Colorado Withholding laws & HR compliance analysis

Colorado Withholding: What you need to know

Employers must deduct and withhold Colorado state income taxes from employee's wages based on the number of tax exemptions claimed for federal income tax purposes. Employers may use official wage bracket tables available from the Department of Revenue, a specific percentage withholding method, or other method set out by the Department, as long as that method results in a reasonable approximation of the employee's actual tax liability.
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Withholding applies to wages of residents, regardless of where earned and to wages of nonresidents for income earned in Colorado. Generally, employees who are subject to federal income tax withholding are also subject to state income tax withholding. (Certain agricultural and domestic employees who are exempt from federal withholding are also exempt from state withholding.)
Withholding applies to all wages, including cash payments such as salaries, commissions, and bonuses, as well as the market value of noncash payments such as meals, lodging, and goods. Changes to the federal Internal Revenue Code are automatically adopted by Colorado. Thus, compensation that is subject to federal withholding is also subject to state withholding.
Registration. Employers required to withhold Colorado income taxes must obtain an employer identification number by registering online through Colorado Business Express (www.colorado.gov/cbe) or by submitting a Colorado Sales Tax/Withholding Account Application (CR 0100).
Employee information reports. Employers must furnish employees with copies of federal Form W-2 by January 31, or 30 days after the last payment of wages showing wages paid and taxes withheld during the previous year.
Deposits. For each calendar year, employers are required to report and deposit withheld taxes quarterly, monthly, or weekly depending on the amount withheld during the 12-month period ending on the previous June 30 (the look-back period). Employers that report less than $7,000 during the look-back period file on a quarterly basis; employers reporting between $7,000 and $50,000 during the look-back period file on a monthly basis; employers reporting more than $50,000 file on a weekly basis (other employers may do so voluntarily).

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