Oregon Tax applicable to non-resident

[WP21Rams1]

I live in Washington state and my employer pays me from Oregon and withholds Oregon state income tax.  I do.not work in Oregon but from my home in Washington state.  Do I need to pay Oregon state income taxes?

[JotikaT2]

It depends.

If your gross income exceeds the amounts listed in the following link based upon your filing status, you will need to file a nonresident tax return in Oregon as the income is from Oregon sources.  

You will file using Form OR-40-N if you meet the filing requirement.

Oregon nonresident filing requirement threshold amounts

[TomD8 · Accepted solution]

From page 47 of the 2020 Oregon Tax Instructions:

Nonresidents. *Oregon taxes the income you earned while working in Oregon. Oregon doesn’t tax any amount you earned while you were working outside Oregon.  Nonresident telecommuters who work for an Oregon employer are taxed only on the income earned from work performed in Oregon, including sick pay or other benefits.

https://www.oregon.gov/dor/forms/FormsPubs/publication-or-17_101-431_2020.pdf

Therefore, if you're a Washington resident who never actually performs work in Oregon, your income is not subject to OR income tax.  However, if your employer incorrectly withheld OR income tax, you will have to file a non-resident OR tax return, showing zero OR income, in order to receive a refund of those taxes.

[WP21Rams1]

Thank You!

[fresnoace]

What if I am an OR resident but work for a foreign employer (100% income) and pay foreign tax (42%) already at a rate much higher than OR tax rate?  

[TomD8]

@fresnoace --

See "Foreign income tax" on pages 76-77 of the 2021 Oregon Individual Income Tax Guide:

https://www.oregon.gov/dor/forms/FormsPubs/publication-or-17_101-431_2021.pdf

[hlthomas18]

You shouldn't pay income tax in OR if you do not work there (and are a nonresident). Why don't you fill out the OR-W-4 and select exempt with reasoning 'M' (non-resident)? Then they won't withhold any taxes. It should not be listed on your W-2 at the end of the year as OR income since you did not work in that state.

[TomD8]

@hlthomas18 wrote:  "You shouldn't pay income tax in OR if you do not work there."

Not exactly true.  If you're a legal resident of OR, all your income is taxable by OR, regardless of where you earn it.

[hlthomas18]

@TomD8  My response was 100% pertaining to his situation, not for all situations. He lives in WA & works in WA, but his employers main office is in OR, however his wages shouldn't be taxed in OR since they are not earned there and he's a nonresident.