The Tax Cuts and Jobs Act (TCJA) made changes to the federal tax code that directly impact how withholding allowances are calculated. As a result of these changes, use of federal Form W-4 to calculate Oregon withholding allowances may no longer result in adequate withholding for Oregon personal income taxes.
We've created Form OR-W-4, Oregon Employee's Withholding Allowance Certificate, for employers to provide to their employees any time the federal Form W-4 is provided. Employees may complete both the federal Form W-4 and the new Oregon Form OR-W-4, and submit both to their employer to ensure adequate allowances are claimed for federal and state purposes.
If you filled out the new federal Form W-4 or Form W-4P during 2018, you need to check your Oregon income tax withholding using our withholding calculator.
Generally, you should review your withholding at the end of each year and make any adjustments before the beginning of the new tax year.
What if I'm withholding too much or too little?
If you're withholding more than your estimated tax liability, you'll likely be due a refund when you file your taxes. You can adjust your withholding and get more money with each paycheck by increasing the number of state allowances you claimed.
If you're withholding less than your estimated tax liability, you'll owe money when you file your taxes. If your total amount of tax due isn't paid by the due date of your return (usually April 15) or if you owe more than $1,000 when you file, you may be charged penalties and interest. To avoid this, adjust your Oregon withholding to have more taken out of each paycheck, or make estimated quarterly payments throughout the year. See the withholding calculator for more information on adjusting your withholding or Publication OR-ESTIMATE for information about estimated payments.
You can easily share information about withholding changes with your employees through a message on their paystubs. If you issue paper paystubs, try these easy-to-print stuffers. For electronic paystubs, consider adding—or asking your payroll service provider to add—the following language:
"If you started a new job or filled out a federal Form W-4 after January 1, 2018, or if the federal tax law changes impact you, you might not be withholding enough to cover your Oregon tax liability, which could result in you owing money when you file your taxes.
To find out if you're withholding enough for your state personal income taxes, go to the withholding calculator.
Employers aren't required to ensure their employees are withholding properly. You're only responsible for withholding based on what they provide on the Form W-4. Please make Form OR-W-4, Oregon Employee's Withholding Allowance Certificate, available to your employees when they fill out their federal W-4s so they can determine the correct amount of withholding for Oregon.
About Oregon income tax withholding
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 amount you have withheld from your paychecks to cover your anticipated income tax liability for the year. Your employer withholds the amount you specify—based on how you fill out the federal and state employee's withholding allowance certificates—and sends it to the Oregon Department of Revenue and the IRS, where it's applied to your tax account. 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 year, you'll claim the amount withheld from your paychecks and subtracted it from the amount 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.
How does my employer know how much to withhold?
Employers use Oregon Form OR-W-4 and the federal Form W-4, submitted by their employees, to determine the state and federal withholding amounts. If an employee does not complete Oregon Form OR-W-4, employers will use the information on the federal Form W-4 to calculate Oregon withholding. This could result in inadequate state withholding.
Can my employer help me determine how much I need to withhold?
Your employer may offer to help you fill out your withholding certificates, but they aren't required to ensure you're withholding enough to cover your federal and Oregon tax liabilities. Ultimately, you're the one responsible for making sure you withhold enough to cover your taxes. To ensure you're withholding the correct amount, you should use the withholding calculator.
Why is there a difference between what I withhold for federal taxes and Oregon taxes?
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.