Income 51: Estimated Income Tax - Department Of Revenue (Page 3 of 6) in pdf

requested on the 104EP, the taxpayer(s) must make a written request to the department prior to the filing of the

Colorado Income Tax Return (Form 104).

Estimated tax penalty

If a taxpayer fails to remit required estimated payments or underpays their required estimated tax, the taxpayer will

owe an estimated tax penalty. The penalty is actually an assessment of interest, calculated on the unpaid or

underpaid amount, from the due date of the payment until the date of payment is made or the date the annual

income tax return is due, whichever is later. See Form 204 and FYI General 11 to determine the applicable interest

rate. Taxpayers can calculate the estimated tax penalty they owe using Form 204.

In calculating the penalty, a taxpayer’s wage withholding and nonresident real estate withholding are treated as a

payment toward estimated tax, with 25% allocated to each quarter unless the taxpayer establishes the dates on

which the amounts were actually withheld.

Under certain circumstances a taxpayer may be exempt from the requirement to remit estimated payments. A

taxpayer will owe no estimate tax payments and owe no estimated tax penalty if either of the following conditions

apply:

1. the taxpayer’s net Colorado tax liability minus all credits, withholding, and any sales tax refund (but not any

payment the taxpayer remits), is less than $1,000; or

2. the taxpayer was a full-year resident for the preceding 12-month tax year and filed a Colorado income tax

return for the preceding year and had no net Colorado tax liability for the preceding year.

If the tax return is filed and any tax due is paid by January 31 of the following tax year, no penalty will be due for

any underpayment of the fourth quarter installment payment.

Farmers and fishermen

Special rules apply for the calculation and remittance of required estimated payments for farmers and fisherman. A

taxpayer is considered a farmer or fisherman subject to these special rules if at least 2/3 of their gross income is

from farming or fishing for the tax year or for the preceding tax year. See IRS Publication 505 for assistance in

calculating gross income from farming and fishing. The department verifies taxpayers’ farming and fishing income

with the IRS.

Three special rules apply to estimated tax payments for farmers and fisherman:

1. A farmer or fisherman’s required annual payment, based upon his or tax liability for the current year, is 50%

of actual net Colorado tax liability (rather than 70%).

2. Farmers and fisherman are not required to make four quarterly payments, but rather are only required to

make one payment, due January 15 of the following tax year, for the entire required annual amount.

3. A farmer or fisherman owes no estimated tax penalty if he or she files a return and remits full payment of any

tax due by March 1 of the following tax year.

C CORPORATION ESTIMATED TAX

In general, a C corporation must remit Colorado estimated tax payments if its net Colorado tax liability for the tax

year exceeds $5,000.

Net Colorado tax liability

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

the total tax determined on the C corporation’s return or by any subsequent amendment or assessment minus certain

credits. For this calculation, total tax includes Colorado tax plus any recapture of prior year credits. The credits

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

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



(-)

(=)

Recapture of prior year credits



Non-resident real estate withholding

tax liability



Payments remitted by the taxpayer

Page 3 of 6 (01/17)

Income 51: Estimated Income Tax - Department Of Revenue Page 3

Related Articles

Related forms

Related Categories