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Updated: May 19, 2023
Rock climbing, skiing, snowboarding, whitewater rafting, hiking, kayaking…you name it, Colorado has it. It’s a state filled with adventures, and running your own small business is no exception. But sometimes, administrative tasks like calculating payroll taxes can make it seem like anything but an adventure.
Luckily, our payroll tax calculator can do all the heavy lifting so you can get back to doing what you do best. Grab your employees’ W-4 and wage information, enter them into the calculator, and boom! Each employee’s gross pay, deductions, and net pay for both Federal and Colorado state taxes will be calculated for you.
First and foremost, you have to give Uncle Sam his due. Luckily, we’ve already been there and done that, so we know just what to do. Here’s what you need to know:
Start with your employees’ gross wages, regardless of whether they are paid on salary or hourly. Don’t forget to add in commissions, bonuses, and tips into gross wages as well. This is your starting point.
Then, apply any and all payroll tax withholdings. These are benefits like a 401(k) or a Flexible Spending Account that allows your employees to reduce their taxable income.
Easy enough. But alas, there’s more.
The federal income tax is the biggest tax of them all. The IRS taxes anywhere from 0% to 37% of gross wages. We won’t get stuck in the details here, but you can find more in-depth withholding information through the IRS.
Double trouble when it comes to FICA taxes. That’s because you have two taxes to worry about: First up is Social Security Tax, which is 6.2% of each employee’s taxable wages until they reach an annual earning of $160,200. Then there’s Medicare Tax, which is 1.45% of each employee’s taxable wages until they have reached an annual earning of $200,000. As the employer, you are responsible for matching both FICA taxes dollar-for-dollar.
As the late-night infomercial would say…that’s not all! Although employees who earn more than $160,200 don’t have to pay Social Security Tax above this amount, the opposite is true for Medicare Tax. High wage earners above $200,000 have to pay what’s called the Additional Medicare Tax. This additional tax is 0.9% on top of the 1.45% that they are already paying. Thus, gross wages above $200,000 are taxed at 2.35% with no wage limit.
Fortunately for you, employers are not responsible for paying the 0.9% Additional Medicare Tax. Only employees have to pay.
However, only employers are responsible for paying FUTA taxes, more casually known as the federal unemployment tax. As an employer, you’re paying 6% of the first $7,000 of each employee’s taxable income. Your employees get to sit this one out, so don’t withhold FUTA from their paychecks.
The good news is that if you pay your state unemployment taxes in full and on time each quarter, you can claim a tax credit of up to 5.4%. It’s worth your time and money to check out this video, especially since you’ll be getting a whopping 90% discount on your FUTA tax liability.
Finally, you might need to deduct post-tax withholdings. Not every employee will have post-tax withholdings, things like court-ordered wage garnishments and child support. But for the ones that do, you’ll need to deduct these items from their net pay.
Now that we’re done with federal taxes, let’s talk about Colorado state taxes, shall we?
Colorado is the highest state in America, towering over the rest at an average of 6,800 feet above sea level. Luckily, the Colorado state income tax rate isn’t quite as high. In fact, the flat tax rate of 4.55% more closely resembles the Grand Mesa, the world’s largest flat-top mountain.
However, employees working in Aurora, Denver, Glendale, Sheridan, or Greenwood Village must take into account what’s called the Occupational Privilege Tax into consideration.
Employers fund unemployment benefits. Some employers are required to pay additional premiums on top of unemployment insurance. This employer liability chart can help you determine what you owe if you owe anything at all.
Colorado Unemployment Insurance is complex. It changes on a yearly basis and is dependent on many things, including wage and industry. And if you’re in the construction business, unemployment taxes are especially complicated. If you are in a construction-related industry, the Colorado UI office recommends you get in touch with their office for assistance. Here are the phone numbers they provide:
303-318-9100 (Denver-metro area)
1-800-480-8299 (outside Denver-metro area)
For 2023, the Unemployment Insurance tax range is from 0.75% to 10.39%, with new employers in Colorado generally starting at 1.7%.
You’re on your way to becoming as unique as a Colorado landmark. Once you’ve calculated each employee’s net pay, you’ll be ready to spread the wealth. Just make sure you don’t forget to set aside any FICA and UI contributions your business is responsible for paying, or else you will have a big tax surprise when year-end rolls around.
Federal tax filings are due quarterly by filing Form 941 and annually by filing Form 940, but for most Colorado employers, taxes must be paid on an ongoing basis via the EFTPS payment system. You can find detailed information from the IRS here.
Here are some more helpful links so you can learn even more about paying taxes for your small business, including quarterly due dates and the IRS forms you have to send in.
Forms & Publications ︳Colorado Department of Labor and Employment
Online Federal Tax Payments ︳Electronic Federal Tax Payment System
Employment Tax Due Dates ︳Internal Revenue Service
With the calculator at the top of this page, Colorado employers can confidently calculate employees’ gross and net pay, as well as deductions. But every so often, employers run into situations that require a bit more wrangling. For example, do your best-performing employees occasionally get bonuses? Keep Uncle Sam in mind because he considers this type of payment to be supplemental wages and requires taxes to be withheld. Also, if you have workers who come and go, there may be times when you need to figure out what their final paycheck will be. So, if you need a little more help with the math, check out some of the calculators listed below.
Try OnPay out yourself to see how easy payroll and HR can be. To get started, just share a few basic details about your business. Our team of pros will set everything up and import your employees’ information for you.