Colorado Hourly Paycheck Calculator
Colorado is home to some of the tallest mountains in the country. There are 53 fourteeners —those are mountains over 14,000 feet tall.
While climbing these peaks is strenuous and leaves you gasping for air, processing payroll in Colorado isn’t as taxing (no pun intended)!
Regardless of whether you’re just starting on your payroll journey or are a seasoned veteran looking for a refresher, we’ll lay out all the details on payroll taxes.
Colorado payroll taxes
Colorado withholding tax
Colorado uses the information from federal Form W-4 to calculate how much state income tax to withhold from your employees’ paychecks.
Colorado no longer publishes tax tables that you would normally use to calculate withholding tax. Instead, they want you to use the Colorado Income Tax Withholding Worksheet for Employers for each of your employees.
An easier solution is to use payroll software to eliminate the hassle.
Withholding Colorado income tax is required for all residents and employees who are nonresidents but completing work in Colorado.
The amount of withholding tax you collect in a year determines whether you pay weekly, monthly, or quarterly.
You’ll always need to file a zero-return when you have no wages or withholding tax to report for the period. Failure to file a zero-return can result in penalties.
In addition to making payments and filing reports throughout the year, you’ll also need to file an annual summary report.
Colorado unemployment tax
Colorado charges new employers standard unemployment tax rates based upon the type of business. For 2022, rates range from 0.20% to 7.58%.
After an employer has paid wages for a period of time, they are eligible for a computed rate that factors in the amount of benefits paid to former employees and historic payroll amounts.
Denver’s Occupational Privilege Tax
In addition to the various state payroll taxes, employers and workers in Denver need to be aware of the Occupational Privilege Tax.
This tax has two parts: one employer-paid and one employee-paid.
|Denver Occupational Privilege Tax|
|Employee||$5.75/month when wages are $500 or more a month|
|Employer||$4.00/month per taxable employee|
Other local taxes in Colorado
If you have employees working in one of the below locations, you or your employees may be liable for an Occupational Privilege Tax (OPT).
You can find your existing OPT account number(s) and deposit schedule(s) on notices you’ve received from the local agencies. You can also contact the agency directly:
- Aurora: (303) 739-7000
- Denver: [email protected]
- Glendale: (303) 759-1513
- Greenwood Village: (303) 486-8299
- Sheridan: (303) 762-2200
Final paychecks in Colorado
When an employee is laid off or otherwise involuntarily terminated, their final paycheck is due on the last day of work. For employees who resign or quit, their final check is due by the next regularly scheduled payday.
Overtime pay in Colorado
Hourly employees need to be paid overtime—time and a half for any work that is in excess of:
- 40 hours in a workweek or
- 12 hours in a workday or
- 12 consecutive hours
Hourly employees can’t be provided comp time in lieu of overtime pay.
Minimum wage in Colorado
For 2022, the minimum wage in Colorado is $12.56 per hour. For tipped employees, the rate is $9.54 per hour.
Each year, the minimum wage in Colorado is adjusted to account for the cost of living increases. So you’ll need to check each January for the new minimum wage.
Domestic abuse leave in Colorado
In Colorado, employees are entitled to up to three days off in a 12-month period if they are a victim of domestic abuse, stalking, or sexual assault. Whether the leave is paid or unpaid is up to the employer.
Paid sick leave in Colorado
All Colorado businesses are required to provide paid sick leave. Employees must earn at least one hour of paid sick leave for every 30 hours worked up to a maximum of 48 hours a year.
Workers’ Compensation insurance in Colorado
If you determine that your company is required to purchase Workers’ Compensation insurance in your state, learn how to sign up for this insurance with Gusto.
Sometimes, companies get a request for a workers’ comp audit—head to this article and click the workers’ comp audit reports dropdown for more information.
New hire reporting in Colorado
Federal payroll taxes for Colorado employers
We can’t forget about federal payroll taxes. There are four to keep track of.
- Federal income tax (FIT)
- Additional Medicare tax
- Federal unemployment tax (FUTA)
- Federal Insurance Contributions Act tax (FICA)
Federal income tax (FIT)
Employees need to have federal income tax withheld from their paychecks unless they are exempt.
This starts with your employee completing a Form W-4, Employee’s Withholding Certificate, when they begin working for you. Things like tax filing status and the number of dependents affect the tax amount.
The information on the form, along with some lengthy tax tables, allows you to calculate the withholding amount. If you’re not up for flipping through pages of tables, payroll software can make the calculations for you.
Hang on to the W-4s. File them away in your payroll records.
Additional Medicare tax
The Additional Medicare tax was created in 2013 as a part of the Affordable Care Act and it applies to compensation above a certain threshold. As an employer, you’ll need to withhold 0.9% from any employee that you pay more than $200,000 in a calendar year.
Federal unemployment tax (FUTA)
Like the state, the federal government also has an unemployment tax. It’s called FUTA and it’s an annual tax employers pay on the first $7,000 of each employee’s wages. The FUTA rate for 2022 is 6%, but most employers only have to pay 0.6% each year.
Federal Insurance Contributions Act tax (FICA)
The FICA tax is made up of the Medicare tax and the Social Security tax.
In 2022, the Social Security tax requires employers and employees to each contribute 6.2% of wages up to $147,000. The Medicare tax requires each to contribute 1.45% of all wages. See the IRS webpage for details, like maximum thresholds.
Paying federal payroll taxes
The amount of tax you withhold and owe determines how often you pay. Generally, monthly or semi-weekly payments are required although some annual filing is allowed, which we discuss below. But if you owe $100,000 or more from one payday, you need to send the payment to the IRS on the next business day.
Filing federal payroll taxes
Although you’ll be paying your federal taxes more frequently, you’ll need to file quarterly or annual summary reports.
For FIT, FICA, and Additional Medicare tax, a quarterly report using Form 941 must be filed by the end of the month following a calendar quarter. For example, the first quarter Form 941 is due by April 30.
For FUTA, most employers will pay this tax annually when they file their summary report on Form 940. But if your FUTA liability is greater than $500, you’ll need to pay and file quarterly.
For both of these forms, you’ll still need to submit them even if you have no tax liability.
Keep in mind that most full-service payroll processors will complete and file your quarterly reports for you.
And that’s it! Now you’re ready to calculate your Colorado payroll. If you’re not sure if you want to dive into payroll without help, no worries. A comprehensive payroll provider will give you the peace of mind you want.