[Revenews] Listserv - Withholding Formula Update

[GROVER Tracy * DOR]

HB 3601 (2013 special session) disallows the personal exemption credit for individuals with federal adjusted gross income of more than $100,000 for single filers or more than $200,000 for joint filers. The department has heard from certain individuals who have wages totaling more than $100,000 that they are no longer receiving credit for any allowances previously claimed based on the updated withholding formulas that were issued by the department after this bill became law.
Withholding formulas don't account for items such as alimony or large amounts of itemized deductions. The law requires that withholding be as close as possible to the tax that would be owed on wages. That means that the department has to develop the withholding formulas to reflect situations that apply to the majority of taxpayers with wage income. The department accounts for a person being able to claim the standard deduction, the federal tax subtraction and personal exemptions in the formula. Anything else is far too variable to be sure most people are entitled to claim it.
The instructions issued by the department account for changes indentified in HB 3601. However, some payroll providers are taking a strict approach to these instructions. There are options for a taxpayer in the situations described above to avoid higher withholding. The taxpayer can complete an "Oregon-only W-4" to reflect the proper withholding for Oregon. This is done by submitting another federal form W-4 to their payroll department and writing "For Oregon only" on the bottom of the form. On the Oregon-only W-4, the taxpayer can use one of the following options:
*       If the taxpayer is a single filer, but is married and has joint wages between $100,000.01 and $200,000, the taxpayer can file as 'married' to keep their reported allowances.
*       If the taxpayer is a single filer, has wages more than $100,000 and is single, the taxpayer can file as exempt and enter the amount of withholding on line 6 of the Oregon only W-4 to mirror their withholding prior to the implementation of this law.
It's the department's hope that this information will assist those individuals who fall into the above wage categories. Please contact the Withholding/Payroll Tax section by email (payroll.help.dor at oregon.gov<mailto:payroll.help.dor at oregon.gov>) or by phone (503.945.8091) for assistance.



Tracy Grover
Program Coordination Unit
tracy.grover at oregon.gov
(971) 301-1805 phone
(503) 945-8772 fax
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