Procedure for Correcting the Filing of Withholding Statements or Exemption Certificates

(a) When the employee has filed an exemption certificate with the employer and the department determines the employee does not meet the exemption requirements given in OAR 150-316-0237;

(b) When the employee has filed a withholding statement with the employer and the department has determined the employee incorrectly calculated their withholding rate with no reasonable basis for the calculation, or has claimed a frivolous position, as defined in OAR 150-316-0284.

(c) When the employee has not filed an Oregon personal income tax return and the department has assessed tax owing, after withholding and estimated payments are credited, in two of the past three filing tax years under ORS 305.265(10);

(d) When the employee has filed an Oregon personal income tax return for the past three filing tax years and owed more than $1,000 in net tax to pay, after withholding and estimated payments are credited, for each of those tax years.

(2) An employer may use an exemption certificate that claims an exempt status for state purposes when the employee meets the exemption requirements provided in OAR 150-316-0237.

(3) An employer shall not use a withholding statement or exemption certificate for state income tax withholding purposes if:

(a) The certificate claims an exempt status for state withholding purposes and the employer determines the employee does not meet the exemption requirements provided in OAR 150-316-0237; or

(b) The withholding statement or exemption certificate is filed with the employer for use in determining state withholding, and the Department of Revenue has instructed the employer to change the employee’s withholding statement or exemption certificate under section (5) of this rule.

(4) If subsection (3) of this rule applies:

(a) the employer shall withhold at the flat rate of eight percent of taxable wages until such time as the employee files a new withholding statement. The employer shall give prompt notice to the employee that an exemption certificate claiming an exempt status for state purposes is not acceptable because there is no applicable provision under state law for such exempt status; or

(b) In the event the department has instructed the employer to change the employee’s withholding statement or exemption certificate under section (5) of this rule, the employer shall withhold at the rate determined by the department.

(5) The department may make a change in an employee’s withholding statement or exemption certificate when it determines that the employee’s withholding is materially deficient as defined in section (1) of this rule. The department shall notify the employer and employee in writing of the change. Upon receipt of the notice, the employer shall withhold according to the department’s determination. The employee may appeal the action of the department as provided in ORS 305.275.

(a) If the employee seeks to have less withholding than allowed by the department or wants to submit an exemption certificate for state withholding purposes, the employee must provide satisfactory evidence of a personal or financial change affecting their tax situation. To report the change that affects their tax situation and to request that the department consider the new information, the employee shall submit a new withholding statement or exemption certificate to the department requesting a redetermination. The withholding statement or exemption certificate shall be accompanied by all information required by the department. The employer shall continue to withhold according to the department’s most recent determination until the department authorizes a subsequent change in withholding or fully releases the withholding determination for the employee.

(b) If the employee files a new withholding statement with the employer requesting more withholding for Oregon than the determination made by the department, the employer may withhold according to the newly filed withholding statement. Once a new withholding statement that increases Oregon withholding is accepted by the employer, the employer shall not honor subsequent withholding statements that seek to lower withholding below the department’s determination unless the employee has followed the process given in section (5)(a) of this rule and the department has authorized the reduced withholding.