May 29th, 2010 by Tim Kober
A recent It’s Only Money column in the Oregonian describes how getting a tax refund is essentially giving an interest-free loan to the State or Federal Government. You can match your withholding to your tax liability by adjusting your allowances on form W-4.
When considering changing your tax withholding, it is important to separately consider your federal and state tax situation. For example, if you received a federal refund last year and owed Oregon tax, raising your allowances COULD mean that you would be subject to a Oregon underpayment penalty.
Good news – you can adjust your federal and state withholding allowances separately. The Oregon income tax withholding brochure from the Oregon Department of Revenue describes situations where your withholding may differ from your tax liability
• You are in a dual-earner household filing a joint return;
• You have more than one job;
• You have large amounts of nonwage income;
• You have large deductions;
• You claim federal credits that don’t apply to Oregon,
such as federal child tax credit; or
• You claim Oregon credits not accounted for on the
federal tax form, such as Oregon Working Family
Child Care Credit.
You can change your Oregon allowances by submitting a form W-4 and writing “for Oregon only” on the top of the form. The brochure includes Oregon adjustment guidelines, and a calculator for high-income earners.