I received a response to my Open Records Request late this afternoon. There were two emails to local media, about how the EIPs generally reduce the deduction and therefore increase the state tax, but not addressing the specific question of whether it makes a difference if the second EIP was not received. There were also several emails from taxpayers, asking or complaining about what they see as a state tax on the EIP.
Then this. A “Tax Aide” preparer in Ashland reported this to Oregon DoR on January 19:
“We have 4 returns that are required as part of the Tax Aide certification process, and that's how we found the issue initially. Today we accessed the TaxSlayer software to look at these and it appears that the issue is partially fixed. Now the software is reducing federal tax liability appropriately for the second payment if it was received as a Recovery Rebate Credit (RRC) but not if it was received in advance as an Economic Impact Payment (EIP). For all returns where the second amount is an RRC, the OR subtraction is taking both into account. We have one return where both amounts were received in advance and the software is just reducing the fed tax liability by the first one. We have another return where we altered the facts so that he didn't get the first EIP but did get the second EIP. The software gave him the first amount as an RRC and reduced his fed tax liability on OR but did not further reduce it by the second EIP.”
The response from a DoR “systems analyst” (I would consider that a title for a computer person, not a tax person) was:
“TaySlayer should include both Economic Impact Payments and the Recovery Rebate Credit in the calculation of the Oregon federal tax subtraction. Even if the Economic Impact Payment was received in January 2021, it is still included in the 2020 federal tax subtraction as the payments are really a prepayment of the federal Recovery Rebate Credit.”
I had asked for any communications between DoR and other software vendors, or at least to or from Intuit. None were provided. My conclusion is that only TaxSlayer was contacted, indirectly through the TaxAide preparer.
Those who want to follow the DoR position, which perhaps coincidentally results in the higher amount of state tax collection in all cases, may choose to do so.
In the process, I also found that the DoR admitted there was a mistake in the original instructions for the OR-40. On the Page 13 worksheet for computing the federal tax subtraction, Line 3 originally stated, “Line 2 minus Line 1.” This was later corrected to “Line 1 minus Line 2.” Doesn’t matter for purposes of this discussion. No correction or additional explanation has been issued for that worksheet regarding how to report EIP#2.
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