tax year. Sandra should file a nonresident return for 2014.

Sandra also qualifies for nonresident treatment for the months in 2013 and 2015 that she maintained bona fide foreign residence. She should file Oregon part-year returns for 2013 and 2015.

For more information about physical presence or bona fide residence, see IRS Publication 54, a Tax Guide for U.S. Citizens Living Abroad.

Nonresidents

If you were domiciled outside Oregon and lived outside Oregon for the entire year, you were a nonresident of Oregon. If you are a nonresident, Oregon taxes only income you earned in Oregon and from Oregon sources. In some cases a taxpayer domiciled in Oregon can be treated as a nonresident. See Special-case Oregon residents above.

Example 1: Misha was a permanent California resident in 2013. She temporarily worked in Medford as a computer consultant for two months in 2013. Misha is a nonresident of Oregon. She will pay Oregon tax on the income she earned in Oregon. California will also tax Misha's income because she is a resident of that state. Because both Oregon and California will tax her income, Misha will have a credit for taxes paid to another state. Read credit for income taxes paid to another state for information about this credit.

Example 2: Nash was a permanent Nevada resident in 2013. He has rental property in Oregon. Nash is a nonresident of Oregon. He will pay Oregon tax on the income from his Oregon rental property.

Part-year residents

If you lived in Oregon for part of the year and you lived in another state for part of the year, you're a part-year Oregon resident. Oregon taxes all of your income for the part of the year you were an Oregon resident. Oregon also taxes any income earned in Oregon or earned from Oregon sources for the part of the year you were a nonresident.

Example 1: Gustav was a resident of Minnesota through July 21, 2013. On July 22 he moved permanently to Oregon. Gustav is considered a part-year Oregon resident for tax year 2013.

Example 2: Bailey was a resident of Oregon from 1986 through March 2013. She permanently changed her residence from Oregon to Delaware on April 1, 2013. Bailey is considered a part-year Oregon resident for tax year 2013.

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Registered domestic partners (RDP)

ORS 314.023

Filing your Oregon income tax return

Registered domestic partners are subject to the same tax statutes and regulations that apply to married filers. You have the option to file jointly or separately. As a registered domestic partner, you are no longer eligible to use the single filing status on your Oregon return; generally you must use one of the following Oregon filing statuses:

  • Registered domestic partners filing jointly, or
  • Registered domestic partner filing separately.

Like married joint filers, RDPs filing jointly will be held jointly and severally liable for their entire tax liability.

To correctly figure your Oregon tax liability, you need to complete a federal income tax return "as if" you are married filing jointly or married filing separately. Use the information you calculated on the "as if" federal return to complete your Oregon income tax return.

The "as if" return will not be submitted to the IRS, but a copy needs to be included with your Oregon tax return.

General filing instructions

If you were an RDP under Oregon law on December 31, 2013, or if you were an RDP during 2013 and your partner died and you did not enter into a new registered domestic partnership or marry during 2013, please follow these directions for filing your 2013 income tax return:
  1. Complete your federal forms (1040, 1040A, 1040EZ) for each partner, using the appropriate federal filing status, such as single or head of household. File these returns with the IRS. 
  2. Use another federal form to complete a return that assumes you were allowed to file a joint or separate federal return. Use all the same IRS rules and procedures that apply to married couples (don’t compute an “as if” federal tax). This is called the “as if” federal return. Important! Do not file this “as if " form with the IRS. Note: If your wage statement includes the imputed value of health or education benefits you received from your employer for your same-sex partner or qualifying dependents, subtract the amount included in your wages on the “other income” line of your “as if” federal return.
  3. Complete your Oregon return jointly (using the RDP filing jointly status) or separately (using the RDP filing separate status) or other filing status if you qualify. Your filing status must match the status you use on the “as if” federal return. Information used to fill out the Oregon returns must be taken from the “as if” federal return and not the individual federal returns that you actually filed with the IRS except for the federal income tax liability subtraction.

Follow these steps to ensure that your income tax returns are filed correctly.

  1. File your individual federal forms with the IRS.
  2. After completing your “as if" federal return, use the appropriate Oregon form (40, 40N or 40P) to file jointly or separately. Use the information from your “as if” return to complete your Oregon return(s). Note: Use the actual amount both RDPs paid in federal tax to compute the correct federal tax subtraction.
  3. Submit the following to the Oregon Department of Revenue:
    • Your original federal return(s), labeled “RDP ORIGINAL,”
    • Your “as if” federal return, labeled “RDP FOR OREGON ONLY,” and
    • Your original Oregon return(s).
If you and your partner file separate Oregon returns, please send the returns in the same envelope, but do not staple your separate returns together.

It is very important to keep all copies of “as if” returns with your tax records for future reference. For more information on filing your taxes as a registered domestic partner, visit our Personal Income Tax page, then under “Taxpayer Tips,” click on “Registered domestic partners (RDP) in Oregon.

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What form to file

Oregon has three types of tax forms. The form you use will depend on your residency status. The three forms are identified below.

Resident - Form 40

Use Form 40 if you are a full-year Oregon resident.

Part-year resident - Form 40P

Use Form 40P if any one of the following is true:

  • You are a part-year resident, or
  • You are filing jointly and one spouse/RDP is a full-year Oregon resident and one is a part-year resident, or
  • You qualified as an Oregon resident living abroad for part of the year.

Nonresident - Form 40N

Use Form 40N if any one of the following is true:

  • You are a nonresident, or
  • You are a special-case Oregon resident. See Residency, or
  • You and your spouse/RDP are filing jointly and one (or both) of you is a nonresident, or
  • You meet the military personnel nonresident requirements. See Military Personnel Filing Information, or
  • You qualified as an Oregon resident living in a foreign country for the entire year. See Residency.
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Filing status

General rule

The filing status on your Oregon return must be the same as your filing status on your federal return.
RDPs use the filing status you used on your “as if” federal return. See exceptions.

Example 1: Minerva filed her federal return using the filing status of single. She must use the same, single, filing status on her Oregon return.

Example 2: Peter and Della are married and both are full-year Oregon residents. They filed a joint federal return. Peter and Della must use the same, married filing jointly, filing status on their Oregon return. 

Example 3: Tia and Colin are married and choose the married filing separately filing status on their federal returns. They must use the same, married filing separately, filing status on each of their separate Oregon returns.

Community property income of married/RDP filing separate taxpayers
An Oregon resident whose spouse/RDP lives in a community property state may have community
property income that is taxable by Oregon. There are nine community property states. They are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Some residents of community property states are not subject to community property laws for various
reasons. You will need to check with your community property state. IRS Publication 555 also contains information that may be helpful to you. Here are examples of how to file for Oregon:

Example 1: Paul and Marie are legally separated. Paul is an Oregon resident. Marie is a California resident. California is a community property state. Although they are married, they maintain separate households. They do not combine funds, and have no plans to get back together. They file a joint return with the IRS. When Paul files his separate return for Oregon on Form 40, he does not have to include any community property income because California’s community property laws do not apply to him and Marie.

Example 2: Renton is an Idaho resident. His wife, Julie, lives in Oregon. Julie plans to move to Idaho next year, but for now they will live separately. Julie’s 2013 income is $40,000 in wages, $3,000 in capital gain, and $100 in interest. 

Because Renton is domiciled in Idaho, they are subject to Idaho’s community property laws. His income for 2013 is $60,000 in wages and $500 in interest. They plan to file a joint return with the IRS, but are not sure whether they want to file joint for Oregon. 

If they file a joint return for Oregon, they will file on Form 40N. The Oregon column, lines 8S through 30S, will contain all of Julie’s income since Oregon taxes all of her income from all sources. In addition to Julie’s separate income, she has $30,250 of community property income for 2013—half of Renton’s wages and bank interest. Line 30F (federal column) of their joint Form 40N is $103,600, which is equal to their federal adjusted gross income. Line 30S (Oregon column) is $73,350—Julie’s wages, capital gain, interest, and community property income ($40,000 + $3,000 + $100 + $30,250). They are also eligible for a credit for taxes paid to Idaho on Julie’s mutually taxed income of $30,250. See Credit for Income Taxes Paid to Another State for more information on the credit.

If they file separate returns for Oregon, Julie will file using Form 40. Julie will fill out a federal return as if she had filed separately. She will include all of her separate income and community property income— $73,350. This amount flows through to line 8 of her Oregon Form 40. She is eligible for a credit for taxes paid to Idaho, because she must also file a return with Idaho for the community property income of $30,250.


Example 3: Becky and her husband, Morgan, are Oregon residents. However, Morgan took a job two years ago in Washington and rents an apartment near his work. Morgan comes to Oregon during winter and spring breaks for a total of 22 days. Occasionally, Becky and the kids go to Washington to see him. Becky works in Oregon and rents a home. The lease for the home in Oregon is in Becky’s name. The lease for the apartment in Washington is in Morgan’s name and most of his belongings are in Washington. He considers Oregon his home and plans to come back here in another year. Morgan’s driver’s license, vehicle registration, and voter’s registration are in Oregon. Because Morgan is not domiciled in Washington, they are not subject to Washington’s community property laws. Morgan meets the qualifications for special-case Oregon resident and Oregon treats him as a nonresident for tax purposes. Morgan and Becky file a joint return with the IRS. They decide to also file jointly for Oregon. They will use Form 40N and only report Becky’s income in the Oregon column.


Example 4: Kevin lives and works in California and is subject to California’s community property laws. Lori, his wife, moved to Oregon with their kids two years ago. Kevin supports them and will be ready to transfer to Oregon within the next two years. Kevin has $110,000 in wages. Kevin and Lori have joint income of $2,000 in interest and $4,000 in capital gain. Lori has separate income of $5,000 from her business. They decide to file separate returns for the IRS. Lori’s federal adjusted gross income is $63,000; half of Kevin’s wages, half of their joint income, and all of her business income. Kevin’s federal adjusted gross income is $58,000; half of his wages and half of their joint income. Lori must file using the married filing separate filing status for Oregon on Form 40 because she did so on her federal return. She is eligible for a credit for taxes paid to another state, but must claim it on her California nonresident return. Kevin is not required to file for Oregon.


Important: You must check the laws of the community property state to see if you, or your spouse/RDP, are subject to those laws even if your situation is similar to one of the examples.

Exceptions: Married/RDP with different residency statuses
If you and your spouse/RDP file a joint federal return but each of you has a different residency status, you have a choice of two different filing statuses to use for Oregon:

  • You and your spouse/RDP may file one Oregon return using the married/RDP filing jointly filing status, or
  • You and your spouse/RDP may file two separate Oregon returns, each using the married/RDP filing separately filing status.

Example: Bea and Cal are married but live in different states. Bea is a permanent resident of Oregon and Cal is a permanent resident of Idaho. Each year they file married filing jointly on their federal return.

In tax year 2012, they decided to file separate returns in their respective resident states. Bea and Cal would both use the filing status of married filing separately on their state income tax returns.

In tax year 2013, Bea and Cal decided to file married filing jointly on their state returns, even though they continue to live in different states. They will file as married filing jointly on each of the Oregon and Idaho state returns.

Note: Married nonresident aliens have to file separate returns for Oregon, since they must file separate returns for federal. This exception does not apply to RDPs as they cannot file joint returns under federal law.

See the next section for more information for married filers with different residency statuses.

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Special instructions for married/RDP filers with different residency statuses

You may file separate Oregon returns if you and your spouse/RDP do not have the same residency status. If you choose to file separately for Oregon, you must use the married/RDP filing separately filing status. You may not file as head of household (ORS 316.122).

  • Full-year resident and part-year resident. If you file separate Oregon returns, the full-year resident will file Form 40 and the part-year resident will file Form 40P. If you choose to file a joint return for Oregon, file Form 40P. The full-year resident will report all income from all sources for the year. The part-year resident will report all income while a resident and all Oregon source income while a nonresident.
  • Full-year resident and nonresident. If you file separate Oregon returns, the full-year resident will file Form 40 and the nonresident will file Form 40N. If you choose to file a joint return for Oregon, file Form 40N. The full-year resident will report all income from all sources for the year. The nonresident will report only Oregon-source income.
  • Nonresident and part-year resident. If you file separate Oregon returns, the nonresident will file Form 40N and the part-year resident will file Form 40P. If you choose to file a joint return for Oregon, file Form 40N. The nonresident will report only Oregon-source income. The part-year resident will report all income while a resident and Oregon-source income while a nonresident.

Filing information
If you file separate returns for Oregon, you and your spouse/RDP each should report your own share of income and deductions. Also, report your share of any Oregon additions or subtractions. See “federal tax” explained below.

If you are a full-year resident, file Oregon Form 40 and report your share of federal adjusted gross
income (AGI). 

If you are a nonresident or part-year resident, file Oregon Form 40N or Form 40P, respectively. Report only your income. Use the following rules to file under this exception. 

Your percentage. Use the following formula to compute your share of certain deductions:

      2013RDP_percentage.jpg

If your share is less than -0-, your percentage is -0-.

Federal tax. Each spouse/RDP may subtract a portion of his or her joint federal tax liability.

RDPs: Use amounts from your actual federal returns, not your “as if” return, for determining your federal  tax subtraction.

Multiply the joint federal tax liability (after all credits except the earned income credit) by your percentage to determine your federal tax subtraction. See federal income tax liability for limitations.

Itemized deductions. Multiply the itemized deductions by your percentage to compute your share. Or, you may itemize separately if you can clearly determine each spouse’s/RDP’s deductions. Remember to use “Net Oregon itemized deductions.” See limit on itemized deductions.

Standard deduction. The Oregon standard deduction is $2,080 for each spouse/RDP.
Each spouse/RDP is allowed an additional $1,000 if:

  • He or she is age 65 or older.
  • He or she is blind

It is possible for each spouse/RDP to have up to $2,000 in additional standard deductions for age and blindness, plus the regular $2,080 standard deduction. 

Exceptions:

  • You cannot claim the standard deduction if yourspouse/RDP claims itemized deductions. In this case, your standard deduction is zero, and you should itemize deductions.
  • You cannot claim the standard deduction if you are a nonresident alien. You may only claim itemized deductions.

Exemptions. You cannot prorate exemptions. You may claim exemptions for yourself and any dependents allowed on your federal return. You cannot claim an exemption for the same dependent claimed on your spouse’s/RDP’s return.

How to file your separate return for Oregon only. Write your Social Security number in the heading of the return. Do not write your spouse’s/RDP’s name or Social Security number in the heading. Write your spouse’s/RDP’s first name, last name (first four letters only), and Social Security number in the space after the “Married filing separately” or “Registered domestic partners filing separately” box.

If you file separately for Oregon only, write “MFS for Oregon only” in the center at the top of the form.
Please write this in blue or black ink.

Important: Include a federal Form 1040 or Form 1040A showing how your federal return would have
been filed if you had filed married filing separately. Also, include a copy of the joint federal Form 1040
or 1040A that you actually filed. For RDPs, include a copy of your joint “as if” federal return.

If possible, mail both Oregon returns and the federal returns in the same envelope, but do not staple them together.

Note: If you file separate federal returns, you must file separate Oregon returns. If you are a nonresident spouse/RDP without Oregon income, you are not required to file an Oregon return.

Example: Jim worked and lived in Oregon all year. Mary moved from Idaho to Oregon in July and married Jim. They filed a joint federal return and are filing separate returns for Oregon.

Mary earned $30,000 in Oregon and $22,000 in Idaho. Jim earned $41,000 in Oregon. Their total federal adjusted gross income (AGI) was $93,000.

Jim and Mary claimed $12,200 itemized deductions, including $4,900 Oregon withholding tax, on their joint federal return. Mary’s Oregon withholding tax was $2,200. Jim’s Oregon withholding tax was $2,700. Their joint federal income tax liability was $14,400.

Jim, a full-year Oregon resident, files Form 40 and reports his income of $41,000. He claims the following federal tax liability and deductions:

His share: = .44 (44%)

Federal tax: .44 × $14,400 = $6,336

(Subtraction limited to $3,125)

Total itemized
deductions: .44 × $12,200 = $5,368

Deduction for
Oregon tax: .44 × $4,900 = $2,156

Jim will have net Oregon itemized deductions of $3,212 ($5,368 – $2,156). He will claim his own Oregon withholding of $2,700 on his separate Oregon return.

Jim follows the line instructions for Oregon Form 40 to complete his return.

Mary, a part-year resident, files Form 40P and reports $52,000 federal AGI ($30,000 from Oregon sources). She claims the following federal tax liability and deductions:

Her share: = .56 (56%)

Federal tax: .56 × $14,400 = $8,064

(Subtraction limited to $3,125)

Total itemized
deductions: .56 × $12,200 = $6,832

Deduction for
Oregon tax: .56 × $4,900 = $2,744

Mary will have net Oregon itemized deductions of $4,088 ($6,832 – $2,744). She will claim her own Oregon withholding of $2,200 on her separate Oregon return. 

Mary follows the line instructions for Form 40P to complete her return.


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Filing requirements

Full-year residents

Note: Amounts on the chart apply to all taxable income from all sources.

You must file an Oregon return if:

​Your filing status is:
​Number of boxes checked on line 7a of return: ​And your gross income is more than:
Single, can be claimed on another's return​ ​Any ​See "Dependents" below
​Single ​ ​ ​0 ​$5,695
​1 ​$6,895
​2 ​$8,095
​Married/RDP filing joint
​ ​ ​ ​
​0 ​$11,390
​1 ​$12,390
​2 ​$13,390
​3 ​$14,390
​4 ​$15,390
​Married/RDP filing separate ​ ​ ​0 ​$5,695
​1 ​$6,695
​2 ​$7,695
​Head of household ​ ​ ​0 ​$7,105
​1 ​$8,305
​2 ​$9,505
​Qualifying widow(er) ​ ​ ​0 ​$7,920
​1 ​$8,920
​2 ​$9,920
In addition, file a return if:
  • You're required to file a federal return.
  • You had $1 or more of Oregon income tax withheld from your wages.​ ​ ​
    


Dependents

2013 dependents worksheet

If line 1 is more than line 6, you must file an Oregon return. If line 6 is more than line 1, you are not required to file an Oregon return.

Example 1: Billy Jo is single, age 20, and a full-time college student. Her parents claim her as a dependent. Billy Jo has earned income of $700 from her job. She also has $29 of interest income from her savings account. 

2013 dependents example 1 worksheet
Because line 6 ($1,050) is more than line 1 ($729), Billy Jo is not required to file an Oregon return.

Note: If Billy Jo had any Oregon income tax withheld from her income, she should file an Oregon return to claim her refund.


Example 2: Norman is single, age 17, and claimed as a dependent by his parents. Norman has earned income of $3,015 from his part-time job. He does not have any other income.

2013 dependents example 2 worksheet
Because line 1 ($3,015) is more than line 6 ($2,080), Norman is required to file an Oregon return. 


Example 3: Katrina is single, age 19, a full-time student, and claimed as a dependent by her mother. Katrina did not work but had $1,057 of unearned interest income from her certificate of deposit.

2013 dependents example 3 worksheet
Because line 1 ($1,057) is more than line 6 ($1,000), Katrina is required to file an Oregon return.


Part-year residents and nonresidents

Amounts apply to Oregon-source gross income and gross income received while an Oregon resident.

You must file an Oregon return if: 

2012 part-year resident filing status

If your Oregon income is less than your standard deduction, you are not required to file a return.

If you have Oregon state income tax withholding and aren't required to file a return, you still must file a return to claim a refund of withholding.

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Individual Taxpayer Identification Number

The Internal Revenue Service (IRS) issues individual taxpayer identification numbers (ITINs) to taxpayers and their dependents who do not have Social Security numbers. If you have your own Social Security number, do not apply for an ITIN, use your Social Security number. If you already have an ITIN, enter your ITIN wherever your Social Security number is requested.

Requesting an ITIN from the IRS
You must file your federal return and attach Form W-7, Request for ITIN. The IRS will issue an ITIN,
associate the ITIN with your return, and process your return. For Form W-7, go to the IRS website or call 1-800-829-1040.

Filing your Oregon return before receiving your ITIN
You may file your Oregon return without a Social Security number (SSN) or ITIN. Please follow these instructions if you, your spouse/RDP, or your dependents do not have an ITIN when you file your Oregon return:

  1. Complete and attach a copy of each ITIN application (federal Form W-7) to your federal tax return. File your 2013 federal tax return before April 15, 2014.
  2. On your Oregon tax return, write “ITIN applied for” wherever the Social Security number (SSN) is required for you and/or your family members who have applied for an ITIN. You do not need the ITIN(s) to file your Oregon tax return. Do not attach your ITIN application to your Oregon tax return.
  3. File your 2013 Oregon tax return before April 15, 2014.
  4. The IRS will send you a letter with your ITIN information. We need this information to issue your refund and so your future tax payments will be correctly applied to you. Refunds will not be issued without a valid SSN or ITIN. Please send us your:
  • Name (and the name of your spouse/RDP and dependents if they applied for an ITIN),
  • Current address,
  • Previous SSNs or ITINs used when filing an Oregon return (if any), and
  • A copy of each of the letters you receive from the IRS with the ITINs for you, your spouse/RDP, or your dependents.
Send this information to:
Oregon Department of Revenue
PO Box 14999
Salem OR 97309-0990
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Military personnel filing information

Military personnel are usually domiciled in the state where they joined the service, but they can change their domicile. Military assignment does not change domicile unless other actions are taken.

As a member of the armed forces, you may establish a new domicile during a tour of military duty if you meet certain requirements. Domicile and residency are explained in the residency sectionNote: Are you the spouse/RDP of a military member? See Military spouses/RDPs.

This information will help you file your Oregon individual income tax return.

Nonresidents stationed in Oregon
Oregon does not tax your military pay if you’re stationed in Oregon and domiciled in another state. You do not need to file an Oregon return unless you had other income from an Oregon source or had Oregon tax withheld from your pay. Examples of Oregon source income include:

  • Wages from a job held on off-duty hours, or
  • Earnings from an Oregon business or rental property.

Note: Nonresidents’ interest income from an Oregon bank account generally is not taxable by Oregon. If you had Oregon withholding from your military pay, you should file to claim a refund. You should also contact your pay clerk to stop withholding Oregon taxes if Oregon is not your state of domicile.

How to file. Use Form 40N. Enter your military income on line 8 in the federal column only. Do not enter your eligible military pay in the Oregon column. Report any other income taxable by Oregon in the Oregon column.

On line 37F, subtract the military wage income you reported in the federal column on line 8F and identify with subtraction code 319. On line 37S, enter zero. It is important to enter your military pay this way because it affects the amount of deductions and credits you’re entitled to claim. Write “Military Nonresident” at the top of your Form 40N in blue or black ink.

If you filed a joint federal return, file a joint Oregon return. File Form 40N. Don’t report your military
income in the Oregon column, but you must include any other income taxable to Oregon.

If your spouse/RDP is also domiciled outside Oregon, see Military spouses/RDPs below.

National Guard and armed forces reserves. Nonresident members of the National Guard or reserves will be treated the same as any other nonresident military member working in Oregon. National Guard members and reservists are usually domiciled where they live, but they could be domiciled in another state if they have retained a prior domicile and have not established a domicile where they are living. See Nonresidents stationed in Oregon above if domiciled outside Oregon.

Example 1: Selina is a nonresident of Oregon in the U.S. Army stationed in Portland. She has no other Oregon-source income and doesn’t have Oregon income tax withheld from her military pay. Selina is not required to file an Oregon return.

Example 2: Jared is a nonresident of Oregon in the U.S. Coast Guard stationed in Astoria. In his off-duty hours he works part-time for an Oregon employer. Because Jared has Oregon income other than his military wages, he will file Oregon Form 40N for a nonresident. For instructions on how Jared will complete his Oregon Form 40N, see Nonresidents stationed in Oregon.

Oregon residents stationed outside Oregon
Oregon residents who enter the armed forces from Oregon do not lose their Oregon domicile merely by being stationed outside Oregon. However, for income tax purposes, if you meet certain requirements you may be considered a nonresident and will not have to pay Oregon tax on your military pay.

Requirements. If you meet all three of the following requirements, you are treated as a nonresident for Oregon tax purposes:

  1. You did not have a permanent residence in Oregon for yourself or your family during any part of the tax year, and
  2. Your permanent residence was outside Oregon during the entire tax year, and
  3. You spent less than 31 days in Oregon during the tax year.

If you meet these three requirements, you are treated as a nonresident for Oregon tax purposes and Oregon won’t tax your military pay. If you have Oregon income tax withheld from your military pay, you should file an Oregon nonresident tax return to get a refund of withholding.

You will owe Oregon tax only if you had income from another Oregon source. This income may be from an Oregon property sale, a business, or rental property located in Oregon. 

How to file. Use the same procedure described previously under “How to file” for nonresidents stationed in Oregon. 

If you do not meet all three requirements above, your military pay and all other income is subject to Oregon tax. You must file an Oregon individual income tax return Form 40. See below for the military pay subtractions you may be able to claim.

Withholding exemption. You have the option to stop Oregon withholding from your military pay if all of the following are true:

  • You had a right to a refund of all 2013 Oregon income tax withheld because you had no tax liability, and 
  • You expect a refund of all 2014 Oregon income tax withheld because you think you won’t have any tax liability, and
  • You expect to be stationed outside of Oregon all of 2014.

If all of the above are true and you do not want Oregon tax withheld from your military pay, you must file a Form W-4. This Form W-4 is for Oregon tax purposes only and is in addition to your federal Form W-4. 

When completing a Form W-4 for Oregon only, write “exempt” on line 7. At the top, write “For Oregon
Only—Stationed Outside Oregon” in blue or black ink. Give this Form W-4 to your pay clerk.

Military pay subtractions
You may qualify for more than one subtraction for U.S. military pay. To be eligible for the subtractions,
the military pay must be included in federal adjusted gross income (AGI). Active duty pay, reenlistment bonuses, guard and reserve annual training, weekend drills, and inactive duty training are all military pay.

The Oregon military pay subtractions are:

Stationed outside of Oregon. As of August 1, 1990, you can subtract military pay earned while stationed anywhere outside Oregon until the date the president sets as the end of combat zone activities in the Persian Gulf Desert Shield area. The date was not set when this material was printed. You are not required to be stationed in a designated combat zone to be eligible for this subtraction.

Guard and reserve away from home. Guard members and reservists assigned away from home for 21 days or longer can subtract their military pay earned during this time.

Other military pay. You can subtract any remaining taxable military pay after removing the above subtractions, up to $6,000.

Total subtraction. You may qualify for more than one military pay subtraction. However, your total subtraction can’t be more than the total military pay included in federal AGI. The following examples show the military pay subtractions described above.

Example 3: Seth, an Oregon resident, enlisted in the Navy. He earned $10,000 of active duty pay in Spain and $8,000 of military pay inside Oregon during the year. He included the $18,000 in his federal AGI. Seth’s total military pay subtraction is $16,000. Seth can subtract the $10,000 earned outside Oregon and $6,000 of his military pay earned in Oregon. Seth will file Oregon Form 40 and claim his military pay subtraction on line 18 using numeric code 319.

Example 4: Brett is an Oregon resident and files jointly with his wife who lives and maintains a residence in Oregon. Brett served in a designated combat zone for five months this year and earned $8,000 in combat pay. He served in Germany for the rest of the year and earned $15,000 of military pay. The president did not declare an end to combat zone activities this year. Because Brett excluded his combat pay on his federal return, he cannot subtract it on his Oregon return. Therefore, Brett’s Oregon subtraction is limited to the $15,000 of military pay earned outside Oregon and included in federal AGI. Brett and his wife will file Oregon Form 40 and claim the subtraction on line 18 using numeric code 319.

Example 5: Gertrude and Merlin are married, filing a joint return. Both are Oregon residents. Gertrude was on active duty overseas (not in a combat zone) this year. She had $21,000 active duty pay. Merlin served in the Oregon National Guard and was away from home overnight from April to July and then again for two weeks in November. He served in Oregon when away from home. Merlin earned $1,500 military service pay for his weekend drills. He also earned $8,000 while away from home from April to July and $1,000 for the two weeks in November.

Gertrude and Merlin will include $31,500 of military wages in their federal AGI. Then they will determine their Oregon subtraction.

  1. Stationed outside Oregon: All $21,000 of Gertrude’s active duty pay is eligible for this subtraction because she was stationed outside Oregon.
  2. Guard and reserve away from home: $8,000 of Merlin’s pay is eligible for this subtraction because he was away from home for more than 21 days consecutively from April to July. The two weeks he was away from home in November doesn’t qualify.
  3. Other military pay: Gertrude doesn’t have any other military pay not already eligible for the other subtractions. Merlin’s remaining military pay is the $1,500 he earned for weekend drills and the $1,000 he earned for two weeks in November. The total is $2,500 which is less than the $6,000 maximum allowed per military member so he is allowed to subtract all of it.

Combined, Gertrude and Merlin have a military pay subtraction of $31,500 because all of their military pay is eligible for one of Oregon’s military pay subtractions. They will file Oregon Form 40 and claim
the subtraction on line 18 using numeric code 319. 

Military spouses/RDPs

If you’re a military spouse/RDP, you may have a different domicile than where you live. See Residency for more information about determining your domicile.

Your income may not be taxable to Oregon if your spouse/RDP is stationed in Oregon and you and your spouse/RDP are domiciled in another state. Your income may not be taxable if you are domiciled in Oregon, but living in another state where your spouse/RDP is stationed.

Nonresident spouse of military member stationed in Oregon
The federal Military Spouse Residency Relief Act prevents Oregon from taxing your Oregon wages if
you meet certain criteria. If you moved to Oregon only to be with your spouse who is stationed here
and you both are domiciled outside of Oregon, your Oregon wages are exempt from Oregon tax and are not Oregon-source income. Note: This exemption doesn’t apply to spouses who are also members of the military.

You are not required to file an Oregon return unless you had other income from an Oregon source or
Oregon taxes withheld from your pay. Examples of Oregon-source income:
  • Nonmilitary wages or business income earned by your spouse (the military member) in Oregon,
  • Earnings from an Oregon rental property.
If you file, use Form 40N. Include all of your wages on line 8 in the federal column only. Don’t include your exempt income (or your spouse’s military pay) in the Oregon column. There is no further adjustment for your exempt wages. For information about the military pay subtraction for your spouse’s military pay, see Nonresidents stationed in Oregon.

If Oregon taxes were withheld from your exempt wages, you should file Form W-4 with your employer. At the top, write “For Oregon Only—exempt military spouse” and write exempt on line 7. Your employer may require proof that you qualify for the exemption.

Oregon resident spouse/RDP of military member stationed outside Oregon
Do you qualify to be treated as a nonresident because you meet the “special case Oregon resident” requirements? If so, you are not taxed on your out-of-state wages or self-employment income even if the other state cannot tax you because of the federal Military Spouse Residency Relief Act. You don’t have to file unless you had Oregon tax withheld or other Oregon source income, such as rental income or retirement pay. If you file, use Form 40N.

Copy of federal return
When filing Form 40 or Form 40N, include a copy of your federal Form 1040, 1040A, or 1040EZ, whichever is applicable. This is required even if you owe no Oregon tax or are only requesting a refund of tax withheld.

Filing and payment date
The due date for filing a calendar year return and payment of the tax is April 15. If the 15th falls on a
Saturday, Sunday, or legal holiday, the due date is the next working day of the month. If you are outside the United States on the due date, the due date is extended by two months.

If you owe tax on your Oregon income tax return, you must pay the entire amount by the due date. Interest and penalty will be added to all unpaid balances.

Extension for filing your return
You can get an extension to file your return but not to pay your tax. You must pay the entire tax by the due date to avoid interest and penalty charges.

You are allowed the same extension period for Oregon as allowed for your federal return. Do you need an extension to file only your Oregon return? Or, do you have a federal extension but need to make a payment to Oregon with your extension? Use Oregon Form 40-EXT. Go to our download the form or call us  to order the form.

Were you stationed in a combat zone or contingency area? Did you receive additional time to file your federal return and pay your 2013 tax? If so, Oregon allows the same additional time to file and pay your Oregon tax. Write “Combat Zone” in blue or black ink at the top of the return.

Interest and collections
  • If you owe taxes while on active duty (Title 10), you may qualify for a reduced interest rate while on active duty and up to six months after. The interest rate limit is 6 percent. File a claim for a reduced rate of interest by writing to us within six months after your active duty service has ended. Include a copy of orders showing your active duty status and dates.
  • If your active duty service (Title 10) has materially affected your ability to pay your Oregon tax debt, you may qualify for relief of interest and collection activity while on active duty and up to six months after. File a claim for relief by writing to us within six months after your active duty service has ended. Relief may not be available for the period prior to receiving your request. Include a copy of orders showing your active duty status and dates.
  • You may qualify for relief of interest and collection activity under Oregon law if you meet the following requirements:
    • You have a tax liability that came due while on active duty under Title 10, and
    • You have been on active duty for more than 90 consecutive days, and
    • Your active duty service (Title 10) occurred on or after September 11, 2001, and
    • You notify us within six months after your active duty service has ended.
    • Guard members called into active state service by the governor under Title 32 may qualify for relief of interest and collection activities on any tax owed prior to active state service. Send a written request for relief to the department within six months after
      the active state service has ended. Include a copy of your orders.
 
To get relief, you have to notify us that you are on active duty or send a written request. Relief may not be available for the period prior to receiving your notification. Contact us for more information.

 
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Limited liability companies

Oregon LLCs and foreign LLCs doing business in Oregon are taxed and classified the same as for federal income tax purposes. Oregon follows federal tax treatment.

  • LLCs that choose to be taxed as corporations file the same forms as corporations (Form 20 excise tax or Form 20-I income tax).
  • LLCs with two or more members who choose to be taxed as partnerships file using the same form as partnerships (Form 65).
  • A single-member LLC that chooses to be taxed as a sole proprietor files federal Schedule C, Schedule E, or Schedule F with their individual income tax return.

For specific questions on workers’ compensation coverage requirements for LLCs, contact the Oregon Workers’ Compensation Division in Salem at 503-947-7810, toll-free from an Oregon prefix at 1-800-452-0288, or www.oregon.gov/dcbs.

Contact the Oregon Department of Employment in Salem for information on how LLCs are treated
under Oregon’s unemployment insurance laws. Call 503-947-1488, select “5” from the menu, and ask for a status examiner. The Department of Employment’s website is www.oregon.gov/employ.

For information on organizing an LLC, contact the Corporation Division of the Secretary of State’s office in Salem at 503-986-2200, or go to www.filinginoregon.com.

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Composite tax returns

ORS 314.778

Filing a composite tax return

A pass-through entity (PTE) will file Form OC, Oregon Composite Return, for its electing nonresident owners.

For forms and instructions, go to our forms page.

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Pass-through entity owner payments

ORS 314.781, 314.784

PTEs are required to withhold tax for nonresident owners who don't join the composite return.

The PTE doesn't withhold tax if the PTE's owners are also pass-through entities.

Form OR-19 and instructions can be found on our forms page.

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Real estate tax payments

ORS 314.258

Escrow agents, and in some cases attorneys ("authorized agents"), are usually required to withhold and remit tax payments for any taxes that may be due when a nonresident sells Oregon property. The agent handling the closing is required to send payment that is the lesser of:

  • Four percent of the consideration;
  • The net proceeds from the sale; or
  • Eight percent of the gain includable in Oregon taxable income.

There are exceptions to this requirement. For more information see Form OR-18 and its instructions on our forms page.

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Appeal procedures

If you disagree with an Oregon Department of Revenue action, you have the right to appeal. The following situations commonly start the appeal process:

  • You disagree with a Notice of Deficiency or Notice of Deficiency Assessment.
  • You disagree with a notice adjusting the refund you claimed.
  • You disagree with our notice based on a federal audit report or an audit by another state that you are appealing.
  • You disagree only with the penalties or interest charges shown on our notice.
  • You disagree with the interest on underpayment of estimated tax.

Include a completed Tax Information Authorization and Power of Attorney for Representation form with your letter of appeal if you want someone else to represent you in your appeal.

Appealing a Notice of Deficiency to the Oregon Department of Revenue

If you disagree with a Notice of Deficiency, you have the right to appeal. You must appeal in writing within 30 days of the date on our notice.

You have two appeal options. If you decide to appeal, choose one of the options listed below:

Option A: Written objection

Send a written objection and tell us why you disagree with the Notice of Deficiency. Write "Written Objection" at the top of your letter. Include any new information you have. Within 30 days of the date of the notice, send your letter to:

Oregon Department of Revenue
PO Box 14725
Salem OR 97309-5018

When you write, include:

  • Your full name,
  • Your current mailing address,
  • Your Social Security number (SSN) or individual taxpayer identification number (ITIN),
  • The tax year(s) involved,
  • A detailed explanation of why you are appealing,
  • Any new information you want us to consider, and
  • A telephone number where you can be reached during the day.

Keep us informed of any changes to your address or telephone number.

We will review your letter, try to resolve the matter, and send you a written decision. If an auditor adjusted your return, that auditor will review your letter including any information you provide and send you a written decision. If you disagree with the decision, you may continue your appeal and will receive new appeal instructions.

Option B: Conference

In writing, request a conference and tell us why you disagree with the Notice of Deficiency. Write "Conference Request" at the top of your letter. Include any new information you have. Within 30 days of the date of the notice, send your letter to:

Oregon Department of Revenue
PO Box 14725
Salem OR 97309-5018

When you write, include:

  • Your full name,
  • Your current mailing address,
  • Your Social Security number (SSN) or individual taxpayer identification number (ITIN),
  • The tax year(s) involved,
  • A detailed explanation of why you are appealing,
  • Any new information you want us to consider, and
  • A telephone number where you can be reached during the day.

Keep us informed of any changes to your address or telephone number.

A conference officer will discuss the matter with you or with someone you choose to represent you, usually by telephone. The conference officer will send you a written decision. You may choose to receive our decision by either regular or certified mail. If you disagree with the decision, you may continue your appeal and will receive new appeal instructions.

Appealing a Notice of Deficiency Assessment to the Oregon Tax Court

If you disagree with a Notice of Deficiency Assessment, you have the right to appeal. However, you cannot appeal tax that you said you owed with your return. You must appeal to the Magistrate Division of the Oregon Tax Court within 90 days of the date of the Notice of Deficiency Assessment. Complaint forms for appealing to the Magistrate Division are available from the Tax Court:

Oregon Tax Court
Magistrate Division
1163 State Street
Salem OR 97301-2563
(503) 986-5650
TTY (503) 986-5651
www.courts.oregon.gov/tax

Mail a signed complaint form along with the filing fee and a copy of the Notice of Deficiency Assessment to the Magistrate Division of the Oregon Tax Court (address listed above).

Further appeal rights

For personal income tax, withholding tax, corporate income or excise tax, fiduciary income tax, or timber tax:

If you pay your Notice of Deficiency in full, your deficiency is considered assessed either on the date of your payment or 30 days from the date of the notice, whichever is later.

If you do not file a timely appeal, you have two years from the date your liability is paid in full to appeal the assessment. Appeal to the Magistrate Division of the Oregon Tax Court.

There are some cases where we may consider your case even if you did not file a timely appeal. Please call us to see if you meet the conditions for "doubtful liability" relief.

For any other Department of Revenue tax program:

For any other tax program administered by the Department of Revenue, you must appeal within 90 days of the assessment date. Otherwise, the assessment is final and cannot be changed unless you meet the conditions for "doubtful liability" relief. For more information, call us.

Resolving issues without appealing to the Tax Court

You may be able to resolve certain issues without appealing to the Magistrate Division. Write to us if your disagreement concerns one of the following issues:

  • The date or amount of payments made to your account.
  • A request for waiver of the penalty or interest charges.
  • The charges for interest on underpayment of estimated tax.
  • A withholding adjustment.

In writing, tell us why you disagree or why penalty or interest should be adjusted. Include any new information you have. Most disagreements concerning these issues can be resolved with us. Generally, we do not waive interest charges.

Send your letter to:

Oregon Department of Revenue
PO Box 14725
Salem OR 97309-5018

Interest charges

Appealing a deficiency or an assessment will not stop interest from accruing on the taxes owed. Interest is figured from the due date of the return to the date of payment. Interest is charged even if you have filed a valid extension. If your appeal reduces the tax due, the interest charges will also be reduced.

Paying your liability during appeal

You may pay your balance due at any step of the appeal process. Payment does not mean you agree with the notice. Payment stops interest charges from accruing on your liability. If you win your appeal, you will receive a refund of the overpayment, including interest.

If you don't pay before we assess your account, a 5 percent failure-to-pay penalty will be added to your balance due.

Note: See the Payment Options section for information on ways to pay your liability.

Appealing a refund adjustment notice

If you disagree with a notice of refund adjustment and you decide to appeal, choose one of the appeal options listed below.

Appealing a refund adjustment notice within the first 30 days to the Department of Revenue

Option A: Written objection

Send a written objection and tell us why you disagree with the notice of refund adjustment. Write "Written Objection" at the top of your letter. Include any new information you have. Your written objection must be postmarked within 30 days of the date on our notice. Send your letter to:

Oregon Department of Revenue
PO Box 14725
Salem OR 97309-5018

When you write, include:

  • Your full name,
  • Your current mailing address,
  • Your Social Security number (SSN) or individual taxpayer identification number (ITIN),
  • The tax year(s) involved,
  • A detailed explanation of why you are appealing,
  • Any new information you want us to consider, and
  • A telephone number where you can be reached during the day.

Keep us informed of any changes to your address or telephone number.

We will review your letter, try to resolve the matter, and send you a written decision. If an auditor adjusted your return, that auditor will review your letter including any information you provide and send you a written decision. If you disagree with the decision, you may continue your appeal and will receive new appeal instructions.

Option B: Conference

In writing, request a conference and tell us why you disagree with the notice of refund adjustment. Write "Conference Request" at the top of your letter. Include any new information you have. Your written request for a conference must be postmarked within 30 days of the date on our notice. Send your letter to:

Oregon Department of Revenue
PO Box 14725
Salem OR 97309-5018

When you write, include:

  • Your full name,
  • Your current mailing address,
  • Your Social Security number (SSN) or individual taxpayer identification number (ITIN),
  • The tax year(s) involved,
  • A detailed explanation of why you are appealing,
  • Any new information you want us to consider, and
  • A telephone number where you can be reached during the day.

Keep us informed of any changes to your address or telephone number.

A conference officer will discuss the matter with you or with someone you choose to represent you, usually by telephone. The conference officer will send you a written decision. You may choose to receive our decision by either regular or certified mail. If you disagree with the decision, you may continue your appeal and will receive new appeal instructions.

Appealing a refund adjustment notice after the 30th day to the Oregon Tax Court

You must file a complaint with the Magistrate Division of the Oregon Tax Court no later than:

  • 90 days after the date of the written objection response or conference decision, or
  • 120 days from the date of the notice if you do not send a written objection or request a conference.

If you fail to file a complaint within the stated time periods, your appeal rights will expire and the adjustments cannot be changed.

Complaint forms for appealing to the Magistrate Division are available from the Tax Court:

Oregon Tax Court
Magistrate Division
1163 State Street
Salem OR 97301-2563
(503) 986-5650
www.courts.oregon.gov/tax

Mail a signed complaint, filing fee, and copy of the refund adjustment notice to the Magistrate Division of the Oregon Tax Court (address listed above).

Appealing a deficiency based on federal audit reports or audit reports of other states

Do you have an appeal in progress with the Internal Revenue Service (IRS) or another state? If so, you may have extra time to file an appeal with the Magistrate Division of the Oregon Tax Court. To see if the appeal rights apply to you, answer the following questions:

  1. Did you receive an Oregon billing on the same item billed by the IRS or another state?
  2. Did you file a timely appeal with the IRS or another state?

If you answered "no" to either question, use the appeal procedures included with your Oregon notice.

If you answered "yes" to both questions, you need to send proof of your IRS or other state appeal to the Department of Revenue. Generally, this will be a copy of the IRS or other state's notice plus a copy of your written appeal request.

The time allowed for filing your proof of federal or other state's appeal varies.

Did you receive a Notice of Deficiency from us? If so, send us proof of your IRS or other state appeal within 30 days of the date on the Notice of Deficiency. Your account will be assessed without penalty and held until the appeal with the IRS or other state is resolved. Note: Interest will continue to accrue on any unpaid tax.

Did you receive a Notice of Deficiency Assessment from us before sending us proof of the appeal? If so, send us proof of your federal or other state appeal as soon as possible.

After you file proof of your appeal, we will delay any further action on your account until the appeal process is completed. Note: Interest will continue to accrue on any unpaid tax.

You must notify us within 30 days of the final resolution of your appeal with the IRS or the other state. We will review the information and determine whether any adjustments need to be made to your Oregon tax return. You will receive written notification of our determination. If you disagree with our determination, you may appeal to the Magistrate Division of the Oregon Tax Court. Your complete appeal rights will be explained with the written determination. You must appeal within 90 days of our written determination.

Where to write

When you write to us, include:

  • Your full name,
  • Your current mailing address,
  • Your Social Security number (SSN) or individual taxpayer identification number (ITIN),
  • The tax year(s) involved,
  • A detailed explanation of why you are appealing,
  • Proof of your IRS or other state appeal,
  • Any new information you want us to consider, and
  • A telephone number where you can be reached during the day.

Keep us informed of any changes to your address or telephone number.

Send your letter to:

Oregon Department of Revenue
PO Box 14725
Salem OR 97309-5018

Appealing penalty or interest

Waiver or reduction of penalty or interest

Do you feel you have reasonable cause for reducing penalty or interest? If so, write to us and ask for a waiver or reduction of penalty or interest. Generally, the department will not waive interest charges.

Written waiver request. You may ask for a waiver or reduction of part or all of the penalty and interest charges. Waiver criteria are outlined in the Oregon Administrative Rules (OAR) under OAR 150-305.145. You must send a written request to the department and explain which of the waiver criteria you feel you meet. Write "Waiver Request" at the top of your letter.

When you write to us, include:

  • Your full name,
  • Your current mailing address,
  • Your Social Security number (SSN) or individual taxpayer identification number (ITIN),
  • The tax year(s) involved,
  • Which criteria you meet under OAR 150-305.145, and
  • A telephone number where you can be reached during the day.

Keep us informed of any changes to your address or telephone number.

Send your letter to:

Oregon Department of Revenue
PO Box 14725
Salem OR 97309-5018

We will review your waiver request and let you know our decision in writing. If you disagree with the decision, you may continue your appeal and will receive new appeal instructions.

Conference request. If you disagree with our decision on your waiver request, you may ask us for a conference. In writing, request a conference and tell us why you disagree with the decision.

Write "Conference Request" at the top of your letter. Your written request for a conference must be postmarked within 30 days of the date of the decision letter.

When you write to us, include:

  • Your full name,
  • Your current mailing address,
  • Your Social Security number (SSN) or individual taxpayer identification number (ITIN),
  • The tax year(s) involved,
  • Which criteria you meet under OAR 150-305.145, and
  • A telephone number where you can be reached during the day.

Keep us informed of any changes to your address or telephone number.

Send your letter to:

Oregon Department of Revenue
PO Box 14725
Salem OR 97309-5018

A conference is held with a department conference officer who reviews the decision with you or someone you choose to represent you. The conference is usually held by telephone.

After the conference, you will be notified in writing of the conference officer's decision on your waiver or reduction of penalty or interest request. The conference officer's decision is final and may not be appealed.


Appealing interest on underpayment of estimated tax


Appealing to the Oregon Department of Revenue

If you disagree with the interest we charged on underpayment of estimated tax (UND), you can write to us at the following address. Tell us why you disagree.

Oregon Department of Revenue
UND Team
PO Box 14725
Salem OR 97309-5018

We will review your request and send you a written decision. If you disagree with our decision, you can continue your appeal. You'll receive new appeal instructions with the decision letter.

Appealing to the Oregon Tax Court

Magistrate appeal. If you disagree with our decision, you can appeal to the Magistrate Division of the Oregon Tax Court. You must appeal to the Magistrate Division within 90 days of the date on our decision letter. Complaint forms for appealing to the Magistrate Division are available from the Tax Court:

Oregon Tax Court
Magistrate Division
1163 State Street
Salem OR 97301-2563
(503) 986-5650
www.courts.oregon.gov/tax

Mail a signed complaint form, filing fee, and a copy of our decision letter to the Magistrate Division of the Oregon Tax Court (address listed above).

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Record-keeping requirements

Why is record keeping important?

  • Keeping records of your income and deductions will help you prepare an accurate tax return and pay the correct tax.
  • You must be able to prove all items on your return with adequate records or sufficient evidence. Keep records that verify the income, deductions, credits, and other items reported on your tax return. Estimates or approximations do not qualify as proof.
  • Accurate records will help you if the department selects your tax return for examination. Usually, an examination will occur one to three years after a return is filed. It can be longer if you have had a federal audit. If you've kept good records, you can clear up any questionable items and easily arrive at the correct tax. If you haven't, you may have to spend time getting statements and receipts from various sources. You may also have to pay more tax if you can't prove the figures you used.

How should I keep my records?

You must keep accurate records, but no particular system is required for keeping them. Your records should contain all the information you used to figure your income, deductions, credits, and other items shown on your income tax return.

What records should I keep?

If you report an item on your tax return, you must have adequate records to verify it. Here's a partial list of records you should keep:

  • Receipts and sales documents for deductible expenses on Schedule A, self-employment, farm, rentals, sale of assets, etc.
  • Dated and signed receipts for any cash payments that might be deductible.
  • Income statements, including Form W-2s for your wages and Form 1099s for interest, dividends, rents, and nonemployee compensation.
  • All payroll records including copies of W-2s and 1099s issued.
  • Pay statements if you have deductible expenses withheld from your paycheck.
  • Receipts and certificates to verify Oregon tax credits claimed.
  • Copies of your tax returns, including complete federal returns with all federal schedules.
  • Copies of your "as if" returns if you were required to prepare them to claim a special filing status.
  • Worksheets, summary statements, calendars, log books, journals, etc.
  • Canceled checks, substitute checks or carbon copies of checks, bank deposit slips, and receipts.
  • Checking and savings account statements for both personal and business accounts.
  • If you deduct alimony payments, keep copies of canceled checks and the written separation agreement or the divorce, separate maintenance, or support decree.
  • For property you own, keep the purchase price, any purchase expenses, the cost of any improvements, and any other basis adjustments, such as depreciation and deductible casualty losses. If you received property as a gift, you must have records that show the donor's adjusted basis just before the property was given to you, its fair market value on the date of the gift, and any gift tax paid on it.
  • The sale of a capital asset (and certain other assets). This type of sale is reported as a capital gain or loss. Your records must show when and how the asset was acquired, how it was used, and when and how it was disposed of. Records must also show your cost or other basis, the gross selling price, and the expenses of the sale.
  • Year-end statements showing total interest paid on loans, credit cards, mortgages, or notes.
  • Statements and canceled checks, mortgage statements, and other documents for your real estate and personal property taxes paid.
  • Proof of payment to your child care provider if you are claiming the Oregon Working Family Child Care Credit.

How do I document deductible expenses?

A receipt is the best evidence to prove the amount of an expense. A canceled check, together with a bill or invoice from the payee, ordinarily establishes the cost. However, a canceled check might not prove a business expense without other evidence to show that it was for a business purpose. All records should show:

  • The date,
  • The amount, and
  • The purpose of the expense.

The expense must be an ordinary and necessary expense.

How do I document car or truck expenses?

You must have written records to verify vehicle expenses. To deduct car or truck expenses, you must be able to prove:

  • The amount of each separate expense for a vehicle, such as the cost of purchase, capital improvements, lease payments, maintenance, and repairs.
  • The mileage for each business or investment use of the vehicle and the total miles for the tax year.
  • The date of the expense or use. For example, a current trip log.
  • The business or investment reason for the expense or use of the vehicle.

Keep the proof you need for these items in an account book, diary, log, statement of expense, trip sheet, etc. Include all documents needed to verify the item.

How long should I save my records?

Keep your records as long as they are important for any tax law. Keep records that support an item of income or a deduction on your return at least until the statute of limitations expires for that return. A statute of limitations is the period of time after which no legal action can be brought. Usually this is three years from the date the return was filed, or two years from the date the tax was paid, whichever is later. Returns filed before the due date are treated as if they were filed on the due date.

Exceptions: There are times you should keep records longer, including the following:

  • Keep records that support your basis in property for at least four years after you sell or dispose of the property (including all capital improvements).
  • If you were audited by the federal government, Oregon has two years from the date we receive the federal audit report to review your Oregon return for adjustments.
  • If you have employees, we recommend you keep all of your employment tax records for at least five years after the date the tax becomes due or is paid, whichever is later. This includes copies of Wage and Tax Statements (W-2s) and all payroll records.
  • If you did not report some income and it is more than 25 percent of the income shown on your return, you may be audited within five years after the return was filed. If a return is false or fraudulent or if no return is filed, there is no time limit.

What if I do not have all of my records?

If records have been destroyed and your return is selected for review, the auditor will advise you about reconstructing your records.

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What to do if you are audited

General information

We examine returns for several reasons. Many examinations are based on adjustments already made by the Internal Revenue Service (IRS), with which we share information. Other returns are selected because there are sections of tax law that require additional focus because of difficulties in tax law application.

Auditing is reviewing a return to make sure it was prepared correctly. If your return is chosen for an audit, it does not mean you made an error or are dishonest.

By law, we must keep your tax information private. People who prepare your return or represent you must also keep your information confidential. You have the right to know why we are asking for information, exactly how we will use any information you provide, and what might happen if you do not provide the information.

Our goal is to treat taxpayers fairly. We strive to be responsive to the issues and reasonable in our decisions and actions. We will explain any change to your return. We encourage you to ask about anything you do not understand.

For more information, read our publication Your Rights as an Oregon Taxpayer. See the publication on our website or call us to order it.

Types of reviews

Processing adjustments. Processing adjustments are corrections we make to a return while we process it.

Federal audits. These audits are based on information from the Internal Revenue Service (IRS). This information includes the IRS's CP2000 program and federal Revenue Agent Reports. The CP2000 program matches W-2 and Form 1099 information reported by payers to what is shown on a return. A Revenue Agent Report is a federal audit report showing adjustments the IRS made to a return. If you received either of these reports from the IRS, you need to determine if the changes made by the IRS affect your Oregon return. If they do, you should amend your Oregon return as soon as possible. Interest charges accrue until all tax is paid. If you do not amend your Oregon return, you may receive a notice from the department showing adjustments.

Correspondence audits. These are written requests asking you to confirm items on a return. The letter will explain what items are being reviewed and what we need to verify them. You will be asked to send copies of the documents to the auditor who will review the information and notify you of the results. Correspondence audits usually do not require a meeting with the auditor.

Field audits. These audits are more in-depth. They include the review of income and expenses from businesses, farms, partnerships, corporations, or rentals. Field audits usually require a meeting with the auditor. The time and place of the meeting will be arranged between you and the auditor.

What records will I need for the audit?

You'll get a letter from the department asking questions and requesting copies of specific documents. Answer the questions completely and send copies of the documents by the deadline in the letter. It's important that you keep a complete copy of your state and federal tax records. You should also keep a copy of your response.

If you get a letter asking you to make an appointment, contact the auditor who sent the letter. We try to schedule audit appointments at your convenience. It may be held at your home or office, at your representative's office, or at one of our field offices.

The letter will explain the records needed for the audit. Organize the information for the appointment. The auditor may ask you to leave the records while the audit is being conducted. You may ask for a receipt for the records you leave.

Generally, your return is examined in the district where you live. But if the return can be examined more quickly and easily in another district (such as where the books and records are located), you may ask to have the audit transferred.

Who can represent me?

Throughout any audit you can represent yourself, have someone accompany you, or designate someone to represent you. You may represent yourself in all stages of your audit and appeal. However, if your case is hard to understand or involves many issues, you may want someone to help you. Also, if someone else prepared the return, you may want their help. If you designate someone to represent you, he or she will be able to make decisions for you. People who can represent you are Oregon-licensed:

  • Lawyers;
  • Public accountants or certified public accountants;
  • Tax consultants;
  • Enrolled agents.

Out-of-state CPAs may practice in Oregon if they meet the substantial equivalency requirements of ORS 673.010:

  1. Licensed in another state;
  2. Have an accredited baccalaureate degree with at least 150 semester hours;
  3. Passed the Uniform CPA exam; and
  4. Have a minimum of one year of experience.

If you own a business and have an employee who regularly does your tax work, that employee can also represent you.

You must give written authorization to a person you want to represent you. Use our Tax Information Authorization and Power of Attorney for Representation form. The auditor handling the case can provide the authorization form. Or, you can download it from our website, or call us to order a copy.

What if I disagree with the audit?

When we propose any changes to your return, we will explain the reasons for them. It's important that you understand why we propose any changes. Please ask about anything that is unclear to you.

If you disagree with the action of the department, you can appeal. Appeal rights will be included with the notice you receive. See the Appeal Procedures section.

What if the IRS or another state has audited me?

We have an agreement with the IRS to exchange tax return information. If the IRS audits an Oregon taxpayer, we may receive a copy of that information. If your federal return or the return you filed with another state is adjusted, you should amend your Oregon tax return if that adjustment also affects your Oregon return.

If you were previously audited by the IRS and the notice you receive from us is different, send a copy of the final audit adjustments or cancellation from the IRS to us.

If you filed an appeal with the IRS or the other state and you get a notice from us, send a copy of the IRS or other state appeal notification. We will suspend further action until your case is resolved.

You have two years to claim a refund of Oregon tax due to the audit adjustment. This is true even if the normal refund statute has expired.

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Filing a return after tax is assessed

When you do not file a tax return but were required to file, we will "assess" your tax. This means we compute how much tax you owe based on information we have available. You will then receive a Notice of Determination and Assessment.

Even if we have assessed your tax for one or more years, you may still file returns for those years.

Why you should file

We compute your tax assessment using the information available to us about your income, filing status, exemptions, and withholding or estimated tax payments. Because we don't have all your tax information, we may not be able to give you all the deductions or credits you may be entitled to. Once you file a tax return, we may be able to change the tax we assessed.

You may receive a refund

If your withholding and/or estimated tax payments add up to more than the tax due, we may be able to refund the excess to you. However, there are time limits. If you paid more tax than you should have, a refund will be allowed only if you file your return within three years of the due date of the original return not including extensions.

For example, the return for 2012 was due April 15, 2013. Three years after that date is April 15, 2016. To receive a refund of excess tax payments for 2012, your return must be postmarked on or before April 15, 2016.

Where to mail your return after tax is assessed

Send your return to:

Oregon Department of Revenue
PO Box 14600
Salem OR 97309-5049

When you file your return, write "F.A.S.T. Unit" at the top of your return. Please use blue or black ink. This will help us process your return more quickly.

Reviewing your return

After reviewing your return, if we agree with the tax you show, we will change the tax assessed. If the income, deductions, credits, or payments shown on your return do not match our information, we will notify you. The notice we send will explain our adjustments and what to do if you disagree.

Your return needs to include information about filing status, exemptions, income, deductions, credits, tax, and payments. It must be signed and include a statement that, to the best of your knowledge and belief, is true, correct, and complete. The full statement is printed on the forms provided by us and appears directly above the signature lines. If you change this statement on the form, your return may not be accepted. Your return also may not be accepted if:

  • It contains a frivolous argument concerning the payment of taxes, or
  • You file a return you know is not true or correct.

You will receive a Notice of Rejection if your return is not accepted. This notice can be appealed to the Magistrate Division of the Oregon Tax Court within 90 days of the date of the notice, but only if your return was sent to us within 90 days of the date on the Notice of Determination and Assessment.

Appealing the Notice of Determination and Assessment to the Oregon Tax Court

You may also choose to file an appeal with the Magistrate Division of the Oregon Tax Court. Your appeal must be made within 90 days of the date of the Notice of Determination and Assessment or within two years after the tax, penalty, and interest shown on the notice is paid in full. If you file an appeal with the Magistrate Division, you will usually be required to file a tax return before the court will change our assessment.

You can get a complaint form for filing an appeal at:

Oregon Tax Court
Magistrate Division
1163 State Street
Salem OR 97301-2563
(503) 986-5650
TTY (503) 986-5651
www.courts.oregon.gov/tax

Within 90 days of the date on your notice, mail the following items to the address above:

  • Your completed and signed complaint form, and
  • Your filing fee, and
  • A copy of your Notice of Determination and Assessment.

Appealing does not stop interest from being charged on the tax you owe. If you appeal and your tax assessment is reduced, the penalty and interest charges will also be reduced.

Paying your assessment during the appeal process

You can pay your balance due at any step of the appeal process. Payment does not mean you agree with the assessment. Payment stops more interest from being charged. If you pay, you can still appeal any time within two years of the date you pay the tax, penalty, and interest shown on the Notice of Determination and Assessment. See Payment Options for information on payment methods.

Requesting a waiver of penalty or interest

You can ask for a discretionary waiver of part or all of the penalty and interest charges. Waiver criteria are outlined in Oregon Administrative Rules under 150-305.145. Most penalty and interest charge disagreements can be resolved with us. For complete information on your appeal rights when requesting a discretionary waiver, see Appealing penalty or interest.

If you believe part or all of the penalty and interest charges should be adjusted, write to:

Oregon Department Revenue
PO Box 14725
Salem OR 97309-5018

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Why Oregon needs a federal return

Most information to support the amounts on your Oregon return comes from your federal return. Even when Oregon law differs from federal law (such as additions, subtractions, and credits), we still need information from your federal return.

All Oregon tax returns require a copy of the front and back of federal Form 1040, 1040A, 1040EZ, or 1040NR including any "as if" returns. If you're not filing a federal return, include a "substitute" federal return with your Oregon return. Fill out the return as if it were an actual federal return. Do not send copies of your federal schedules. Keep them with your tax records. We may ask for copies later. If you file an electronic return, we will receive your federal return with your Oregon return.

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