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We ended up in Oregon on military orders. At the time, I was the only income earner in our household, being the active duty member.

Military members are exempt from state income tax as they are considered residents of the states in which they enlisted, in my case, Texas. The first year that my spouse earned income in Oregon, we filed a joint return with the state of Oregon. Our taxes seemed very high--in fact, higher than our federal responsibility. We called DOR to question their assessment. In a nutshell, this is how we were assessed:

We were told that I was not taxed because I was active duty.

I earned roughly $50k that year.

My spouse earned roughly $35K for the part of the year that he worked.

My spouse was taxed at the rate of our combined income bracket, at $85K. The DOR rep told us that my income, "had not been touched." When asked why OR taxes weren't based on the $35K earned in Oregon, we were told that taxes were based on the household earnings, but no money was taken from the active duty member's pay.

Seems to me this is double speak. If taxes are 10% (for simplicity's sake) and I earn $200 and my spouse earns $100, but I am tax exempt, then we should be taxed $10 based on the resident's income. However, if you tax the resident at the household earning level and supposedly leave the AD member's pay untouched, then the resident is now taxed as though he earned $300 would have to pay $30.

If my AD nonresident income were subject to taxes, I would also be liable for 10% or $20 of my pay. If my spouse and I filed jointly, we would be assessed at the $300 tax bracket and assessed $30 at 10%.

So, it seems to me that the State of Oregon engaged in a sleight of hand or mathematical prestidigitation. They did this to us every year of my active duty service in this state despite my being a Texas resident the entire time.

When I asked around, everyone, from the rep at H&R block to the state employees, to a friend who had served in the legislature, to the shipmates at my unit, they all said the same thing. "That's just the way they do it."

If this is truly the "way they do it," how long has the state been fleecing nonresident active duty military members and their families and what will they do to compensate for their overzealous taxing measures?

posted 2 years, 12 months ago
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First off, you ask what could make collecting state funds owed easier? The state could start by being completely transparent in their assessments and in their fee/fine schedules. In addition, prompt, COURTEOUS service when dealing with taxpayers who may owe the state would go a long way towards compliance. Lastly, when the state is owed money, the state wants its money and has the resources to collect. If the state cannot or will not be paid in what they deem to be a timely fasion, they can add penalty fees and interest. When the state owes a taxpayer money, they drag their feet and pay when they are good and ready and not one day sooner. The affected taxpayer--who is just as likely to be experiencing a deficit of their own and in need of that money--cannot tack on late fees, penalties, or interest.

After an accident and months of health issues, we overlooked our filing extension deadline and the state assessed our taxes on a refund that they "prepared." Although taxes had been withheld from my spouse's pay checks, we were assessed with an additional $1200 in taxes, penalties, and interest at a time when we were struggling to pay rent and feed out family. We paid as best we could, but the phone calls and letters were incessant. And the customer service was not one of mutual respect and understanding.

We paid that debt off and this year, we found ourselves--happily--on the side owed by the state. After preparing our taxes, we found that we OVERPAID the state of Oregon $4700. We filed prior to the deadline. Four weeks after filing, we read online (DOR's Check Your Refund) that our return was being manually reviewed. Two weeks after that, we get a letter from DOR saying, "things look different." Well, duh, we are no longer Oregon residents. My husband had overlooked updating his W-4, so the W-2 reflected Oregon as the state of residence. We provided all the supporting information required and now we cannot find anyone who will verify receipt of our information (faxed and followed up with hard copies), phone calls requesting an update are not returned, and we are still out $4700 on top of having to pay $4100 to the state in which we reside. Where is the parity?

posted 2 years, 12 months ago
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