Income 51: Estimated Income Tax - Department Of Revenue (Page 4 of 6) in pdf

Determining required payment amounts

C corporations required to make estimated payments typically must make four quarterly estimated payments, each of

which is 25% of the total required annual payment (for tax years that are less than 12 months, see “short tax years”

below). The total required annual payment is either 70% of the C corporation’s net tax liability for the current year

or, if the C corporation meets certain qualifications, 100% of the C corporation’s net tax liability for the preceding

year. A C corporation can base its estimated payments on its preceding year’s liability only if all of the following

conditions are met:

1. the C corporation’s preceding tax year was 12-month;

2. the C corporation filed a Colorado return for the preceding tax year; and

3. the corporation does not meet the IRS definition of a “large corporation” for estimated tax purposes.

In general, a C corporation is a “large corporation” if it (or any predecessor corporation) had a federal taxable

income of $1,000,000 of more for any of the three immediately preceding tax years (see 26 U.S.C. 6655 and

associated regulations for additional information). A large corporation must base its estimated payments on its tax

liability for the current year. A large corporation can initially base its first quarter estimated tax payment on 25% of

the previous year’s tax liability, but must subsequently recalculate the required amount based upon its current year

liability and include with its second quarter payment any additional amount due for the first quarter. The large

corporation must calculate the required estimated payments for the second, third, and fourth quarters based upon

the current year net tax liability.

Annualized income installment method

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

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

the months preceding the payment due date. Taxpayers may use the annualized income installment method only if

they also use the annualized income installment method to compute their federal estimated tax payments.

C corporations can use the following schedule, taken from Part 4 of Form 205, to calculate their required quarterly

estimated payments using the annualized income installment method. In determining each required quarterly

payment amount, the taxpayer must calculate their Colorado taxable income for the annualization period, which runs

from the first day of the tax year through the end of the month preceding the due date of the payment. Generally, a

taxpayer must first complete the federal annualized installment schedule (Part II of Schedule A of either Form 1120-

W or Form 2220) in order to calculate their Colorado taxable income for each annualization period. Taxpayers with

business activity both inside and outside Colorado must calculate apportionment factors for each annualization period

and may not use estimated apportionment factors or apportionment factors from a prior year. Taxpayers must retain

records detailing the calculation of their quarterly estimated payments and provide those records to the department

upon request.

Annualized Installment Method Schedule

day of

Quarterly payment due date (within tax year)

month

Months 1

Annualization period (within tax year)

through 3

through 5

through 8

through 11

Colorado taxable income during annualization

period ……………………………………………………………………

Annualization factor .……………………………………………

2.4

1.5

1.091

Annualized taxable income (line 1 times line 2) …

Annualized Colorado tax (line 3 times 4.63%) .……

Applicable percentage …………………………………………

17.5%

35%

52.5%

70%

Installment payment amount due (line 4 times

line 5, minus any amounts entered on line 6 for

any earlier quarters) ……………………………………………

Page 4 of 6 (01/17)

Income 51: Estimated Income Tax - Department Of Revenue Page 4

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