Colorado Payroll Tax Registration: The Ultimate Guide + FAQs

Learn everything you need to know about Colorado payroll tax registration, a vital process for companies hiring in Colorado.

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Vanessa MacRury

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Colorado Payroll Tax Registration ✍️

Home to the Mile High City and the majestic Rocky Mountains, Colorado is a fantastic vacation destination, but an even better state to call home. And with over 300 days of sunshine a year, it’s no wonder The Centennial State’s population continues to grow by leaps and bounds every year. Given the perennial popularity of the great state of Colorado, chances are good that your next employee could be a Coloradan who would prefer to stay put. Fortunately, remote working has made collaboration across state lines easy, no matter where your business is based.If you want to start hiring Coloradan talent, then you need to make sure that you comply with local employment and tax laws. This post will answer many of your questions about Colorado's payroll tax registration process.

Does Colorado have a payroll tax? 📄

Yes, Colorado does have a payroll tax. All employers paying wages to a Colorado resident or a nonresident employee for services performed in Colorado are subject to wage withholding requirements – even if that employer is not headquartered in Colorado. For more information, read the Colorado Wage Withholding Tax Guide.

How much is payroll tax in Colorado? 💸

As of May 2021, payroll tax rate in Colorado changed from 4.63% to 4.55%. To find out how much tax from employees needs to be withheld, follow the instructions in Form DR1098, Colorado Withholding Worksheet for Employers, and use the accompanying Withholding Worksheet Calculator.Alternatively, watch the video below:

What is an Occupational Privilege Tax (OPT)? 🤔

Five Colorado cities require employees and employers to pay an additional Occupational Privilege Tax (OPT) – sometimes called head tax or locality tax – per employee working in the following cities:

Each city sets its own flat rate based on a city-determined income threshold. The tax is paid by the employee and the employer monthly. The tax is based on where the employee performs the work, not where the employee lives. OPTs are paid to the city’s tax department.

What is the Colorado Unemployment Insurance Tax? 💭

The Unemployment Insurance Tax (UI Tax) provides “unemployment compensation to workers who have lost their jobs” through no fault of their own. To pay, employers will need to have an Unemployment Insurance account number.Rules – based on the Federal Unemployment Tax Act (FUTA) – vary for domestic employers, nonprofit organizations, agricultural employers, and for-profit corporations.

What is the Colorado withholding certificate? 💡

The Colorado withholding certificate refers to a new form available in 2022. The DR 0004 form is optional; employees do not need to complete it. However, should they request adjustment to their withholding, an employer must provide them with a copy of this form. While not designed to replace IRS form W-4 for Colorado withholding, the DR 0004 form allows “employees in a few specific situations to fine-tune their Colorado withholding.”For more information, watch the video below:

Am I required to register for Colorado Payroll Taxes? 🙋

Yes, all businesses – regardless of where they are headquartered – need to register for state and federal payroll taxes and Unemployment Insurance Tax if they want to hire employees residing in Colorado.

How do I file Colorado Withholding Tax? 📋

The easiest way to file withholding tax if you’re hiring Colorado-based employees is to process payroll with a payroll processing platform like Pilot, which can complete the necessary payments and legal requirements on your behalf. This is especially important when you’re hiring remote employees across multiple states and need to contend with multiple compliance requirements.To find out how we can help, sign up for a free demo with one of our experts. Alternatively, you can watch our demo video.

What if I don’t have a payroll processor?

If you don’t have a payroll processor then you either need to hire a certified public accountant or file Colorado withholding tax yourself.To file Colorado withholding tax, you need to ensure that you’re registered with the Colorado Department of Revenue (DOR). If you have a tax ID number registered with them (e.g., SSN, ITIN, or FEIN), you’ll have access to the system within one business day. Otherwise, it could take up to five days.

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How do I register for payroll taxes in Colorado?

The fastest way to register for payroll taxes in Colorado is to go through online registration via the MyBiz Colorado website, which allows you to secure your Unemployment Insurance Account Number (UI), Wage Withholding Account Number (WW), and Sales Tax Account Number (ST).Note: You won’t always be able to use this website, as there are conditions you need to meet. For example, to get a UI account number via the MyBiz Colorado website, you need an FEIN and:

Your first payroll date must have been in the prior calendar year or within 90 days of your online submission date

You must not have previously registered for an unemployment identification number

You must not be involved in a change of ownership

Your business must NOT be classified as one of the following: Agricultural, Nonprofit, Reimbursable, or Government

If you don’t meet these conditions, you need to visit the CDLE website for more information.

How do I apply for a wage withholding account?

If you only need to apply for a wage withholding account because you already have a UI or ST account number, follow the instructions below:Step 1: Go to Revenue Online.Step 2: Scroll down until you see the Withholding box. Click Submit Year End Withholding.Step 3: Click Request Withholding Submitter Access.Step 4: Complete the required fields. You will need the following information to register for payroll taxes in Colorado:

Your business entity (e.g., individual or LLC)

Your business or last name

Doing Business As (DBA) name, if applicable

A federal ID (e.g., SSN, ITIN, FEIN)

Your business address (if the mailing address is different from your business address)

Your name

A valid email address (personal and business)

A contact phone number

Date of the first payroll when wages exceed $100

Industry description

For more visual step-by-step instructions, read the Register To Be A Withholding Submitter Revenue Online guide.

How do I submit year-end withholding?

You’ll be able to file withholding tax once your registration has been processed. Step 1: Go to Revenue Online.Step 2: Scroll down until you see the Withholding box. Click Submit Year End Withholding.Step 3: Choose how to submit your filing. You have two options:

Option 1: Upload your CDOR-EFW2 file or IRS Withholding file by clicking Submit a Withholding File Attachment. Remember that if you’re submitting a W-2, it will need to be saved as IRS Format 1220 or CDOR-EFW2; its RA record must match the Submitter Information on Revenue Online.

Option 2: Manually enter individual records by clicking Submit a Manual Withholding File. You will have the option to save your progress if needed. Take note of your 6-digit Filing ID. When you want to continue submitting your year-end statement, simply go to Revenue Online, scroll to the bottom until you see Return Actions, then click Search for a Saved or Filed Return.

Step 4: Follow the prompts; complete all the fields. Hit Submit.Step 5: Print the confirmation page, which contains the confirmation code, and keep it in your records.

How do I manage my Withholding Tax Account?

Step 1: Go to Revenue Online and log in.Step 2: Once logged in, look for the WTH (for withholding) tax account.Step 3: Go to the Account Menu panel and click File/Amend and View Returns/Payments. You’ll see all relevant filing periods.Note: If you’re submitting 1099 and W-2G forms, you can’t manage your account online. Contact the Department by phone instead.

How do I get a Colorado withholding account number?

To get a Colorado withholding account number, employers need to register with the Department of Revenue and become a “withholding tax agent” by completing the Wage Withholding Account Application.

What is an Employer Payroll Tax Account Number? 📒

An Employer Payroll Tax Account Number is an eight-digit string of numbers that is also known as a State Employer Identification Number (SEIN) or state ID number.

What if I don’t have an EIN? 😔

You don’t always need to have an EIN. To check if you do, answer this short IRS questionnaire.

Legal Disclaimer:

The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.

How can Pilot help you? 🤝

Good news! If you decide to work with Pilot to take care of your hiring and payroll needs, you can complete your state registration online through Pilot. Through Pilot's state registrations feature, you can:

Register your business with the Colorado Department of Revenue and the Colorado Department of Labor and Employment via MyBizColorado to obtain your accounts so your business can file and pay taxes, and make provisions for unemployment insurance in Colorado.

Share your Colorado State Tax ID, Unemployment ID, Unemployment (SUI) Rate, and Occupational Privilege Tax ID and Rate

What state and local taxes and filings does Pilot take care of? 🧾

Pilot withholds income tax, unemployment tax, and locality (Occupational Privilege Tax) as liabilities. We then file and deposit them for you – based on the required filing frequency.Note: Registration requirements for Occupational Privilege Tax (if applicable) vary by city. Pilot's state registration feature also supports registering for OPT in some cities, but not currently all.

Streamline your state registration with Pilot. 📈

If you’d like to streamline your state registration process, why not work with Pilot? Our platform allows you to complete state registrations online in all 50 US states, plus Washington, DC. Eliminate hours of manual effort from the process by using Pilot. L earn more about our state registrations feature.If you would also like to go beyond the United States and take your company global, Pilot takes care of payroll, benefits, and compliance for employees and contractors worldwide. Our team of HR and payroll experts is happy to guide you through any questions.

Going global isn't daunting when you partner with Pilot. 🤝

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