Oregon Non-Resident Filer

[JohnH]

I have a long-time California client to tells me he had income in Oregon in 2007 but continues to live in CA. There is no intention to move to OR. So it looks as though he will file an OR non-resident form and take a corresponding credit for the amount allowable on the CA return.

In looking over the Oregon NR form, it seems fairly simple,allocating OR income and deductions proportionally. However, I notice that OR allows a married taxpayer to prepare a "dummy" MFS Fed resturn and switch to MFS for OR purposes if it benefits them. This taxpayer's spouse does not work outside the home, so I'm thinking MFS wouldn't be likely to benefit them. Can anyone with experience in this area enlighten me?

[BOB W]

I have a long-time California client to tells me he had income in Oregon in 2007 but continues to live in CA. There is no intention to move to OR. So it looks as though he will file an OR non-resident form and take a corresponding credit for the amount allowable on the CA return.

In looking over the Oregon NR form, it seems fairly simple,allocating OR income and deductions proportionally. However, I notice that OR allows a married taxpayer to prepare a "dummy" MFS Fed resturn and switch to MFS for OR purposes if it benefits them. This taxpayer's spouse does not work outside the home, so I'm thinking MFS wouldn't be likely to benefit them. Can anyone with experience in this area enlighten me?

Most states work by % of in state and out of state, so the higher the home state income is the lower the tax would be for out of state income. Joint rates are usually lower than single rates.

[veritas]

Oregon

has a reciprosity agreement with California. So you will take the credit on the Oregon return.

Since our tax rate hits the maximum of 9% at $10,000 taxable for a joint return your credit may not be enough to eliminate the Oregon tax.

From instructions OR 40N:

"You must claim the credit on your nonresident return
or your part-year resident return for the part of the
year you were a nonresident if the income is taxed by
both Oregon and one of the following states: Arizona,
California, Indiana, or Virginia. See our website for
links to other states’ tax websites."

[JON]

Reciprosity

I thought that meant if you worked in one state and lived in the other you could elect to have it taxab le in your home state and your home state withholding. Minnesota and Wisconsin and Minnesota and Michigan. Does anyone, besides me, know why MN has such an agreement with Michigan? It was not from boaters on the Great Lakes...

[JohnH]

Thanks for all the responses

veritas:
I appreciate that info.
It appears it will be even simpler than I first thought.

[travis bickle]

nope. can i guess?

. . . . Does anyone, besides me, know why MN has such an agreement with Michigan? It was not from boaters on the Great Lakes...

was it because of someone living in michigan's upper peninsula working on some boating operation based out of duluth???

[JohnH]

OK, One last question for those familiar with Oregon taxes. Due to the reciprocal agreement and the way the employer withheld, my client has a $2K refund on his OR return and owes CA about $500 net against a total CA liablity that is greater than the proportional OR tax. According to the OR instructions, he must submit proof with his OR return that the CA tax is paid, (along with copies of the CA return and W-2).

How particular is OR concerning the proof of payment? Is a copy of the check written to pay CA sufficient, or do they require a copy showing that the check has cleared the bank? I'd think a little common sense applies here, but would like to know how OR actually applies their rules.

[JohnH]

Bump

(Bumping an edit - I hope this is acceptable)

[Davc]

OK, One last question for those familiar with Oregon taxes. Due to the reciprocal agreement and the way the employer withheld, my client has a $2K refund on his OR return and owes CA about $500 net against a total CA liablity that is greater than the proportional OR tax. According to the OR instructions, he must submit proof with his OR return that the CA tax is paid, (along with copies of the CA return and W-2).

How particular is OR concerning the proof of payment? Is a copy of the check written to pay CA sufficient, or do they require a copy showing that the check has cleared the bank? I'd think a little common sense applies here, but would like to know how OR actually applies their rules.

A copy of the check will do, but I strongly recommend you check the calculation of the other state tax credit on the OR return. The CA rate is only higher on income over 89,628.

[JohnH]

Thanks for the info

Dave:
Thanks for pointing that out to me.

In round figures, this MFJ return with 2 children has total AGI of $124K with the OR portion being $46K and itemized deductions of $28K minus $6K of state income tax deduction. CA tax is $4,400 and OR tax is $2,800 less a $240 exemption amount. I followed the formula on page 31-32 of the OR instructions to arrive at a full credit against the OR net tax , but I think I'll double-check all the calculations & my assumptions.

If anything in the above causes any alarm bells, I'd appreciate a heads up.

[Davc]

On a Quick & Dirty I see a net liability to OR.

[JohnH]

Not following you

I laid this aside for a day and am just now getting back to it. I've rechecked the numbers and even called OR dept of revenue.

Would you mind telling me how you came up with a tax liability? As I see it, the credit is the lesser of his OR tax liabilty, his CA tax liability, or the result of the two formulas on page 31 of the instructions. Running all these caluclations, I come up with the net OR tax being fully offset by the allowable OR credit.