Important Information
Personal income taxes are the
foundation of Oregon's General Fund. The pay-as-you-earn system of personal
income tax withholding provides a consistent and stable revenue stream to support
the public services Oregonians rely on.
What is withholding?
"Withholding"
is the portion of your wages you have withheld from your paychecks to cover
your anticipated annual income tax liability. Your employer withholds the
amount you specify—based on how you fill out the state OR-W-4 and federal W-4 —and
sends them to the Oregon Department of Revenue and the IRS, where it's applied
to your tax account.
How does withholding work?
The
total amount withheld from your paychecks is reported on the Form W-2 that your
employer sends to you in late January or early February. When you file your
personal income tax return for the previous year, you'll subtract your
withholding from the amount of tax you owe. If the amount you owe is more than
the amount withheld, you'll have to pay the difference. If the amount you owe
ends up being less than what was withheld, you'll be due a refund.
Have there been changes to withholding?
Yes. Since early 2020, any change made to state withholding must be made on Form OR-W-4 as the new federal Form W-4 can't be used for Oregon withholding purposes. Previously filed Oregon or federal withholding statements (Form OR-W-4 or Form W-4), which are used for Oregon withholding, can remain in place if the taxpayer doesn't change their withholding elections.
How often should I check my withholding?
The
IRS encourages taxpayers to check annually, especially if you changed jobs. The
Paycheck Checkup tool from
the IRS (https://www.irs.gov/paycheck-checkup) can help you see if you’re
withholding the right amount of federal tax.
Which taxpayers should check their withholding?
Again,
the IRS and DOR recommend all taxpayers check each year. Because of periodic
federal tax law changes a taxpayer’s situation might change. Two-income
families, taxpayers with multiple jobs, seasonal workers, and taxpayers with a
high income or a complex tax return are encouraged to do a Paycheck Checkup.
How do I determine the correct amount of state withholding needed?
You
can use the DOR withholding
calculator, which is updated generally in mid-December in preparation for
the beginning of the next tax filing season.
What documents do I need to check my withholding?
You
will need your most recent paystubs and most recent tax return.
Where can I get a Form OR-W-4?
Form
OR-W-4 can be found at www.oregon.gov/dor/forms,
or check with your employer.
If I took a coronavirus-related distribution from a retirement plan or IRA, when do I have to pay taxes on the distribution?
For
federal taxes, the distributions generally are included in income ratably over
a three-year period, starting with the year in which you receive your
distribution. This
IRS web site has information. Oregon will follow the IRS on when the
pension is included in taxable income. However, the withholding on the pension
payment is claimed in full in the year of the pension withdrawal (year 1).
Taxpayers should arrange to make estimated tax payments for years two and
three.
Withholding Calculator
If you would like to use the withholding calculator, click on the link below.
Oregon's withholding calculator will help you determine the number of allowances you should report on Form OR-W-4. Our withholding calculator doesn't ask you to provide personal information, such as your name, Social Security Number, address, or bank account information.
Once you input all the information for your situation, you'll receive details about your results and instructions on how to update your state income tax withholding using the new Oregon Form OR-W-4. The calculator also works for pension income withholding.
What tax or pay information do I need to get started?
At a minimum, you'll need your most recent pay stub from each job you (and your spouse, if filing jointly) have held this year. Pay stubs will help you calculate your projected income and current withholding for the entire year, and will tell you how much you've already withheld. You may also need a copy of your most recently submitted federal Form W-4, if your paystub doesn't list your federal withholding elections.
It may be helpful to have last year's Oregon and federal income tax returns available. The more complete the information you provide is, the more accurate your results will be.
The withholding calculator will ask you for current year estimates of
the following amounts:
- Your gross wages (from jobs).
- Your spouse's gross wages (if married and filing jointly).
- Other income you might have, including:
- Pension income.
- Unemployment.
- Self-employment income.
- Income from the sale or rental of property.
- Adjustments to your income, such as student loan interest.
- Oregon additions to or subtractions from your federal income, including:
- Interest income that isn't taxed on your federal return.
- 529 college savings plan subtraction.
- Special medical subtraction.
- Itemized deductions for Oregon.
- Oregon tax credits you'll be claiming.
- If you plan on claiming the Working Family Household and Dependent Care credit, you'll need to provide an estimate of the care expenses you expect to pay during the current year.
If you have questions while using the calculator, click on the information icons
for assistance. For information on federal income tax withholding or to adjust your federal withholding allowances, visit the
IRS website.
Take me to the calculator
Frequently asked questions
General information
A: Yes. Employees should check their withholding at the
beginning of each year or when their personal circumstances change. It's
especially important for certain people to check their
withholding, such as those who:
- Started a new job after January 1, 2018.
- Updated their federal Form W-4 in 2018 or 2019.
- Previously claimed federal deductions that were impacted by federal tax law changes, such as the employee business expense deduction.
- Have dependents.
- Itemize their deductions.
- Claim Oregon additions, subtractions, or tax credits.
- Have two or more jobs.
- Work part of the year.
- Have high income or complex tax returns.
- Had a large tax refund or large tax bill last
year.
A: Your marital status determines which formula your
employer will use to calculate the tax to be withheld from your paycheck. This
is because the tax rates and standard deduction amounts are different depending
on whether you are married or single. There is no head of household status for
withholding formulas. A person who files with the head of household status is
considered single for withholding purposes.
A: An allowance represents a portion of your income that is
exempt from tax. On your Oregon tax return, this portion can take the form of a
credit against tax, a deduction, or a subtraction. The more allowances you
claim on Form OR-W-4, the less tax your employer will withhold.
A: Not necessarily. If you are in a two-earner family, or you have more than one job, it's possible that you will still owe tax even if you claim zero allowances. This is because both the federal and Oregon withholding formulas are based on each person or family having just one job and filing a simple tax return each year. If you work more than one job or have other income, you may not have enough withheld even if you don't claim any allowances. In some cases, you may want to have additional tax withheld every paycheck so that you don't have tax to pay when you file your return. If your other income is high enough, you might need to consider making estimated tax payments throughout the year, too.
A: Some people have more complicated tax situations and face
the possibility of being under-withheld. Use the worksheets with Form OR-W-4 to help
you determine the correct amount of withholding, or for more accurate results,
use the withholding calculator.
A: If you under-withhold, there won't be enough put aside to cover the taxes you owe when you file your return. If the difference between what you withhold and what you owe is more than $1,000, you'll be charged interest on the amount owed unless you make estimated payments throughout the year. For more information, see the instructions for making estimated tax payments in Publication OR-ESTIMATE.
A: Some employees are over-withheld on their taxes, meaning
that they'll pay more in tax during the year than what they'll owe when they
file their returns. They might receive a large refund when they file their
return, but they'll have less money in each paycheck throughout the year. If
your taxes are over-withheld, use the withholding calculator to find the
right number of allowances that will leave you with more money in each paycheck,
while still making sure that enough is withheld to cover your tax when you file
your return.
A: Your withholding is based upon your estimated tax liability for the year. Your Oregon tax liability is different than your federal tax liability, as the tax rates and other items you claim on your return, such as deductions and credits, are different for federal and state taxes.
Form OR-W-4
A: Taxpayers who need to change the amount of tax withheld
from their paychecks need to complete Form OR-W-4 and give it to their
employer. Use the worksheets that come with the form or, for more accurate
results, use the withholding calculator to help you complete the form.
A: Yes. However, you can also get the form and instructions from our website, or you can contact us
and we'll send you a copy.
A: Your employer is only required to withhold tax from your pay
and submit it to us. It's up to you to specify how much Oregon tax they should
withhold. If you don't specify your withholding for Oregon, they have to withhold at a flat rate of eight percent. This may not be enough withholding to cover the taxes you owe.
A: You should complete all worksheets in the Form OR-W-4
that pertain to your situation. The more information you fill out, the more
accurate your withholding will be.
A: No. You only give the first part of the form—the part
that you sign—to your employer. Keep the worksheets for your own records.
Tax calculator
A: You should check your withholding whenever your personal or financial situation changes because those can impact your tax liability. Earlier in the year is better than later, since withholding takes place throughout the year. Waiting until later in the year means there are fewer pay periods to make changes, which could have a bigger impact on each
paycheck.
A: The withholding calculator looks at your situation as of
the day you use it. If you've started a new job during the year, or you're
checking your current withholding arrangement, the calculator will make
recommendations for your withholding for the rest of the year. It will also recommend
what you should do next year if your personal or financial situation doesn't
change.
A: No. The withholding calculator doesn't store your
personal or financial information. It doesn't ask for your name or other
identifying information, either.
A: It's a taxpayer's responsibility to check their
withholding and determine if it's accurate for their personal situation.
Payroll offices and human resource departments are responsible only for
processing the Form OR-W-4. It's important to remember people working in these
offices do not know the rest of someone's personal financial situation, and
they are not responsible for giving you tax advice. Employees who have tax
questions should consult with a trusted tax professional. If you have questions
about the withholding calculator or Form OR-W-4, contact us.
A: No. Enter the wages that you'll be reporting when you
file your return. The calculator will use the starting and ending dates to
figure out how much the job pays for the year.
A: It is really important that you enter each job separately
because the withholding calculation will be off if you combine all the jobs.
This is because each employer uses the same basic withholding formula, which
treats each job as if it's the only income you have. The formula includes the
standard deduction and an estimate of the federal tax subtraction you'll claim
on your return. It also applies the tax rates that would apply if you only had
one job. The calculator needs to know how many times these deductions and tax
rates will be applied by your employers. That way, it can figure all of that in
when it makes its recommendation.
A: No, the calculator assumes you will have the job for the
same length of time in 2022. If your personal or financial situation changes
for 2022 (for example, your job starts in summer 2021 and continues for all of
2022, or your part-time job becomes full-time), you are encouraged to come back
in early 2022 and use the calculator again.
A: You can enter these separately or enter just your net
wages, but don't do both. If you enter them separately, the calculator will
figure out the net wages for you.
A: The calculator figures out your withholding based on your
annual wages, including the amount you're paid each pay period and any bonuses.
First, it figures out your net wages for the year based on starting and ending
dates you enter, as well as how often you're paid. Then it adds any bonus
amounts you'll receive and uses that total to figure out how much you should
have withheld for the year.
A: The calculator uses your filing status, number of
allowances, and amount withheld to date to determine how much would be withheld
for the entire year if you didn't change anything. Because some taxpayers
change their allowances during the year, having this information allows the
calculator to figure out how much needs to be withheld for the rest of the
year.
A: Enter the amount you'll include on your federal return as
"other income" and enter the same amount again as an Oregon
subtraction.
A: Yes. You don't have to have wages (or other income that is subject to
withholding) to use the calculator. There is a checkbox you can click that will
allow you to skip entering wages. Instead of suggesting allowances or an
additional withholding amount per period, the calculator will tell you how much
your annual estimated payments should be.
A: Form OR-W-4 uses only some of your personal and financial
information and is a rough estimate. The calculator is more accurate and takes
everything in your situation into account.
A: The results for 2021 factor in taxes you've already had withheld for this year. If your withholding wasn't correct, the results will tell you what to claim for the rest of the year to get back on track. The recommendation for 2022 assumes that your financial and personal situations will be the same as 2021, but it doesn't factor in any taxes that were already withheld.
A: No, the refund amount on the calculator is a refund of
withheld tax only. Refundable credits are included in the calculation only to
the point where your tax liability would be zero and any withheld tax would be
refunded to you. If you claim refundable credits when you file your return, the
amount of your actual refund may be greater than what the calculator says.
A: If the annual wages at your highest-paying job are more
than $100,000 and you're single, or more than $200,000 and you're married, the
formula your employer uses won't include allowances. The calculator takes this into account and won't
suggest any allowances if we know the employer won't use them when they compute
the tax to withhold from your pay.
A: Even if your federal itemized deductions are different,
enter your Oregon itemized deductions in the calculator. The calculator will
use those deductions when figuring your federal tax subtraction. In some cases,
this calculation may be slightly off, but the difference shouldn't be much. If your
Oregon itemized deductions are less than the federal standard deduction, the
calculator will use the federal standard deduction when figuring the federal
tax subtraction.
Disclaimer: This FAQ is for informational purposes only and may not be relied upon as legal authority. This means that the information cannot be used to support a legal argument in a court case.