The Department of Revenue is encouraging taxpayers to start the new year with a paycheck checkup to ensure they’re withholding enough from their wages this year. Not withholding appropriately in 2019 could lead to an unexpected tax bill in 2020.
State and federal tax liabilities are different because tax rates and other items claimed on returns—such as deductions and credits—are different. In past years, these differences were minimal enough that Oregonians were able to use the federal Form W-4 to calculate their Oregon withholding appropriately. However, recent federal tax law changes, including how withholding allowances are calculated, mean that the federal form no longer consistently meets Oregon’s needs.
For tax year 2019, Oregon’s new Form OR-W-4 and online withholding calculator allow taxpayers to more accurately determine the appropriate amount to withhold for Oregon. Employers should provide the OR-W-4 to employees anytime they provide them with the federal W-4. Both the Form OR-W-4 and the calculator are available at the department’s website at www.oregon.gov/dor.
While everyone should check their withholding annually, some groups of taxpayers are more at risk for under-withholding than others, including taxpayers who:
Started a new job in 2018.Updated their federal Form W-4 in 2018.Previously claimed federal deductions that were impacted by federal tax law changes, such as the employee business expense deduction.Live in a two-earner household.
Personal income taxes are the foundation of Oregon’s General Fund. The pay-as-you-earn system of personal income tax withholding is an established and consistent revenue stream that supports the public services Oregonians depend on.
Most employees have a portion of their wages withheld to cover their state and federal income tax liability for the year. Employees are responsible for determining the appropriate number of allowances to claim, which will dictate how much their employer withholds. The employer sends the amount withheld to the Department of Revenue, where it is credited to the employee. When the employee files their annual tax return, the amount of tax due shown on the return is reconciled against the record of withholding for the year. If there was too much withheld, it results in a refund. If there wasn’t enough withheld, the employee will need to pay the difference by April 15.