Study guide
Hiring and payroll taxes for an Oregon therapy practice
The main points of the lesson on one page, for review.
Employee or contractor, decided twice
- The IRS common-law test weighs three groups: behavioral control, financial control, and type of relationship; no magic number of factors decides it
- Oregon decides separately: ORS 670.600 defines independent contractor for Revenue and the Employment Department; BOLI uses an economic realities test (wage and hour) and a right-to-control test (civil rights)
- Someone on your schedule, in your systems, seeing clients you assign looks like an employee under every test
- Treating an associate as a contractor: have an attorney review it before the first payment
Before the first paycheck
- Form W-4: the employee's federal withholding form
- Form I-9: completed for every hire; keep it three years after hire or one year after employment ends, whichever is later; the employer section has a short business-day deadline (confirm it in handbook M-274)
- Report new hires and rehires to the Oregon Child Support Program within 20 days of hire
Federal filings
- Form 941 quarterly: withheld income tax, Social Security, and Medicare, plus your matching share
- Form 940 yearly: FUTA, an employer cost with nothing withheld from the employee
- W-2 to each employee at year end; deposit schedules depend on how much you withhold
Oregon's combined report
- One quarterly Form OQ, filed through Frances Online, covers five programs across three agencies: income tax withholding and the statewide transit tax (Revenue); unemployment insurance and Paid Leave Oregon (Employment Department); the Workers' Benefit Fund (DCBS)
| Item | 2026 figure (official pages, September 2026) |
|---|---|
| UI taxable wage base | $56,700 per employee (up from $54,300 in 2025) |
| UI tax rate | New employers 2.4%; experienced 0.9% to 5.4% (Schedule 3) |
| Paid Leave Oregon | 1% of wages up to $184,500 per employee per year; at 25 or more employees the employer pays 40% and employees 60% |
| Workers' Benefit Fund | 1.8 cents per hour worked |
| Minimum wage, July 1, 2026 to June 30, 2027 | $16.80 Portland metro; $15.55 standard; $14.55 non-urban; no tip credit |
- Under 25 employees: no employer share of Paid Leave, but you still withhold the employee share and send it in, the part first-quarter filers get wrong
Two coverages small practices skip
- Workers' compensation: required of almost every employer (about 30 exemptions in ORS 656.027); with one employee, assume you need a policy
- Protected sick time: at least one hour per 30 worked, up to 40 a year; paid at 10 or more employees, or 6 or more with a Portland location; below that, unpaid but still protected
If you use contractors
- Collect a Form W-9 before the first payment
- Form 1099-NEC for 2026 work: required at $2,000 or more in the year (up from $600, which still applied to 2025 payments)
- Clearing the IRS test does not clear ORS 670.600
Payroll services
- Optional; no agency recommends one. A service handles withholding, the 941, 940, Form OQ, and the new hire report for a monthly fee, but the filings and penalties stay yours
Key terms
- FUTA: federal unemployment tax, paid by the employer
- Form OQ: Oregon's Combined Payroll Tax Report
- Frances Online: the Employment Department system for filing it
- UI taxable wage base: the wages per employee subject to unemployment tax