OAR 150-305-0130
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.
Example 1: Brian owns a convenience store. Brian hired Elmer to help stock shelves in the evenings. Brian did not issue W-2’s for Elmer. Brian’s expense for payments made to Elmer for services rendered are not deductible.
Example 2: Assume the same facts in Example 1, except that Brian issued a Form 1099 to Elmer. Upon examination of Brian’s return it was determined that Elmer was actually an employee, subject to withholding. Brian’s expense for the payments made to Elmer for services rendered are not deductible.

(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:

(a)

Judicial precedents;

(b)

Published rulings;

(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.
Example 3: Martha owns a hair salon employing Sam as an independent contractor. She issues Sam a Form 1099 at the end of each year showing the amount paid to Sam that year for services rendered. The Internal Revenue Service had examined Martha’s payroll in a prior year and no changes or assessments were made to Martha’s return regarding her wage expense. Martha produces the audit reports that show the Internal Revenue Service accepted her characterization of Sam as an independent contractor. Therefore, Martha had reasonable cause to classify Sam as an independent contractor.

(5)

For the purposes of section (3) of this rule, the evidence of reasonable cause must be clear and convincing.

Source: Rule 150-305-0130 — When Deduction for Amounts Paid as Wages or Remuneration Permitted, https://secure.­sos.­state.­or.­us/oard/view.­action?ruleNumber=150-305-0130.

150‑305‑0010
Requirement for Social Security Numbers 150‑305‑0014
Applicable Dates 150‑305‑0016
Electronic Filing 150‑305‑0018
Acceptance of Cash Payments 150‑305‑0030
Declaratory Rulings 150‑305‑0040
Public Notification of Delinquent Taxpayers 150‑305‑0050
Release of Tax Lien and Clouds on Title 150‑305‑0052
Release of Lien 150‑305‑0060
How to Appeal When the Department Denies a Request for Waiver of Penalty or Interest 150‑305‑0062
Discretionary Penalty Waivers for Information Returns 150‑305‑0064
Accrual of Interest After Waiver 150‑305‑0066
Discretionary Waiver of Interest 150‑305‑0068
Discretionary Penalty Waivers 150‑305‑0070
Interest Waivers Due to COVID-19 Pandemic Emergency 150‑305‑0080
Closing Agreements 150‑305‑0085
Financial Institution Data Match 150‑305‑0090
Settlement Offer 150‑305‑0092
Suspended Collection Status 150‑305‑0094
Cancellation of Liabilities Discharged in Bankruptcy 150‑305‑0100
Subpoena Issued by the Department 150‑305‑0110
Disclosure of Confidential Information Provided to the Department of Revenue 150‑305‑0120
Implied Consent 150‑305‑0130
When Deduction for Amounts Paid as Wages or Remuneration Permitted 150‑305‑0140
Interest on Deficiencies and Delinquencies 150‑305‑0142
Interest on Refunds 150‑305‑0144
Interest Rate Formula Rule 150‑305‑0150
Defines Order for Purposes of Interest Rate Increase 150‑305‑0152
Interest Rate Increase — Jurisdictional Only Appeals 150‑305‑0160
Penalty for Dishonored Checks 150‑305‑0170
Representation of Taxpayers before the Department of Revenue 150‑305‑0180
Designation of Oregon Tax Matters Partner 150‑305‑0182
Binding Actions of the Tax Matters Partner 150‑305‑0190
Compromise of a Disputed Liability 150‑305‑0192
Appeals of Interest Charged on the Underpayment of Estimated Tax 150‑305‑0194
“Deficiency” Defined 150‑305‑0196
Notices of Deficiency and Assessment Mailed When Authorization to Represent Signed 150‑305‑0198
Reopening an Audit 150‑305‑0200
Adjustments Included in Deficiency Notice When Federal Audit Report Received 150‑305‑0202
Language Used to Request a Conference or File Written Objections 150‑305‑0204
Conferences: Purpose and Procedure 150‑305‑0206
Written Objections: Procedures 150‑305‑0208
Assessing Tax on Failure to File 150‑305‑0210
Last Known Address 150‑305‑0212
Interest on Deficiency 150‑305‑0214
Penalties 150‑305‑0216
Appeal from a Notice of Deficiency: Periods of Limitation 150‑305‑0218
Waiver of a Conference or Written Objection 150‑305‑0230
Claim for Refund 150‑305‑0232
Notices of Proposed Refund Adjustment Mailed When Authorization to Represent Signed 150‑305‑0234
Written Objections to a Proposed Refund Adjustment 150‑305‑0236
Date of Notice 150‑305‑0238
Audit Period for Refunds Issued without Examination 150‑305‑0240
Proposed Refund Adjustment 150‑305‑0260
Relief for Subsequent Tax Years 150‑305‑0270
Beneficial Ownership 150‑305‑0272
Cancellation of Doubtful Liabilities 150‑305‑0274
Refund of Penalty and Interest 150‑305‑0276
Appeal Time Frame 150‑305‑0290
Concurrent Appeals 150‑305‑0300
“Methods of Collection” Defined 150‑305‑0302
Contracts Requiring Certificate of Compliance with Oregon Tax Laws 150‑305‑0304
Certificate of Compliance With Oregon Tax Laws 150‑305‑0306
Circumstances Not in Violation of Oregon Tax Laws 150‑305‑0308
Annual Certification Requirement 150‑305‑0320
Mediation 150‑305‑0330
Appeal Procedures 150‑305‑0340
Stay of Collection: When Collection Action Won’t Be Stayed 150‑305‑0350
Offset of State Debt Through U.S. Treasury Offset Program 150‑305‑0360
Rules Application 150‑305‑0362
Appearance Procedure — Local Taxes Administered by the Department of Revenue 150‑305‑0370
Use of Checkoff Resources 150‑305‑0380
Application and Signature Due Dates 150‑305‑0390
Certification of Nonprofit Entities for Instruction Listing 150‑305‑0392
Definitions of the Terms “Affiliated and “Central Office” 150‑305‑0394
Signatures Must Be on Department’s Form 150‑305‑0396
Signature Gathering Period 150‑305‑0410
Charitable Checkoff Financial Reporting Requirements 150‑305‑0420
Costs of Administration 150‑305‑0430
Method of Distribution from Check-off Contributions and Reimbursement of Administrative Expenses 150‑305‑0450
Depositing Refunds into College Savings Account 150‑305‑0460
Verification of Returns, Statements, or Documents Filed Under Tax Law 150‑305‑0470
Date When Writing or Remittance Deemed Received by Department of Revenue 150‑305‑0480
Returns Not Filed for Three Consecutive Years
Last Updated

Jun. 8, 2021

Rule 150-305-0130’s source at or​.us