Income 51: Estimated Income Tax - Department Of Revenue printable pdf download

Income 51: Estimated Income Tax

Individuals and C corporations that receive non-wage income may be required to make quarterly estimated income

tax payments. In general, Colorado law requires the payment of tax on income received throughout the tax year. In

the case of wage income, the employer withholds the applicable amount of tax and remits it to the department on

the employee’s behalf. For other types of income, such as business income, capital gains, interest, dividends, and

rents, the payer generally does not withhold any state tax. Consequently, taxpayers that receive these other types of

income generally must remit quarterly estimated tax payments in order to pay tax as they receive income throughout

the year. Taxpayers that do not remit required estimated payments are subject to an estimated tax penalty. Estates,

trusts, and pass-through entities are not generally required to make estimated payments, but may elect to do so.

ESTIMATED TAX PAYMENTS FOR INDIVIDUALS

In general, an individual (or married couple, if filing jointly) must remit Colorado estimated tax payments if his or her

total Colorado tax liability, less withholding and credits, exceeds $1,000. Colorado taxpayers who remit federal

estimated tax payments to the IRS with federal Form 1040-ES typically must pay estimated tax to the Colorado

Department of Revenue as well. The amount a taxpayer must remit for estimated payments is based upon the

taxpayer’s net Colorado income tax liability for either the current or prior year.

Net Colorado tax liability

For the purpose of calculating required estimated tax payments, a taxpayer’s net Colorado income tax liability is the

total tax determined on the taxpayer’s return or by any subsequent amendment or assessment minus certain credits.

For this calculation, total tax includes Colorado tax, alternative minimum tax, and any recapture of prior year credits.

The credits subtracted in this calculation consist of all credits other than wage withholding, non-resident real estate

withholding, sales tax refund credits, and any payments remitted by the taxpayer. This calculation is illustrated below.

Calculation of Net Colorado Tax Liability

Total tax including:

Minus

Certain credits

Equals

All credits EXCEPT:



Colorado tax



Wage withholding

Net Colorado



Colorado alternative minimum tax

(-)

(=)



Non-resident real estate withholding

tax liability



Recapture of prior year credits



Sales tax refund credit



Payments remitted by the taxpayer

Determining required payment amounts

Taxpayers required to make estimated payments typically must make four equal quarterly payments. Each required

quarterly payment is 25% of the total required annual payment. The total required annual payment is either 70% of

the taxpayer’s net tax liability for the current tax year or 100% of the taxpayer’s net tax liability for the preceding

tax year (110% if the taxpayer’s federal adjusted gross income (“AGI”) for the preceding year was more than

$150,000 or, if married filing separately (“MFS”), more than $75,000). The taxpayer cannot base their total required

annual estimated payment on their liability for the prior year if the taxpayer did not file a Colorado income tax

return for the prior tax year or if the taxpayer’s prior tax year was a short year (less than 12 months).

Total Required Annual Payment

Prior year AGI under

Prior year AGI over

$150,000 or $75,000 if MFS

70% of current year liability

100% of prior year liability*

110% of prior year liability*

* A taxpayer’s total required annual payment can be

based upon prior year liability only if the taxpayer’s prior

tax year was 12 months and if the taxpayer filed a

Colorado return.

Annualized income installment method

The annualized income installment method allows taxpayers who do not receive income evenly throughout the year

(for example, taxpayers who own a seasonal business or receive a lump sum payment late in the year) to calculate

the amount of each quarterly estimated payment separately, based upon the income actually received in the months

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Income 51: Estimated Income Tax - Department Of Revenue

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