I live in Washington and work for an Oregon employer. I work part time from my home in WA and part time from the office in OR. My employer withholds Oregon income tax from all of my income/paychecks, even that earned in WA. I know I can allocate my OR earned income on my OR non-resident tax return to receive a partial refund. I am wondering though if my employer is legally allowed to withhold Oregon income tax on all of my income? Or are they legally required to only withhold for the income earned in Oregon and not Washington?
Oregon says an Oregon employer is not required to withhold state tax on wages earned by an out-of-state employee for periods working out of state.
You must also withhold tax from all wages paid to non-resident employees for work performed in Oregon. No Oregon withholding is required when a non-resident employee performs work outside of Oregon.
See page 14 of the Oregon Employer Guide.
You also need to consider this from the employer perspective.
If your payroll is consistent, as is the case for most employees working full-time, your employer isn't going to go back and forth with their payroll provider based on when you are or are not in Oregon (I suppose you could ask them).
They are going to take the position that covers them from a withholding requirement.
As you stated, in the end, you will end up where you should be once you provide Oregon with the necessary information when you file your Oregon tax return.
Also keep in mind the date of replies, as tax law changes.
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