The state of Oregon taxes all income that is earned in the state, including wages, tips, and salaries. Some kinds of unearned income are also taxable, such as unemployment compensation, bank interest, and early retirement distributions. Before you begin preparing a return, you will want to check the state filing requirements to see if you will be required to file a return or not.http://www.oregon.gov/DOR/PERTAX/docs/2010Forms/101-043-10.pdf 

Each state's tax law varies greatly from the federal tax code enforced by the Internal Revenue Service. This means that even if you have prepared your own federal income tax return before, you should consult the Oregon Department of Revenue website for complete information regarding state income tax guidelines.http://www.oregon.gov/DOR/PERTAX/docs/2010Forms/101-043-10.pdf 

Before you can begin preparing your Oregon state tax return, compile all of the documents and information you will need. This will save you time when you are ready to complete the tax form. You will need the following:

1. Your Social Security number
2. Your complete mailing address
3. Your spouse's name and Social Security number, if you will be filing a joint tax return
4. Documentation of your earned income––If you are employed, this will be shown on your Form W-2 or Form 1099. If you work for yourself, this will be the amount of your gross self-employment earnings minus any qualified business expenses.
5. Documentation of your unearned income, such as bank interest, gambling winnings, etc.
6. The total amount of state income taxes paid during the year––For employees, this will be stated on your Form W-2 as state tax withheld. For self-employed individuals, this will be the total of any estimated tax payments you made during the tax year.
7. A copy of your federal income tax return, if you are filing one
   

If you will be completing a federal income tax return, you will want to finish that form before beginning your state return, since you will begin the Oregon form by entering your federal adjusted gross income, or AGI. If you are not filing a federal return, you may want to consult a tax professional who can help you to calculate your federal AGI.http://www.oregon.gov/DOR/PERTAX/docs/2010Forms/101-043-10.pdf 

Once you have all of your necessary information, you need to obtain the tax return that suits your circumstances. In Oregon, you can choose from a short tax return Form 40-S "Oregon Individual Income Tax Return Short Form" or from a long form Form 40-S "Oregon Individual Income Tax Return." The form you choose depends on your tax situation. You can find instructions to help you select the right form on the Oregon Department of Revenue website.http://www.oregon.gov/DOR/PERTAX/formspit.shtml#2010_Tax_Year___Current_Year 

The directions that follow will be for completing the long form, since anyone can file using that return. You can download this form and the accompanying instructions from the DOR website or you can pick up a paper copy from your local library during tax season.http://www.oregon.gov/DOR/PERTAX/docs/2010Forms/101-040-10.pdf 

To file electronically, you will need to use a tax preparation software package or a tax preparation website. If you are already filing your federal return electronically, you will usually be given the option to include your state return for an additional fee. This is generally the most convenient option, since the return is automatically sent with minimal input from you.http://www.oregon.gov/DOR/ESERV/online.shtml 

If you will be filing the return by hand, be sure to write legibly, and use black ink. This will speed up the processing of your form. Begin by entering your full name and Social Security number, as well as your spouse's name and Social Security number, if applicable. Complete the address section, select your filing status and number of exemptions.http://www.oregon.gov/DOR/PERTAX/docs/2010Forms/101-040-10.pdf 

Before you go further, stop and read the accompanying instructions. This will explain income adjustments that you may need to make and state credits that you may qualify to claim. On line 8, you will enter your federal AGI. The return will tell you where to find this figure on your IRS Form 1040.http://www.oregon.gov/DOR/PERTAX/docs/2010Forms/101-040-10.pdf 

Continue working through the return, adding and subtracting income adjustments as needed. Be sure to stop and consult the form instructions if you need clarification of any directions. After you subtract appropriate deductions, you will arrive at your Oregon taxable income. Then you will consult the tax tables located in the instructions to assess the amount of your tax liability for the year.http://www.oregon.gov/DOR/PERTAX/docs/2010Forms/101-043-10.pdf

Subtract your state income taxes paid from this amount. Remember that this will include your state tax withholding or your estimated tax payments. What is left afterward will be either the amount you overpaid (refund) or the amount you underpaid (balance due).http://www.oregon.gov/DOR/PERTAX/docs/2010Forms/101-040-10.pdf 

Sign and date your return, if you are filing jointly with your spouse, he or she needs to do the same. Make a copy of the form for your records. If you have a balance due, write a check or money order for the amount of your balance due and enclose it with your return. If you are receiving a refund, select whether you would like to receive the money via check or direct deposit. Send the return to the address given on the form. Be sure to submit it by April 18.http://www.oregon.gov/DOR/PERTAX/docs/2010Forms/101-043-10.pdf 

If you will be unable to file your state tax return by the April 18 deadline, you'll need to file an Oregon state tax extension.