39-22-604 - Colorado Income Tax Withholding
Basis and Purpose. The statutory bases for this rule are sections 39-21-112(1), 39-21-119(3), 39-22-103(11), and 39-22-604, C.R.S. The purpose of this rule is to clarify the requirements for employers to withhold Colorado income tax from employee wages.
(1)
General Rule. Except as otherwise provided in this rule, every
employer making payment of wages shall withhold from such wages an amount of
tax, as determined pursuant to section
39-22-604, C.R.S., and this rule,
and report and remit such withheld tax in accordance with the same.
(a) Colorado wages subject to withholding
under this rule are any wages for services performed:
(i) either wholly or partially in Colorado by
an employee who is not a Colorado resident or domiciliary, or
(ii) either inside or outside of Colorado or
both by an employee who is a Colorado resident or domiciliary.
(b) The withholding requirements
prescribed by section
39-22-604, C.R.S., and this rule
apply to every employer making payment of Colorado wages, as defined in this
paragraph (1), irrespective of whether the employer maintains a permanent place
of business in Colorado.
(2)
Definitions. As used in this
rule, unless context otherwise requires:
(a)
"Department" means the Department of Revenue.
(b) "Employee" and "employer" have the same
meaning as given in section
39-22-604(2),
C.R.S. Additionally, in accordance with section
39-22-103(11),
C.R.S., in determining whether parties to a relationship are considered
employer and employee subject to the provisions of this rule, due consideration
shall be given to applicable sections of the Internal Revenue Code, federal
rulings, and federal regulations. In general, a relationship constituting an
employer-employee relationship for federal income tax wage withholding purposes
will similarly constitute an employer-employee relationship for the purposes of
this rule.
(c) "Wages" shall have
the same meaning as given in section
39-22-604(2)(c),
C.R.S.
(3)
Wages
Not Subject to Colorado Withholding Requirement. No withholding is
required under this rule for:
(a) wages paid
to a Colorado resident for services performed in another state that imposes
income tax withholding requirements on such wages;
(b) any remuneration specifically excluded
from the definition of wages under section
3401(a) of the Internal
Revenue Code; or
(c) wages exempt
from Colorado income tax withholding pursuant to:
(i)
49 U.S.C. §
11502 as compensation paid to a rail carrier
Employee who is not a Colorado resident and who performs regularly assigned
duties as a rail carrier Employee on a railroad in more than one
State;
(ii)
49 U.S.C. §
40116(f) as pay of an air
carrier Employee who is not a Colorado resident and who earns no more than
fifty percent of his or her pay in Colorado;
(iii)
49 U.S.C. §
14503(a) as compensation
paid to a motor carrier Employee who is not a Colorado resident and who
performs regularly assigned duties in two or more States as such a motor
carrier Employee with respect to a motor vehicle;
(iv)
50 U.S.C. §
4001(b) and section
39-22-109(2)(b),
C.R.S., as compensation paid for military service to a service member who is
not a Colorado resident or domiciliary;
(v)
50 U.S.C. §
4001(c) as compensation paid
to the spouse of a military service member if such spouse is not a Colorado
resident or domiciliary and is in Colorado solely to be with the service member
serving in compliance with military orders;
(vi) section
39-22-604(2)(a),
C.R.S., as compensation paid to any nonresident individual or non-domiciliary
of Colorado who performs services in connection with any phase of a motion
picture, television production, or television commercial for less than 120 days
during the calendar year;
(vii)
sections 39-22-604(19)
and 39-22-104(4)(t),
C.R.S., as compensation paid to a Colorado nonresident for performing
disaster-related work; or
(viii)
sections 39-22-604(20)
and 39-22-104(4)(u),
C.R.S., as compensation paid to an active duty service member in the armed
forces of the United States who reacquires residency in Colorado pursuant to
section 39-22-110.5, C.R.S.
(4)
Registration
to Withhold Tax.
(a)
Opening
an Account. Every employer subject to the withholding requirements
prescribed by this rule and section
39-22-604, C.R.S., shall apply for
and maintain an active wage withholding account with the Department.
(b)
Closing an Account. An
employer with an active wage withholding account who ceases to pay wages
subject to withholding under this rule shall:
(i) promptly notify the Department of such
cessation either online at Colorado.gov/revenueonline or by
submitting the applicable Departmental form;
(ii) by the applicable due date established
in paragraph (7)(b) of this rule submit a return for tax withheld through the
date of the final wage payment along with payment of any tax due; and
(iii) furnish Internal Revenue Service Forms
W-2 to all employees and the Department pursuant to paragraph (8) of this rule
for the period from January 1 through the date of the final wage
payment.
(5)
Withholding Certificate.
(a) On
or before the date of the commencement of employment with an employer, the
employee shall furnish the employer with a signed withholding certificate. The
employee may furnish the employer with a new withholding certificate at any
time during their employment.
(i) Except as
provided in paragraph (5)(a)(ii) of this rule, the Internal Revenue Service
Form W-4, "Employee's Withholding Certificate" furnished to the Employer
pursuant to section 3402 of the Internal Revenue Code shall
also serve as the withholding certificate required to be furnished under this
paragraph (5) and section
39-22-604(16),
C.R.S. Except as otherwise provided in this rule, such certificate shall be
prepared, take effect, and be subject to change in accordance with section
3402 of the Internal Revenue
Code.
(ii) In addition to Internal
Revenue Service Form W-4, an employee may elect to furnish their employer with
a completed form DR 0004, "Colorado Employee Withholding Certificate". If an
employee elects to furnish their employer with a completed form DR 0004,
pursuant to this paragraph (5)(a)(ii), such form shall, along with their IRS
Form W-4, serve as the withholding certificate required to be furnished under
this paragraph (5) and section
39-22-604(16),
C.R.S.
(b) In accordance
with this paragraph (5)(b), the Department may adjust the withholding amount
required for an employee and the withholding allowance used in the calculation
thereof.
(i) Upon written request from the
Department or as directed by guidance published by the Department, an employer
shall provide to the Department a copy of any withholding certificate furnished
to the employer by an employee..
(ii) Prior to making any adjustment, the
Department shall notify the employee that the certificate previously filed by
that employee is being examined. The employee shall be allowed to submit,
within ten days of receipt of the notice, evidence sufficient to substantiate
the information reported by the employee on their withholding certificate.
After reviewing any evidence submitted and any other pertinent information, if
the Department finds the certificate filed by the employee to be defective, the
Department shall notify the employer of any necessary adjustment to the
employee's withholding allowance or required withholding amount. The employer
shall thereafter withhold in accordance with the notice and any necessary
adjustment prescribed therein.
(iii) An employee may request a hearing to
protest any adjustment made under this paragraph (5)(b). Such hearing shall be
conducted pursuant to section
39-21-103, C.R.S., and any final
determination shall be appealable in district court in accordance with section
39-21-105, C.R.S.
(c) The employer is required to
request a withholding certificate from each employee. If the employee fails to
furnish such certificate, the employer must calculate withholding for such
employee as if the employee had filed an Internal Revenue Service Form W-4
indicating that they were a single filer.
(6)
Determination of Required
Withholding. The required amount of income tax to be withheld shall be
computed in accordance with the formula prescribed in guidance published by the
Department. The amount of wages used for computing the required amount of
income tax to be withheld do not include any wages that, under paragraph (3) of
this rule, are not subject to Colorado income tax withholding. The Colorado
wages subject to withholding under this rule for a nonresident employee shall
be determined in accordance with section
39-22-109(2),
C.R.S.
(7)
Withholding Tax
Filing Periods and Due Dates. An employer required to withhold Colorado
income tax must file returns and remit tax quarterly, monthly, or weekly based
upon an annual determination made pursuant to this paragraph (7).
(a)
Determination of Status.
The determination of whether an employer is required to file and remit tax
quarterly, monthly, or weekly is based initially on the employer's estimated
annual Colorado income tax withholding. Thereafter, if the actual aggregate
amount of Colorado income tax withholding reported by the employer for any
calendar year exceeds the amount established under this paragraph (7)(a) for
the employer's required filing frequency, the employer's required filing
frequency shall be redetermined based upon the actual aggregate amount of
Colorado income tax withholding reported by the employer for that calendar
year. Any change in an employer's required filing frequency based upon a review
of the aggregate amount of Colorado income tax withholding reported during a
calendar year shall become effective on January 1 of the following year.
(i)
Quarterly filing and
remittance. An employer is required to file and remit tax quarterly
for the entire calendar year if the employer's annual Colorado withholding tax
is less than $7,000.
(ii)
Monthly filing and remittance. An employer is required to file
and remit tax monthly for the entire calendar year if the employer's annual
Colorado withholding tax is at least $7,000, but not more than
$50,000.
(iii)
Weekly
filing and remittance. An employer is required to file and remit
weekly for the entire calendar year if the employer's annual Colorado
withholding tax is more than $50,000.
(b)
Due Dates. An employer
must file returns and remit any applicable taxes on or before the due dates
prescribed in this paragraph (7)(b). If an employer fails to file and remit any
applicable tax within the time prescribed by this paragraph (7)(b), penalty and
interest shall apply in the manner prescribed by section
39-22-604, C.R.S.
(i)
Quarterly filing and
remittance. An employer that is required to file and remit tax
quarterly must file a Colorado withholding tax return and remit the total
Colorado tax due for the calendar quarter on or before the last day of the
month following the close of the calendar quarter. Except as provided in
paragraph (7)(b)(iv) of this rule, an employer that is required to file
quarterly must file a return for each calendar quarter, even if no taxes have
been withheld.
(ii)
Monthly
filing and remittance. An employer that is required to file and remit
monthly must file a Colorado withholding tax return and remit the total
Colorado tax due for the month on or before the fifteenth day of the following
month. Except as provided in paragraph (7)(b)(iv) of this rule, an employer
that is required to file monthly must file a return for each month, even if no
taxes have been withheld.
(iii)
Weekly filing and remittance. An employer that is required to
remit tax weekly must remit the total Colorado withholding taxes accumulated as
of any Friday on or before the third business day following such
Friday.
(iv)
Seasonal
rule. An employer whose business does not operate continuously
throughout the year may request permission from the Department to file returns
for only those periods that the business is in operation. If the Department
grants such approval, the employer is not required to file returns for those
months for which the business does not operate.
(v) If the due date for filing a return and
remitting tax falls upon a Saturday, Sunday, or legal holiday, the return and
tax shall be deemed timely if filed and remitted on the next business
day.
(8)
Annual Withholding Information Returns.
(a)
Statements for
Employees. On any Form W-2 an employer provides, pursuant to section
6051 of the Internal Revenue Code, to an
employee who is either a Colorado resident or who performs services for the
employer in Colorado, the employer shall report:
(i) the employee's Colorado wages including:
(A) in the case of an employee who is a
Colorado resident, the entirety of the employee's wages except for any wages
exempted from withholding pursuant to paragraph (3)(b) or (3)(c) of this rule;
and
(B) in the case of an employee
who is not a Colorado resident, the portion of the employee's wages, excluding
any wages exempted from withholding pursuant to paragraph (3)(b) or (3)(c) of
this rule, that are Colorado-source income as determined in accordance with
section 39-22-109(2),
C.R.S.; and
(ii) the
amount of Colorado income tax deducted and withheld from the employee's
wages.
(b)
Filing Forms W-2 with the Department. Every employer shall
file with the Department any Forms W-2 reporting Colorado wages pursuant to
paragraph (8)(a) of this rule. Such Forms W-2 shall be filed on or before the
due date for filing such Forms W-2 pursuant to section
6071 of the Internal Revenue Code.
(i)
Mandatory electronic
filing. Any employer required by section
6011(e) of the Internal
Revenue Code to file any Form W-2 by magnetic media shall electronically file
such Form W-2 with the Department in accordance with published Departmental
guidance.
(ii) Any Forms W-2 an
employer must file pursuant to paragraph (8)(b) of this rule, but for which
electronic filing is not required under paragraph (8)(b)(i) of this rule, the
employer may elect to file with the Department either:
(A) electronically; or
(B) in paper form along with DR 1093, "Annual
Transmittal of State W-2 Forms".
(iii)
Penalty for failure to file
Forms W-2. If an employer required by this paragraph (8)(b) to file
Forms W-2 with the Department fails to do so within the time prescribed, the
employer shall be subject to a penalty, at the discretion of the executive
director, of not less than five dollars nor more than fifty dollars for each
Form W-2 that is not timely filed, unless such failure is shown to have been
due to reasonable cause. Any employer required by paragraph (8)(b)(i) of this
rule to file Forms W-2 electronically will be deemed to have filed such forms
only when the employer has filed such Forms W-2 electronically.
(c)
Correction of
Statements.
(i) In the time
prescribed by section 6051 of the Internal
Revenue Code an Employer shall furnish a corrected Form W-2 to both the
employee and the Department to show:
(A) the
correct amount of wages paid during the prior calendar year if the amount of
such wages reported on a statement previously furnished to the employee for
such year is incorrect; and
(B) the
amount actually deducted and withheld as Colorado income tax if such amount is
less or more than the amount reported as tax withheld on the statement
previously furnished to the employee for such year.
(9) In accordance with
section 39-22-103(11),
C.R.S., due consideration shall be given to federal rulings and regulations
interpreting the sections of the internal revenue code cited in this
rule.
Notes
1. See § 39-22-103(8), C.R.S., Rules 39-22-103(8)(A) and 39-22-103(8)(B), 1 CCR, 201-2, for definitions and rules to determine if an individual is a resident individual and domiciliary of Colorado.
2. See § 39-22-103(11), C.R.S. regarding reference to the Internal Revenue Code for meaning and interpretation of Colorado income tax statutes.
3. See Special Rule 1 Electronic Funds Transfer, 1 CCR 201-1.
4. Colorado Income Tax Withholding Tables for Employers (DR 1098)
5. Colorado W-2 Wage Withholding Tax Return (DR 1094)
6. Annual Transmittal of State W-2 Forms (DR 1093)
7. Colorado.gov/RevenueOnline for electronic filing
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