When Deduction for Amounts Paid as Wages or Remuneration Permitted
(1)An individual or entity will not be allowed a deduction for wages or payments to individuals for personal services rendered if:
(a)The individual or entity fails to file information returns, such as 1099’s or W-2’s, as required by ORS 314.360 (Information returns) or 316.202 (Reports by employer) or by administrative rule; or
(b)The individual or entity files information returns for payments made to an individual as if the individual was an independent contractor and upon examination the individual is determined to have actually been an employee.
(2)In the case of a failure to file as described in subsection (1)(a) of this rule, the expense will be allowed if the individual or entity can show there was a circumstance beyond the individual or entity’s control that caused the failure to file returns as required by law. Refer to OAR 150-305-0068 (Discretionary Penalty Waivers) for examples of situations that are accepted by the department as a circumstance beyond the individual or entity’s control.
(3)In the case of a misclassification as described under subsection (1)(b) of this rule, the expense will be allowed if the individual or entity can show reasonable cause as to why the appropriate returns were not filed. Reasonable cause will be considered if the individual or entity had relied on information from:
(c)Technical advice memorandums or letter rulings;
(d)Past Internal Revenue Service audits in which there were no assessments of employment tax for amounts paid to other individuals who held a similar position;
(e)A recognized practice of the industry;
(f)Advice from someone who would be considered knowledgeable in tax matters; or
(g)Written advice from an employee of the Department of Revenue.
(4)The preceding are factors that would influence the department’s decision regarding the existence of reasonable cause. It is not intended to be an exclusive list.
(5)For the purposes of section (3) of this rule, the evidence of reasonable cause must be clear and convincing.
Rule 150-305-0130 — When Deduction for Amounts Paid as Wages or Remuneration Permitted,