The Complete Guide To Oregon Payroll Taxes

Oregon payroll can be challenging because employers may need to handle federal payroll taxes, Oregon income tax withholding, unemployment insurance, Paid Leave Oregon contributions, statewide transit tax, and local transit payroll taxes.

Oregon employers also need to follow state labor rules for minimum wage, sick leave, overtime, payday requirements, workers’ compensation, and payroll recordkeeping.

This guide breaks down the Oregon payroll taxes and labor laws small business owners need to know.

Does Oregon Have State Income Tax?

Oregon has a state income tax, and employers generally must withhold Oregon income tax from employee wages based on each employee’s Form OR-W-4 and Oregon’s current withholding formulas. The Oregon Department of Revenue publishes updated payroll withholding formulas, rates, and deductions for employers.

Oregon businesses may also owe other state business taxes. For example, corporations may be subject to Oregon corporate excise or income tax, with rates of 6.6% on Oregon taxable income of $1 million or less and 7.6% on Oregon taxable income over $1 million. However, corporate excise tax is separate from payroll taxes.

What Is The Oregon Payroll Reporting System?

The Oregon Payroll Reporting System, formerly known as OPRS, is now Frances Online. Frances Online is Oregon’s payroll reporting system for employers and third-party administrators. Employers use it to file payroll reports and report Paid Leave Oregon contributions.

To create a Frances Online account, employers generally need a Business Identification Number (BIN), Federal Employer Identification Number (FEIN), and payroll information from reports filed within the last two years.

Oregon employers still need to register for a BIN to report and pay Oregon payroll taxes. Oregon’s Department of Revenue says Oregon uses a Combined Payroll Tax Reporting System, and employers can use Revenue Online to register for a BIN, manage tax accounts, make certain payments, view letters, and file certain returns.

Federal & State Payroll Taxes In Oregon

Oregon employers may need to handle federal payroll taxes, Oregon income tax withholding, unemployment insurance, Paid Leave Oregon contributions, Workers’ Benefit Fund assessments, statewide transit tax, and local transit payroll taxes.

Oregon businesses may also be responsible for other business taxes, such as corporate excise tax, Corporate Activity Tax, or industry-specific taxes, but those are separate from payroll taxes.

Oregon Payroll Tax Exclusions & Exemptions

Oregon payroll tax exemptions depend on the type of worker, type of wages, and specific payroll tax involved. In general, employers must withhold Oregon income tax from employee wages unless a specific exemption applies. Oregon employers may also need to handle unemployment insurance, Paid Leave Oregon, Workers’ Benefit Fund assessments, and transit payroll taxes.

Employees may claim an exemption from Oregon income tax withholding only if their wages are exempt from Oregon taxation or they meet Oregon’s no-tax-liability requirements. Employees claiming exemption from withholding generally need to provide the proper withholding certificate, and exemption claims may need to be renewed annually.

Some types of work may also be exempt from Oregon withholding or payroll tax requirements. For example, Oregon rules say casual labor that is not in the course of the employer’s trade or business may be exempt from withholding.

Independent contractors are treated differently from employees. Businesses generally do not withhold payroll taxes for properly classified contractors, but contractors are still responsible for their own tax obligations.

Oregon businesses may qualify for other tax credits, incentives, or exemptions, but those usually apply to income, corporation, or business taxes, not payroll taxes.

Oregon Labor Laws & Other HR Requirements

Oregon employers need to follow state and federal labor laws covering new-hire reporting, paid leave, payday rules, minimum wage, workers’ compensation, sick leave, child labor, meal and rest breaks, jury duty, and anti-discrimination policies.

How To Calculate Payroll Taxes In Oregon

Oregon payroll can be more complex than payroll in some states because employers may need to handle state income tax withholding, unemployment insurance, Paid Leave Oregon contributions, Workers’ Benefit Fund assessments, statewide transit tax, and local transit payroll taxes.

Step 1: Set Up Payroll Tax Accounts

Before running payroll, make sure your business has the accounts needed to report and pay payroll taxes. Oregon employers generally need a Business Identification Number (BIN) and may use systems such as Revenue Online, Frances Online, and the federal EFTPS system.

Revenue Online is used for many Oregon Department of Revenue payroll tax tasks and payments. Frances Online is used for unemployment insurance and Paid Leave Oregon reporting. EFTPS is used for federal payroll tax payments.

Step 2: Identify Which Payroll Taxes Apply

Make a list of the payroll taxes and contributions your business needs to handle. Common Oregon payroll taxes include:

• Federal income tax withholding
• FICA taxes
• FUTA tax
• Oregon income tax withholding
• Oregon unemployment insurance
• Paid Leave Oregon contributions
• Workers’ Benefit Fund assessments
• Oregon statewide transit tax
• Local transit payroll taxes, if applicable

Step 3: Calculate Gross Pay

Calculate each employee’s gross pay before taxes and deductions. For hourly employees, multiply hours worked by the hourly rate and include overtime when required. For salaried employees, divide the annual salary by the number of pay periods.

Include taxable earnings such as bonuses, commissions, tips, PTO, reimbursements, and other compensation when applicable.

Step 4: Calculate Taxes & Deductions

Use each employee’s gross wages, withholding forms, and applicable tax rates to calculate payroll taxes and deductions.

Some taxes are withheld from employee wages, including federal income tax, Oregon income tax, FICA, Paid Leave Oregon employee contributions, statewide transit tax, and employee-authorized deductions.

Other taxes or assessments may be paid by the employer, including FUTA, Oregon unemployment insurance, the employer share of Paid Leave Oregon when applicable, Workers’ Benefit Fund assessments, and local transit payroll taxes when applicable.

Step 5: Pay Employees & Submit Payroll Taxes

After calculating gross pay, taxes, deductions, and net pay, pay employees using an allowed payment method, such as direct deposit, paper check, or another approved method.

Then file payroll reports and submit payments through the appropriate systems, such as EFTPS for federal taxes, Revenue Online for Oregon Department of Revenue payroll taxes, and Frances Online for unemployment insurance and Paid Leave Oregon reporting.

Step 6: Keep Payroll Records

Keep payroll records organized and secure. Records should include employee names, Social Security numbers, addresses, pay rates, hours worked, pay periods, payment dates, deductions, and tax records.

The IRS generally requires employment tax records to be kept for at least four years. FLSA payroll records should generally be kept for at least three years, while wage calculation records, such as timecards and work schedules, should generally be kept for at least two years.

Oregon Payroll & Business Resources

For official guidance, use the Oregon Department of Revenue for withholding, statewide transit tax, Revenue Online, and Business Identification Number registration. Use Frances Online for unemployment insurance and Paid Leave Oregon reporting. Oregon employers can also use the Bureau of Labor & Industries for wage, hour, sick leave, child labor, and workplace law guidance.

For federal payroll rules, use the IRS for federal withholding, FICA, FUTA, and employer tax filing guidance, and the U.S. Department of Labor for FLSA wage, overtime, and recordkeeping requirements.

If you’re interested in taking a deeper dive into payroll taxes, check out our guide to payroll taxes for small businesses. Or if you’re looking to adopt affordable payroll software for your business, check out our guide to the best cheap payroll software