Payroll Tax Frequently Asked Questions

Below you'll find our most frequently asked questions related to Payroll Taxes, or select one of the following subjects for additional FAQs:

Hearings
Frances Online is our new payroll reporting system
Tax Audits

How do I register as an employer?

Who counts as an employee?

All individuals, including non-citizens and minors, who receive employment compensation or are under any contract for hire by an employer, are considered to be employees for the purpose of reporting and paying Unemployment Insurance taxes.

The law does not cover some types of services, for example service performed by members of a limited liability company (LLC), a partnership or by an independent contractor as defined by ORS 670.600.

How are Unemployment Insurance benefits financed?

The money used to pay Oregon unemployment insurance benefits comes from Oregon employers.

Taxpaying Employers - Private, subject employers pay a quarterly tax (annually for domestic employers) directly to the State of Oregon.
Reimbursing Employers - State and federal subject employers must reimburse (pay back) the state for benefits paid to former employees.
Local governments or non-profit private sector employers (exempt under Internal Revenue Code 501(c)(3)) may choose either to pay the tax or reimburse the state for benefits paid.

Taxes collected are deposited into a trust fund used to pay Unemployment Insurance benefits. The money to administer the Unemployment Insurance program comes from a federal tax, created by the Federal Unemployment Tax Act (FUTA). This federal tax is assessed against all private employers and is paid to the Internal Revenue Service.

What is a subject employer?

Subject employers are required to provide Unemployment Insurance coverage for their workers. They include:

1. Subject employers who:

Pay $1000 or more to employees in a calendar quarter (a three-month period that begins January 1, April 1, July 1 or October 1), or
Have one or more employees in each of 18 weeks during a calendar year (January 1 through December 31)

2. Agricultural (farm) employers who:

Pay $20,000 or more cash wages in a calendar quarter, or
Have 10 or more employees in each of 20 weeks during a calendar year

3. Domestic (home) employers who:

Pay $1,000 or more in cash wages in a calendar quarter whose employees work in a personal residence

*Not everyone who meets the above criteria is a subject employer, as certain exemptions apply. Contact a Tax representative for more information.

How do I find out what my Unemployment Insurance (UI) tax rate is?

View your rate on the Employer Account Access site or call 503-947-1488 and ask to speak with a representative in the Contributions and Recovery Unit.

I have domestic (household) employees working in my home. Do I have to report their wages?

Domestic employers are required to cover employees once the employees are paid cash wages of $1,000 or more in total payroll in a calendar quarter, in either the current or preceding calendar year. For unemployment tax purposes, domestic employers do not include non-cash compensation (i.e., room and board) as wages.

When domestic employers meet this criterion they must:

Register with the Employment Department
File an annual tax report (Forms OA & 132) or
Quarterly tax reports (Form OQ & 132).
Pay unemployment taxes

I own a farm and operate with employees six months out of the year. Do I report wages on these employees?

Agricultural employers will need to report wages if they:

Pay $20,000 or more cash wages in a calendar quarter, or
Have 10 or more employees in each of 20 weeks during a calendar year

For Unemployment Insurance Tax purposes, agricultural employers should not include non-cash compensation (i.e. room and board) as wages.

Once an agricultural employer becomes subject to Unemployment Insurance law, they become subject for the entire calendar year and all of the next calendar year, as long as employment exists. This is true even if the payroll is less than $20,000 in those quarters.

Do I have to report wages for employees who work on commission only, or are relatives?

Unless specifically excluded in ORS Chapter 657, wages include, but are not limited to the following:

Salaries
Hourly pay
Piece rate
Payments by the job
Vacation, sick, holiday, disability and guaranteed wage payments
Commissions, dividends, distributions, bonuses, gifts, fees, prizes and tips

I hire people who work on contract. Do I have to report their earnings?

People who are hired and compensated for services are employees and their compensation for services are taxable wages unless specifically excluded by law.

I hire employees on a temporary basis. Are these considered independent contractors?

No. People who are hired and compensated on a temporary basis are employees, and their compensation for services are taxable.

Do nonprofit employers have to file payroll taxes?

Nonprofit employers must register and file quarterly payroll reports like other employers. Certain nonprofits may select different ways to finance their Unemployment Insurance costs. Local governments may finance their costs by paying quarterly.

If an employee performs services in Oregon and another state(s), where should the wages be reported for Unemployment Insurance taxes?

This is determined by the application of four tests. The tests are similar to provisions of all other states’ law and are applied in descending order. They are applied to the employee’s work situation and not the employer.

I purchased part of another business. Can I use the tax rate assigned to that business?

A new or existing employing unit that acquires an identifiable and segregable portion of an employer may be a partial successor. The identifiable and segregable unit of the transferring employing unit must be such that it could operate independently of the remainder of the transferring enterprise.

A new employer’s tax rate will be based on the transferring employer’s experience. If the acquiring employer was previously subject to unemployment tax, the transferring employer’s experience would be consolidated with its experience in the following year.

If you believe you might qualify for partial transfer of a predecessor’s experience rating or need additional information, please contact one of our Tax Representatives.

I pay my employees on a piece-rate basis. How do I report their hours worked on the Employee Detail Report (Form 132)?

The Employee Detail Report, Form 132, requires employers to report the number of hours worked during a quarter. If you do not keep hours worked as part of your payroll system, a reasonable estimate of hours worked is acceptable.

Are my contributions to an employee benefit plan considered wages?

The Employment Department law generally considers fringe benefits as wages. However, it excludes payments for several types of benefits.

If I do not have any employees for a quarter, do I need to file a quarterly report?

A quarterly report is required as long as the account is active. Penalties may be applied for failing to file a report even if there is no payroll.

OPTIONS

Telephone Reporting: You can now file "no payroll" quarterly reports by telephone, any time day or night. If you have no payroll and no subject hours for any quarter, dial (503) 378-3981 and phone in your quarterly report.
Form OQ: Place a "0" (zero) in the "subject wages" boxes for each subject program and use the "number of hours worked" box for the Workers’ Compensation Assessment. Leave blank "subject wages" boxes of any programs the employer is not subject to.
Business Change in Status Form: To close an account due to being out of business or no employees and none will likely be hired in the foreseeable future, complete a Business Change in Status Form.

Employers are required to notify the Employment Department of any changes in their business entity. To report, use the Business Change in Status Form. This form is also provided in the back of the Oregon Combined Payroll Tax Report booklet.

What is the difference in the Unemployment Insurance tax obligation between a corporation and an LLC?

Corporations must report and pay Unemployment Insurance taxes on amounts paid to individuals for services rendered. This includes amounts paid to corporate officers and shareholders.

An LLC is not liable for unemployment insurance taxes on compensation for services paid to its members.

I am the owner of my business as a sole proprietor or partner. Do I report my personal earnings as wages for Unemployment Insurance tax purposes?

No. Owners of sole proprietorships and partnerships should not report their personal earnings as wages for Unemployment Insurance tax purposes. These individuals are not covered employees and also may not elect Unemployment Insurance coverage for themselves.

I dissolved a partnership and incorporated. Do I have to report these changes to the Employment Department?

Employers are required to notify the Employment Department of any changes in their business entity.

To report, use the Business Change in Status Form. The form is also available in the back of the Oregon Combined Payroll Tax Report booklet.

Why does my tax rate change from year to year? What is an "experience rate"?

Unemployment tax rates are assigned in accordance with Oregon law. New employers are assigned a “base rate” until they have sufficient “experience” to qualify for an “experience rate” based tax rate. This usually takes about three years.

All employers are mailed their rate for the next calendar year by November 15th. The employer’s Unemployment Insurance tax rate is also pre-printed on the Oregon Quarterly Tax Report (Form OQ) sent in February of each year.

What is the Special Payroll Tax Offset? What is it used for?

Special Payroll Tax Offsets are authorized by the Oregon Legislature and collected using the unemployment insurance tax system. They are included as part of the UI tax rate, but the money is not deposited into the Unemployment Insurance Trust Fund. For that reason, the money cannot be certified as "contributions paid to the state" when preparing federal FUTA Form 940.

Special Payroll Tax Offsets are used to fund various state programs. Programs that have been supported this way include:

Wage Security Fund -- Pays final wages to persons who are unemployed and whose employer could not afford to make a final payroll.
SEDAF--The Supplemental Employment Department Administrative Fund is used to provide Employment Department services.

What rights are protected by the Employment Department? What are my responsibilities as an employer?

Employer rights include confidential handling of your information and protection from unauthorized disclosure. Oregon law provides you with appeal rights. Many documents you receive give you the option to appeal the decision or assessment.

Employer responsibilities specify that you must:

Allow the Employment Department to review your records, if asked.
Register using the Combined Employer’s Registration.
Post the notice that you are a subject employer where employees can read it.
Keep adequate business payroll records.
Pay taxes or reimbursements when due.
File the required quarterly or annual tax forms on time with complete information.
Inform the Employment Department and Department of Revenue of any changes to the organization or its status.

Why is benefit charge information for employers not available online?

Benefit charge information is currently provided quarterly, either by paper or electronically, if an employer requests that they receive benefit charge statements. We are continually expanding the services we offer online and this may be one way to offer more current information in the future.