How to Do Payroll in Colorado

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Payroll processing is a large portion of the business world, but it’s also unfortunately one of the most cumbersome processes. This article will explain how to do payroll in Colorado so you can avoid human errors and save time using this digital solution.

The “colorado employee tax withholding form” is a document that employers in Colorado must fill out and submit to the state. The form includes information about how much employees are paid, what taxes are withheld from their paychecks, and other information.

In comparison to states like New York, which have complicated payroll requirements that change often, Colorado’s payroll is quite simple. Colorado has a minimum wage of more than $12 and forces employers to pay state unemployment taxes. Taxes on income are also required by the state. We’ll walk you through the stages of how to conduct payroll in Colorado so you can properly manage payroll taxes and employee payments.

If you have a large number of workers, payroll software like Gusto may be a good option. It covers Colorado as well as the other 49 states and is up to date on state payroll requirements, ensuring that you are protected. At no extra charge, you may pay your staff through Deposits made directly into your bank account or Check on paper. It also helps you avoid IRS fines by filing your taxes on time. Sign up for a free 30-day trial.

Gusto is a great place to visit.

How to Run Payroll in Colorado: A Step-by-Step Guide

Because Colorado has no unique taxes or numerous state-specific documents, managing payroll is quite straightforward. The following are the fundamental stages for processing payroll in Colorado.

Step 1: Register your company as an employer. Obtain the Federal Employer Identification Number (FEIN) for your business (FEIN). If your business is newly new, you may need to register for a Federal Employer Identification Number (FEIN). This is a straightforward procedure that may be conducted using EFTPS online. Keep the FEIN available if you work for a firm that already has one. To pay federal taxes, you must have a Federal Employer Identification Number (FEIN).

Step 2: Fill out the Colorado registration form. Any business that employs people in Colorado must register with the Secretary of State’s office. In order to credit your withholdings, you must also register with the Colorado Department of Revenue and the Department of Labor and Employment.

Step 3: Set up your payroll system. If you work for a large corporation, you may have inherited a payroll system. If your firm is completely new, though, you may need to start the payroll process from scratch. Overall, you have three options for handling your Colorado payroll: do it yourself (not advised), set up an Excel payroll template, or hire a payroll service.

Step 4: Have staff complete the necessary paperwork. During onboarding, new workers should submit specific documents, including payroll forms. On their first day on the job, all workers must undergo I-9 verification. A completed W-4 must also be on file for each employee. Because Colorado does not have its own W-4 form, you may utilize the federal version instead. Deposits made directly into your bank account information must also be provided by employees.

Step 5: Go through your time sheets again. This is a step you’ll repeat each time you perform payroll. Maintaining correct payroll requires keeping track of workers’ hours. Review time sheets for accuracy and address any problems or difficulties with workers as soon as possible, whether you use paper time sheets or time and attendance software. It’s a good idea to have workers sign their time sheets, whether electronically or by pen on paper.

Step 6: Work out the compensation and taxes for your employees. If you utilize a regular method and payroll software to compute pay, you will be able to simplify your life and decrease errors. There are many methods for calculating payroll, and it’s up to you to choose the one that works best for you. Payroll software or even Excel may be used. Remember that manually computing Colorado payroll taxes might cause issues. Because calculations are complicated, it’s simple to make mistakes.

Step 7: Reimburse employees for their salary, benefits, and taxes. The majority of businesses now pay their workers by Deposits made directly into your bank account, although cash (which isn’t the greatest choice) and Check on papers are still available. Your federal and state taxes may also be paid online. If you utilize a benefits provider, they should collaborate with you to make deductions as straightforward, automated, and electronic as possible.

Step 8: Make a backup of your payroll data. You should make copies of everything, as you should with most company documents. You want to know where to go for a paystub and that you have it if you ever need it. Maintaining records for all workers, even those who have departed, is critical to your company’s compliance. Because there are no extra regulations for document storage in Colorado, follow the federal requirements.

Step 9: Register with the federal and state governments to file payroll taxes.

All Colorado state taxes must be paid on time, generally quarterly, to the appropriate state agency, which you may do on the Colorado Department of Revenue website. If you operate in a Colorado jurisdiction that has local taxes, you must additionally submit those taxes to the appropriate agency according to the timetable given. You may pay federal taxes online utilizing the Electronic Federal Tax Payment System (EFTPS) on one of two schedules:

When the IRS sets you a monthly schedule, you must deposit employment taxes on payments received during that calendar month by the 15th of the next month.
When the IRS gives you a semi-weekly schedule, you must deposit employment taxes by the following Wednesday for payments made Wednesday, Thursday, and Friday, and by the following Friday for payments made Saturday, Sunday, Monday, and Tuesday.

Please keep in mind that the reporting and depositing of employment taxes are two separate things. You must submit taxes quarterly on Form 941 or yearly on Form 944, regardless of your payment schedule.

Step 10: Finish your payroll reports for the year.

You must first complete all W-2 forms for your workers and 1099 forms for any independent contractors at the end of the year. Employees and contractors must receive these forms by January 31 of the following year.

In this tutorial on how to conduct payroll, you may learn more about how to do payroll yourself. You may obtain a free checklist to ensure you don’t miss any tasks.

Payroll Laws, Taxes, and Regulations in Colorado

In general, Colorado adheres to federal rules. It’s a good idea to consult with an employment law specialist in your region to ensure that your firm complies with all rules and regulations. Review the ins and outs of making payroll in Colorado below to help you stay in compliance with payroll requirements.

Taxes in Colorado

Most employers in the United States are required to pay Federal Insurance Contributions Act (FICA) taxes, with a few exceptions. FICA tax rates for Social Security and Medicare are now 6.2 percent and 1.45 percent, respectively. Colorado imposes state taxes on companies and workers in addition to federal taxes. Businesses are responsible for calculating and withholding the necessary amount of tax from workers, as well as paying a proportion from their own bank accounts.

Unemployment Taxes for Employers

In Colorado, all companies are required to pay State Unemployment Tax Act (SUTA) taxes. Employers are now charged 6% of the first $7,000 of each employee’s taxable income. Businesses who pay SUTA in full and on time may be eligible for a tax credit of up to 5.4 percent on their FUTA taxes.

Check out our FUTA and Form 940 guide to learn more about the requirements.

Compensation for Employees

Colorado businesses with one or more employees must carry Compensation for Employees insurance. Maintenance or repair work as well as domestic work are exceptions to this requirement. Compensation for Employees premiums will vary depending on the industry in which your company operates.

Taxes on income

For employees, Taxes on income are a big item you need to keep in mind as more employers allow remote work: If an employee resides in Colorado but works in another state, they may not have to pay Colorado state income tax. For most employees, you will need to deduct state Taxes on income from each paycheck. Pay close attention to where employees live because several cities and municipalities in Colorado require additional income tax withholdings. Colorado has five jurisdictions that levy a flat dollar amount per month in income tax:

Minimum Wage in Colorado

Colorado’s current minimum wage is $12.32 per hour, which is more than the federal minimum wage of $7.25. To meet the minimum wage, tipped workers may earn no more than $3.02 per hour in tips. The employer must make up the difference if an employee’s tips and cash compensation do not equal $12.32 per hour.

Beginning in 2022, Colorado’s minimum wage will rise in line with cost-of-living adjustments in the Consumer Price Index. Denver has its own minimum wage, which is higher than the state and federal minimums. Denver’s minimum wage is $14.77 in 2021, and it will rise to $15.87 in 2022. After that, Denver will make yearly modifications using the same formula as the state.

Overtime Calculation

If you have workers who are qualified for overtime compensation, you must multiply their usual rate by 1.5 to compute their overtime pay. If an employee has worked the following hours, they are entitled for overtime pay:

In a single workweek, you may work for more than 40 hours.
In a single weekday, I worked for more than 12 hours.
Regardless of the start and finish times of the workday, over 12 hours in a row

Employee Remuneration

Employers must pay workers at least once a month in Colorado. You may now conduct payroll on a more regular basis. You must have regular and predictable paydays, regardless of your company’s pay schedule. You can’t rearrange the days to aid with cash flow. As a consequence, if you pay your workers on alternate Fridays, you must maintain that schedule.

You may also pay your staff in a variety of ways:

Cash
Check on paper
Deposits made directly into your bank account
Pay card

Use one of our suggested methods to generate a free payroll check if you need to pay an employee right away and aren’t presently utilizing a service.

Pay Stub Regulations

Colorado law mandates that you provide your workers with a written or printed paystub when they are paid. The pay slip must indicate clearly:

Wages on the whole
All deductions and withholdings
Wages net
Dates of pay periods
Name and address of the company
Name of the employee or his or her Social Security number

Deductions from Colorado Paychecks

Aside from the deductions outlined above, your firm is only allowed to remove money from an employee’s paycheck if the deduction is:

Local law requires it, or a court has permitted it.
to return your company’s debts to the employee
to reclaim company property that has been taken
For a legal purpose, an employee approved it.

Final Paychecks of Terminated Employees

If an employee leaves, your work becomes much easier. After they leave, you must pay them for the hours they worked on the following normal paycheck.

If you terminate an employee, you must pay them right away. If you are unable to cut the employee’s last paycheck on the day of termination, you must send it the next business day.

Use one of our suggested methods to generate a free payroll check if you need to pay an employee right away and aren’t presently utilizing a service.

HR Laws in Colorado That Affect Payroll

Colorado’s human resources and employment legislation are in line with federal guidelines. However, some details must be considered in order for your organization to stay compliant.

New Hire Reporting in Colorado

Employers in Colorado are required to report new hires to the Colorado State Directory of New Hires. This information is used by the state to track down parents who may owe child support.

Lunches, Breaks, and Nursing Mothers

Every four hours an employee works, Colorado law mandates that they be given a compensated 10-minute break. Employers and workers may reach an agreement in writing to reduce the break length to two five-minute breaks.

When a person works for more than five hours in a day, their employer is required to provide them a half-hour food break. Unless the employee is unable to move away from their work, this lunch break may be payed. If an employee must continue working, they must be permitted to eat and compensated during this time.

Employers are required to provide women an unpaid nursing break for up to two years following the birth of their child. The employer must also make reasonable measures to provide a private nursing place for the mother.

Child Labor Laws in Colorado

Child labor regulations in Colorado are mainly based on the Fair Labor Standards Act (FLSA). Workers under the age of 18 are subject to certain limitations under the FLSA.

In Colorado, working more than 40 hours a week or more than eight hours in a 24-hour period is prohibited for juveniles. Apart from this, no minor may work between the hours of 9:30 p.m. and 5 a.m. unless the minor is a babysitter or the next day is not a school day.

Requirements for time off and leave

Colorado is one of just a few states that provide paid family leave. Beginning in 2024, Colorado employees will be entitled for up to 12 weeks of half pay for family and medical leave. Employees will now be entitled for an additional four weeks of leave if their absence is due to a significant health condition induced by pregnancy or delivery difficulties.

Through a new Colorado payroll tax paid by both employers and workers, employees will get a maximum benefit of 90 percent of the state’s average weekly earnings. The employer portion of this tax will not be levied on businesses with less than ten workers.

There is no legislation in Colorado that requires companies to provide paid time off to their workers. Employers are permitted to establish paid time off rules, which must be followed.

Colorado requires employers to provide paid sick leave to their employees beginning January 1, 2021. This rule first applies to companies with 16 or more workers. This law will apply to all Colorado businesses beginning January 1, 2022. Each qualifying employee is entitled to one hour of paid sick leave for every 30 hours worked, up to a total of 48 hours per year.

Use our free PTO calculator if you need assistance calculating your PTO accumulation.

Employers are required by Colorado law to provide employees no more than two hours of paid time off for voting if they request it a day in advance. An employer is not required to approve a leave request if the employee has three or more hours after the polls open or before they close outside of their usual working hours.

Payroll Forms in Colorado

Payroll forms differ by state, and some states have their own W-4 form. Colorado, fortunately, does not have any state-specific forms.

Forms for Federal Payroll

Here is a complete list and location of all the Forms for Federal Payroll you should need.

W-4 Form: Provides information on employee withholdings so you can properly calculate and withhold federal and state Taxes on income
W-2 Form: This form is used to record each employee’s total yearly pay.
W-3 Form: This form is used to record all workers’ total yearly salaries.
Form 940 is used to compute and submit unpaid unemployment taxes to the Internal Revenue Service (IRS).
Form 941 is used to submit quarterly income tax returns.
Form 944 is used to submit annual income tax returns.
Non-employee contract work 1099 forms: Provides information for non-employee contract work.

Payroll Tax Resources in Colorado

Conclusion

In comparison to other states, Colorado payroll is rather simple. There are no state-specific paperwork or taxes to worry about; all you have to do is keep up with state-specific payroll and HR requirements.

One of the best ways to ensure you don’t make any mistakes or miss any steps is to use a payroll software that walks you through Colorado payroll every time. You may want to consider Gusto to help you file accurately and on time. It even pays employees with Deposits made directly into your bank account for free and offers health insurance benefits. Sign up for its 30-day free trial.