Oregon State Tax Routine (ORTX)

Oregon State Tax Special Routine Processing utilizes the following steps:

Line 1	Determine annualized wages.
Line 2	Determine Federal Withholding: If Wages >= Annual Gross Amount Minimum (Tax Parameters (TAXP) reference page) look at the Tax Parameters State reference page (TAXPS) to determine the employee’s bracket. Compare the Standard Deduction Amount from TAXPS to the employee’s annual Federal Tax Withholding and use the lesser of the two numbers as the Federal Tax Withholding amount. If Wages < Annual Gross Amount Minimum (TAXP), compare the Standard Deduction Amount Maximum to the employee’s annual Federal Tax Withholding and use the lesser of the two numbers as the Federal Tax Withholding amount.
Line 3	Determine Standard Deduction: Compare the employee’s State Tax Marital Status to the DEFAULT ST/LOC TAX MAR STAT Site Specific Parameter (SPAR). If the employee’s State Tax Marital Status matches the Text Value on the SPAR, look to Deduction Plan (DPLN) and compare the employee’s State Tax Allowance count on Employee Tax Parameters (TAX) to Amount/Percent 1 for the deduction being processed. If the State Tax Allowance count is >= Amount Percent 1, use Amount/Percent 2 as the Standard Deduction Amount. If the State Tax Allowance count is < Amount/Percent 1, continue processing on step 3B. If the employee’s State Tax Marital Status does not match the Text Value on the SPAR, continue processing on step 3B. Use the Standard Deduction Amount Rate from TAXP for the employee’s State Tax Marital Status as the Standard Deduction.
Line 4	Base = Line 1 – Line 2 – Line 3
Line 5	Determine Number of Allowances to use: If Wages > Annual Gross Amount Maximum (TAXP), use 0 for the number of Allowances. If Wages <= Annual Gross Amount Maximum (TAXP), use the number of State Tax Allowances (TAX) as the number of Allowances.
Line 6	Determine Tax Withheld: Compare the employee’s State Tax Marital Status to the DEFAULT ST/LOC TAX MAR STAT SPAR. If the employee’s State Tax Marital Status matches the Text Value on SPAR, look to Deduction Plan (DPLN) and compare the employee’s State Tax Allowance (TAX) count to Amount/Percent 1 for the deduction being processed. If the State Tax Allowance (TAX) count is >= Amount/Percent 1, use the Higher Withholding Rate entries for the employee’s State Tax Marital Status on Marginal Tax Rates (DEDX) for the deduction. If the State Tax Allowance (TAX) count is < Amount/Percent 1, continue processing on step 6B. If the employee’s State Tax Marital Status (TAX) doesn’t match the Text Value on SPAR, continue processing on step 6B. If Base < Annual Gross Amount Minimum (TAXP), then WH = Base Tax Amount + [(Base – Income Level Amount) * Tax Rate Percent] – (Annual Exemption Amount * Number of Allowances). If Base >= Annual Gross Amount Minimum, WH = (Base Tax Amount – Annual Exemption Amount) + [(Base – Income Level Amount) * Tax Rate Percent] – (Annual Exemption Amount * Number of Allowances).

Data Setup Considerations

Sites will need to ensure they have implemented the following Business Process/Data Setup changes at their site prior to using the Oregon State Tax Routine.

Tax Parameters (TAXP) setup for Oregon State Tax Deductions:

The Annual Exemption Amount field is the Personal Exemption Amount for the specified Marital Status.
The Maximum Standard Deduction is the maximum Federal Tax Withholding amount allowed for the specified Marital Status.
The Standard Deduction Rate is the Standard Deduction amount for the specified Marital Status.
The Maximum Annual Gross Amount is the Gross Income threshold used to determine if the employee is eligible to claim allowances.
The Minimum Annual Gross Amount is the Gross Income threshold used to determine if whether or not the Federal Tax Withholding Phase Out should be applied.

Tax Parameters State (TAXPS) setup for Oregon State Tax Deductions:

The Adjusted Gross Income field is the lower number of each Phase Out bracket for the Specified Marital Status.
The Standard Deduction field is the maximum Federal Withholding amount allowed for a given Phase Out bracket.

Employee Tax Parameter (TAX) enrollment: (Note: this only applies to employees enrolled in a Tax Class (TAXC) that includes an Oregon State Tax Deduction).

The State Tax Allowance field is the number of allowances claimed.

Site Specific Parameter (SPAR) setup considerations:

The Text Value on the DEFAULT ST/LOC TAX MAR STAT SPAR should be set to the value used for the Single Tax Marital Status.

Deduction Plan (DPLN): (Note: this only applies to deduction plans with Special Routine set to Oregon State Tax Routine)

Amount/Percent 1 should be set to the Single Employee Allowance Threshold. For example, Oregon states for 2021 that a single employee with 3 or more allowances should use a different tax bracket than a single employee with fewer than 3 allowances. The value entered in Amount/Percent 1 should be 3.
Amount/Percent 2 should be set to the Standard Deduction amount for single employees with an allowance amount greater than the Single Employee Allowance Threshold. For example, for 2021, Oregon states that a single employee with 3 or more allowances should use a Standard Deduction amount of 4630 and a single employee with fewer than 3 allowances should use a Standard Deduction amount of 2315. Amount/Percent 2 should be set to 4360, as this is the amount used for single employees who report over the allowance threshold of 3.

Marginal Tax Rates (DEDX) for Oregon State Tax Deductions:

Due to the guidelines provided by the State of Oregon regarding tax withholding, employees that report that they are single with over a certain amount of allowances (referred to in this document as Single Employee Allowance Threshold) should have tax withheld using a different set of tax brackets than single employees who report a number of allowances under this threshold. In order to support this requirement, sites that withhold taxes for the State of Oregon will need to set up 2 sets of brackets for single employees. The Standard/Higher Withholding Rate option determines which bracket should be used for each type of single employee. The tax brackets for single employees that report an allowance number greater than or equal to the Single Employee Allowance Threshold will utilize the brackets set on DEDX where the Standard/Higher Withholding Rate field is set to Higher Withholding Rate. The tax brackets for Single employees that report an allowance number lower than the Single Employee Allowance Threshold used will utilize the brackets set on DEDX where the Standard/Higher Withholding Rate is set to Standard Withholding Rate.
The Tax Withholding calculation that is used for Oregon taxes is based off the amount of annual wages that an employee reports. If an employee reports wages over a certain threshold (for example, $50,000) the Base Tax Amount used in the withholding calculation is equal to the Base Tax Amount for the defined bracket - 1 Personal Exemption Credit. In order to accommodate this adjusted Base Tax Amount, the first bracket listed under the ‘Annual wages of $50,000 or higher’ formula (the $50,000 being carried over from the example above) should be skipped, as it is the same bracket as the top bracket of the ‘Annual wages up to $50,000 formula. For example, if the ‘Annual wages up to $50,000’ formula has 3 brackets, and the ‘Annual wages of $50,000 or higher’ formula has 2 brackets, the first bracket of the ‘Annual wages of $50,000 or higher’ formula should not be included on the Marginal Tax Rates setup, resulting in 4 brackets total for the given marital status.