Colorado Payroll Tax and Registration for Employers—A Complete Guide
One key regulatory requirement for businesses in Colorado is registering and setting up payroll tax accounts. Employers typically pay these payroll taxes to fund government programs, such as unemployment insurance and social security.
Depending on the region of Colorado in which a business operates, there are three important payroll taxes every employer must note. Additionally, entities must know the regulatory bodies overseeing each payroll tax so they can register, secure tax identification numbers, and avoid costly penalties.
Managing these tax obligations can be complex. As such, many businesses rely on third-party service providers, like Harbor Compliance, to handle the tax registration process and obtain tax identification numbers.
In this article, we'll explore the Colorado payroll tax for employers, its various types, and the regulatory bodies responsible for each. Furthermore, we'll introduce Harbor Compliance and explain how its Payroll Tax Registration Service can assist your entity.
Employer Witholding Tax Licensure
This section applies to employers that are applying for a license in Colorado for the first time to withold taxes from payroll.
| Agency: | Colorado Department of Revenue |
| Form: | |
| Filing Method: | Mail or online. |
Unemployment Tax Licensure
This section applies to employers that are applying for a license in Colorado for the first time for unemployment insurance.
| Agency: | Colorado Department of Labor and Employment |
| Filing Method: |
What Is the Colorado Payroll Tax?
The Colorado payroll tax is a mandatory fee businesses pay to the state government that is typically deducted from employees' wages or contributed by the employer on behalf of their workers. The revenue generated from payroll taxes in Colorado funds government initiatives like unemployment insurance and maintenance of local infrastructure.
To remain in good standing, businesses must open payroll tax accounts and regularly submit filings to the regulatory authorities. Failure to meet these requirements can result in significant fines and penalties for delinquency.
What Payroll Taxes Do Employers Pay in Colorado?
Depending on where you operate in the state, employers are expected to pay at least two of the following payroll taxes:
- State Unemployment Insurance tax
- Wage withholding tax
- Local payroll taxes
1. Colorado State Unemployment Insurance (SUI) Tax
The Colorado State Unemployment Insurance (SUI) tax is a tax that employers must pay to the state to provide financial assistance for employees who lose their jobs through no fault of their own, such as during a layoff.
The Colorado Department of Labor and Employment (CDLE) oversees this tax, and it's important to note that employers bear the full responsibility of paying it—employees do not contribute directly.
Employers who are required to pay the SUI must meet one of the following criteria:
- They must have paid at least $1,500 in wages during a calendar quarter in the prior or current calendar year.
- They must have employed at least one person for any part of a day in 20 separate weeks during the prior or current calendar year.
Additionally, the Employer Liability Chart outlines the liability criteria for specific types of employers, such as agricultural employers, nonprofit organizations, and domestic employers.
2. Colorado Wage Withholding Tax
The Colorado wage withholding tax is a portion of an employee's wage that the employers must withhold and remit to the state government. The tax is overseen by the Colorado Department of Revenue and applies to employees who are either Colorado residents or nonresidents who perform services in the state.
3. Colorado Local Payroll Taxes
In addition to the SUI and wage withholding taxes that all employers must pay, many municipalities in Colorado require businesses to pay a local payroll tax known as the Occupational Privilege Tax (OPT) or head tax.
How Much Are Payroll Taxes in Colorado?
Each of the Colorado employer payroll taxes falls under the control of different regulatory authorities, and as a result, the rates for each tax may vary.
1. State Unemployment Insurance Tax
The SUI tax is calculated based on several factors, including the wages already paid to employees and the unemployment benefit payments made to former workers.
New businesses typically start with a standard rate, while established companies may have their rates adjusted depending on the state's Unemployment Insurance Trust Fund levels or if there's a solvency surcharge for the current year.
2. Wage Withholding Tax
The wage withholding tax is calculated based on an employee's earnings. Businesses can use the Colorado Withholding Worksheet for Employers (DR 1098) to calculate the correct amount of tax based on information provided by employees on their IRS W-4 form or Colorado DR 004 withholding certificate.
3. Occupational Privilege Taxes (OPT)
The rate for the OPT is determined by each municipality in Colorado. Typically, the total amount is shared between the employer and the employee. The table below outlines the amounts expected from both employers and employees in several municipalities where the tax is required:
| Municipality | Employee Rate (Per Month) | Employer Rate (Per Month for Each Employee) |
|---|---|---|
| Aurora | $2 | $2 |
| Denver | $5.75 | $4 |
| Glendale | $5 | $5 |
| Greenwood Village | $2 | $2 |
| Sheridan | $3 | $3 |
Colorado Payroll Tax Filing Requirements
Each regulatory authority responsible for Colorado payroll taxes has established filing requirements for employers, as shown below.
1. State Unemployment Insurance Tax
Employers are required to file their premium and wage reports every quarter to the CDLE. The table below outlines the reporting deadlines for each quarter:
| Quarter | Month Wages Are Paid | Reporting Deadline |
|---|---|---|
| Quarter 1 | January–March | April 30 |
| Quarter 2 | April–June | July 31 |
| Quarter 3 | July–September | October 31 |
| Quarter 4 | October–December | January 31 |
2. Wage Withholding Tax
The filing frequency and reporting deadline for the Colorado wage withholding tax are determined by the annual amount each employer holds, as shown in the table below:
| Annual Amount Withheld | Filing Frequency | Reporting Deadline |
|---|---|---|
| Less than $7,000 | Quarterly | Last day of the month following the end of each calendar quarter |
| Between $7,000 and $50,000 | Monthly | 15th day of the following month |
| $50,000 and beyond | Weekly | The third business day that follows the Friday that concludes the week |
3. Colorado Local Payroll Taxes
Each municipality sets its own filing frequency for the OPT. In some cases, such as in Glendale, the filing frequency depends on the employer's total tax liability. In most municipalities, reports are due either monthly or quarterly.
Partner With Harbor Compliance for Seamless Colorado Payroll Tax Registration
Before businesses can start filing payroll taxes in Colorado with the CDLE or other regulatory bodies, they must create payroll tax accounts and obtain a tax identification number. While it's possible to register independently through the MyBiz Colorado website, many organizations outsource this task to third-party providers.
This is because payroll tax registration can be complex, and professionals like Harbor Compliance streamline the process and stay informed about the latest tax requirements, preventing businesses from making costly mistakes.
At Harbor Compliance, we specialize in helping businesses meet their regulatory obligations, from filing annual reports to managing Doing Business As (DBA) requirements. Our Payroll Tax Registration Service is specifically designed to help employers set up their payroll tax accounts quickly and hassle-free. Additionally, we offer comprehensive support for other tax registrations or licensing needs your entity may have.
Harbor Compliance's Software Suite for Colorado State Payroll Tax Registration
In addition to our Payroll Tax Registration Service, we offer a software solution specifically designed to streamline tax management. Tax Manager, a module sold separately within our proprietary Software Suite, helps businesses manage their tax obligations in the following ways:
- It securely stores tax registration information and related documents in a centralized location.
- It tracks federal, state, and local tax exemptions and registration.
- It sends automated reminders when tax filings are due so entities don't miss a reporting deadline.
How To Order Harbor Compliance's Payroll Tax Registration Service and Tax Manager Software
Whether you need our registration service, tax management software, or a combination of both, Harbor Compliance offers the flexibility to meet your entity's specific needs. To order our Payroll Tax Registration Service, follow these steps:
- Go to the website and visit the Payroll Tax Registration page.
- Select Order Online.
- Enter your contact details and business information in the online form.
- Proceed to checkout.
If you're also interested in our Tax Manager, you can order it by following these steps:
- Visit Harbor Compliance's Tax Manager page.
- Select Schedule a Demo.
- Provide your contact details and other necessary information.
- Submit your demo request.
Additional Services Harbor Compliance Offers
Harbor Compliance's support extends beyond tax registration and management solutions. We offer tailored services that assist entities with regulatory obligations and entity management tasks. The table below outlines our different service categories:
| Service Category | Service |
|---|---|
| Business licensing support | Our business licensing support helps entities secure general business and industry-specific licenses like construction and engineering. |
| Entity lifecycle support | Our entity lifecycle support ranges from filing for incorporation, LLC formation, amendment, and name reservation to assisting with dissolution and withdrawal. We also help with publications and reinstatement. |
| Document filing and retrieval | We offer Drop-off Filing services and assist entities in securing certificates of good standing and certified copies. We also assist in filing foreign qualifications and initial reports. |
| Registered agent service | Our local offices across the U.S. enable us to serve as your registered agent and receive legal correspondence on your behalf. We also offer solutions when you want to change your registered agent. |
| Nonprofit formation | We assist in filing for nonprofit incorporation and 501(c) tax exemption. |
| Beneficial Ownership Information (BOI) reporting | We can help you file up to four initial, updated, and corrected BOI reports. We also send automated reminders to ensure you update your entity's information before the reporting deadline. |
Colorado Payroll Tax FAQs
Here, we will answer some frequently asked questions about the Colorado state payroll tax. To learn more, visit Harbor Compliance's information center.
Colorado has three primary payroll taxes—the State Unemployment Insurance (SUI) tax, wage withholding tax, and the Occupational Privilege Tax (OPT). Regardless of your business's location, you must pay at least two of these taxes.
Colorado payroll tax rates are determined by different regulatory authorities. As such, the rates are typically estimated based on factors like an employee's wage, the total wages already paid, and any unemployment benefits made to former employees.
The filing requirements for payroll taxes in Colorado are determined by the specific regulatory authority overseeing each tax. Typically, businesses are required to file reports either quarterly, monthly, or weekly.
Utilizing Harbor Compliance's Payroll Tax Registration Service
Regardless of the municipality in which they operate, employers in Colorado are expected to pay at least two payroll taxes to the relevant authorities. Before meeting these requirements and filing payroll tax reports, businesses must set up payroll tax accounts and secure tax identification numbers.
Outsourcing the creation of your entity's payroll tax accounts to a third-party provider like Harbor Compliance is an excellent choice as we have the experience to navigate the complexities of registration. You can also opt-in for our Tax Manager software to securely store your tax-related documents and track tax registration and exemptions.
If you want to get started, you can schedule a demo session to learn about our Tax Manager software and order our Payroll Tax Registration Service. We will then handle setting up your payroll tax accounts.
In the meantime, you can use our FREE Harbor Compliance Score™ to evaluate your standing with the state and explore our extensive collection of payroll tax registration information for other states and territories throughout the U.S.:
