What Employers Must Do for Colorado Payroll Tax

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Colorado is pretty middle-of-the-road when it comes to payroll taxes. Like some of its neighbors—Utah and Arizona—it charges a flat income tax rate. Its neighbor to the north, Wyoming, charges no state taxes at all. At the same time, states like New Mexico, Kansas, and Nebraska charge a graduated income tax rate that’s higher than Colorado’s.

Here’s what you need to know about running payroll in the Centennial State. 

Colorado Payroll Tax Overview 

From worker’s compensation to income taxes, there’s a lot to think about when you’re running payroll in Colorado. We’ve summarized the most important information here: 

  • State Income Tax: Colorado charges a flat rate of 4.40%. This means no matter how much they make, employees must pay this rate on their Colorado income.
  • Local Taxes: Cities, counties, and special districts in Colorado can charge their own sales taxes. Some cities—and all counties except Denver County and Broomfield County—have state-collected tax. This means the Colorado Department of Revenue collects the taxes on behalf of the local governments. Local governments who opt out of this collect and regulate the tax themselves.
  • Minimum Wage: ln 2024, Colorado’s state minimum wage is $14.42 an hour, or $11.40 an hour for tipped workers. But some counties have even higher minimum wages—like Denver, which mandates $18.29 an hour, or $15.27 an hour for tipped workers. Check your local laws to make sure you’re paying the correct minimum wage. If your county or city has no minimum wage, default to the state minimum. 
  • State Unemployment Tax: All Colorado employers must pay into the state’s Unemployment Insurance Trust Fund. The state will send a UI notice each year to notify you of your rate. The taxable wage base is $23,800 in 2024. The rate depends on several different factors. But in general, it ranges from 0.64% to 8.86% plus a support surcharge of 0.07% to 0.96% and a solvency surcharge ranging from 0.1% to 2.7%. For new employers, the beginning rate depends on what industry you’re in. You can see a full breakdown of new employer rates here
  • PFML Taxes: Colorado enacted a paid leave law in 2020. The state-run program gives eligible employees up to 12 weeks of paid leave for situations affecting their family or health. The Paid Family and Medical Leave Insurance (FAMLI) program is funded by both employers and employees. So what’s the rate? Just 0.9% of the employee’s wages. They can pay up to half while you carry the other half, but if you want to, you can pay the full 0.9%. The rules are a little different for small businesses. If you have fewer than 10 employees, you only need to deduct the employee’s half from their paycheck. You do not need to pay your half. All businesses with at least one eligible employee must register with the Colorado Department of Labor’s FAMLI Division.
  • Workers Compensation: All Colorado employers are required to carry workers compensation insurance. This is true even if you only have one employee, and they only work part-time, and they’re a family member. Employers cannot deduct the cost of workers comp insurance from their employees’ wages. Learn more on the Colorado Department of Labor and Employment’s website.
  • Meal Breaks: Colorado has strict laws surrounding meal breaks. All employees are entitled to take a 30-minute meal break during any shift lasting more than five consecutive hours. The break must happen at least one hour after the employee starts work and at least one hour before their shift ends. Meal breaks must be paid unless employees are free to leave the workplace and do personal activities. Make sure you understand all the fine print of this law before you hire employees. 

We know it’s a lot to digest, but now you have a firm understanding of the payroll taxes and laws to follow. Just keep in mind that these are just the state-specific payroll laws. You still have to account for employment laws, like paying overtime, and federal tax laws

Filing Colorado Payroll Tax and Wage Reports 

There are a couple different places where employers must register to file different taxes and wage reports. We’ll cover each one below. 

Register with MyBizColorado

You can do most of your business activities through your MyBizColorado portal. This includes: 

  • Collecting and remitting sales tax
  • Submitting taxes withheld from employee wages
  • Filing wage reports
  • Managing your state unemployment insurance (SUI) account
  • Applying for business licenses

It’s easy to get started. All you have to do is answer a few questions about your business and the portal will guide your next steps. Best of all, you can save your progress and come back later to finish the registration—as long as you do so within 60 days. 

Get started with MyBizColorado here.

Register with My FAMLI+ Employer

To pay any FAMLI taxes deducted from your employees’ paychecks—along with the employer share—you must register for a FAMLI+ Employer account.

With a FAMLI+ account, you can submit quarterly wage reports, send premium payments, and apply for an exemption if you have a private family leave plan.

Before you register, grab your Federal Employer Identification Number (FEIN). That’s all you need to get started. 

Important Due Dates

Each type of payroll tax or wage report comes with its own set of key due dates. Here’s an outline of those: 

  • Sales Tax: Depends on the amount collected, but in general, anything under $300 should be submitted within 20 days of the end of a quarter. Anything over that must be filed monthly.
  • Withheld Income Tax: Quarterly, monthly, or weekly depending on how much you typically deduct from employee wages. 
  • Wage Reports: By the end of the month following the end of a quarter. For example, for Quarter 1 (January, February, and March), reports are due by April 30.
  • Unemployment Insurance: By the end of the month following the end of a quarter.
  • FAMLI: By the end of the month following the end of a quarter.

Make sure you keep track of due dates on a calendar—or better yet, use payroll software to keep track of them for you.

Colorado Paycheck Laws

Unlike some states, Colorado does have a final paycheck law. Under the Colorado Wage Act, employers must give terminated employees their final pay immediately. As in, before they leave the building. 

If the accounting department isn’t open because it’s after hours, then you must pay the final wages within six hours of the next business day. 

Employees who quit or resign must get their final paycheck on or before the next regular payday. Final pay must include everything the employee has earned up through their quit date, like any bonuses, commissions, and unused vacation time. (Yes, you have to pay out unused PTO in Colorado.)

The Colorado Wage Act also spells out the rules for when employers can deduct money from employees’ paychecks—or claim credits. Here’s a breakdown:

  • You can deduct for taxes, Social Security (FICA), court orders for things like child support, and automatic retirement plan enrollments.
  • With the employee’s written consent, employers can also deduct things like loans, goods, services, or property provided by the employer. That said, these deductions can’t reduce an employee’s earnings below the minimum wage. Which is pretty high in Colorado, so make sure you do the math here.
  • Employers can claim credits toward the minimum wage for providing housing, meals, or accounting for tips. However, there are strict rules you must follow to make sure these benefits are fair, and your employee must co-sign them.
  • There are special rules to follow even if an employee is found to have stolen from your company. If this happens, deductions for the stolen amount can only be made if you have filed a police report and followed all the right legal processes.

Along with these detailed rules, Colorado has a strict pay stub law. Employers must list out all deductions and credits on each employee’s pay statement every pay period. The statement must show why and how much you deducted or credited to the employee. 

Any deduction that doesn’t fit the allowed categories—or is made without the employee’s agreement—is not allowed. This includes deductions for damages, losses, or costs that the employee did not specifically agree to cover.

If employers don’t follow these rules, they might have to pay back the deductions, and with added penalties to boot.

New Hire Reporting for Colorado

Employers must report all employees to the Colorado State Directory of New Hires within 20 days of their start date. This includes self-employed workers and contractors. For the report, you’ll need to include:

  • Employment start date (or first day of contract for independent contractors)
  • Worker’s full name, date of birth, and address
  • Worker’s Social Security number (SSN)
  • Employer’s payroll address and Federal Employer Identification Number (FEIN)

This law helps enforce child support payment laws. You can get started on the Colorado New Hire Reporting Employer Services Portal.

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