Oregon Question - CA Resident

[JohnH]

I think I asked this last year but would like to bring it up again in case someone from Oregon would like to confirm my thinking or tell me I'm all wrong.

Taxpayer lives in CA and works full-time in OR. Has never resided in OR, simply commutes from CA daily. On line 15 of the W-2, the employer allocates income as $80K to CA and $40K to OR and reports withholding in both states. Naturally, CA collects tax on all his income earned in OR - no problem understanding that.

If I read the instructions correctly, I'm supposed to do a separate calculation which ends up zeroing out the OR income tax and he gets a full refund of OR tax withheld. If this is always the case, I'm trying to figure out why the employer goes to the trouble of allocating the income & withholding in the first place.

[taxmandan]

Nope, if his work location is in Oregon he owes Oregon income tax. He can claim a credit for tax paid to another state on his Oregon return, that may or may not zero out the tax. He files an Oregon non-resident return.

[JohnH]

Well, that's what I thought would be the case based on common sense and what I see in most other states, but when I follow the instructions on the Oregon 40N (nonresident), it brings me back to claiming a full credit for tax paid to CA and CA doesn't allow me to claim a credit for tax paid to OR. Maybe CA & OR have some sort of reciprocal agreement, or maybe I'm just not filling out the forms correctly.

[joanmcq]

OR & CA do have a wierd reciprocal agreement as does CA & NV. credit taken on NR return, not resident.

[JohnH]

joan:

Thanks for the confirmation.
I feel better about this return now.

[veritas]

Oregon has reciprocity

agreements with Arizona, California, Indiana and Virginia.

See page OR-5 in The Taxbook All States Edition

[JohnH]

veritas; Thanks for that info as well. Funny thing, I had searched both the CA and OR web sites using "reciprocity" and several other similar terms, but could never get a clear answer from their own sites. Guess they want to keep people in the dark about this for some reason (or maybe my search skills aren't so hot). One would think that since their reciprocity agreements are so counter-intuitive, they would offer some clear guidance.

[Gene V]

veritas; Thanks for that info as well. Funny thing, I had searched both the CA and OR web sites using "reciprocity" and several other similar terms, but could never get a clear answer from their own sites. Guess they want to keep people in the dark about this for some reason (or maybe my search skills aren't so hot). One would think that since their reciprocity agreements are so counter-intuitive, they would offer some clear guidance.

Try Oregon Pub. 17 1/2 page 93-95

http://www.oregon.gov/DOR/PERTAX/docs/2008Forms/101-431-08.pdf