Taxes

A. Estimated tax: Providers may have to make quarterly estimated tax payments toward their Federal and Oregon taxes in order to make sure they pay in 90% of their tax liability throughout the year.

  • If one spouse is employed, quarterly estimated tax payments may be avoided by having the employed spouse increase the amount of income tax withheld from their paycheck.
  • Calculation of how much to pay in quarterly estimates can be very difficult for a first year provider. However, failing to pay in quarterly estimates may result in a penalty when the return is filed as well as a large balance of tax due at the time the return is filed.
  • Quarterly estimated payments are made on IRS Form 1040-ES and Oregon Form 40-ES.
  • IRS Publication 505, “Tax Withholding and Estimated Tax” contains detailed information about the computation and payment of Federal tax estimates.

B. Self-employment tax: Many providers pay more in self-employment taxes than they do for their income tax.

  • Self-employment tax is due at the time the individual return is filed, and is added in to the calculation of Federal estimated tax payments.
  • This tax is calculated on the net profit of the business; the tax is a rate of 15.3% of profits
  • An amount equal to 1/2 of the self-employment tax can be claimed as a deduction on Form 1040.

C. Credits available on your Federal return:

  • Earned income credit: For 2016, this Federal tax credit is available to qualifying individuals with one dependent child with total income less than $39,296 ($44,846 for joint returns). Taxpayers with three or more dependent children qualify if total income less than $47,995 ($53,505 for joint returns). Taxpayers without dependent children whose total income is under $14,880 ($20,430 for joint returns) may receive some credit. Special limitations apply if you had income other than “earned” income during the year, for example capital gains from the sale of stock. This credit is claimed on Form 1040, Schedule EIC. This credit can result in a refund, even if there is no tax liability or no tax paid in during the year. The credit is not allowed unless social security numbers are included for all children. The amount of the credit ranges from $1 - $6,269 depending on the number of children and the amount of qualifying income.
  • Child Tax Credit: For tax year 2016 taxpayers are allowed a $1,000 tax credit for each qualifying child under the age of 17 at the end of the year. The credit will be available to you for your own child for whom you can claim a dependency exemption. The credit will begin to be phased out if your income exceeds $75,000 ($110,000 if you are married filing jointly). In certain cases, this credit can be refundable, even if there is no tax liability.

D. Local taxes:

  • Providers who operate their business within the Tri-Met boundaries will be subject to the Tri-Met self-employment tax on their business profits if the profits from their business exceed $400. The tax rate for 2016 is .007337.
  • Oregon law requires any business that owns taxable personal property as of January 1st to file a personal property tax return with their County Assessor’s office no later than March 15th. Personal property includes all equipment, furniture, etc. that is used partially or fully, in your business. Licensed vehicles are excluded from the definition of personal property. If the value of the personal property, as determined by the County Assessor’s office, is less that $16,500, there will be no tax assessed for the year 2017. However, an annual return still needs to be filed. once you have filed a return, a new form will be mailed to you each year by the county where your business is located. the report form can be downloaded at https://www.oregon.gov/DOR/forms/FormsPubs/form-or-cppr_553-004_2017.pdf .   
  • Providers who operate their business within the City of Portland and/or Multnomah County will be subject to an income tax if the gross receipts (total income collected) are in excess of $50,000 for the year. If your business operates within these boundaries you will need to file a report with the City/County even if your income is less than $50,000 for the year. You can get information about registering your business at https://www.portlandoregon.gov/revenue/29320
  • Any provider who lives within the limits of a city should check with that city to obtain any necessary city business licenses.

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