How Much Is Payroll Tax in Colorado?

Payroll taxes are an important obligation for businesses employing individuals in Colorado. These taxes fund various federal and state programs, including Social Security, Medicare, and unemployment benefits. Understanding these components is important for compliance.

Federal Payroll Tax Components

Federal payroll taxes include contributions to Social Security and Medicare, known as Federal Insurance Contributions Act (FICA) taxes, and the Federal Unemployment Tax Act (FUTA) tax. FICA taxes are split between the employer and employee. For 2025, the Social Security tax rate is 6.2% for both, applied to wages up to an annual limit of $176,100. The Medicare tax rate is 1.45% for both, applied to all wages without a wage base limit.

An additional Medicare tax of 0.9% applies to individual wages exceeding $200,000 ($250,000 for married filing jointly, or $125,000 for married filing separately). Employers must withhold this additional tax from an employee’s wages once they exceed $200,000 in a calendar year, regardless of filing status. Employers do not match this additional Medicare tax.

The Federal Unemployment Tax Act (FUTA) tax is an employer-paid tax that funds unemployment benefits. For 2025, the standard FUTA tax rate is 6.0% on the first $7,000 of each employee’s wages. Employers can receive a credit of up to 5.4% for timely state unemployment tax payments, which can reduce the effective FUTA tax rate to 0.6%.

Colorado State Payroll Tax Components

Colorado employers must address state-specific payroll taxes. The Colorado State Unemployment Insurance (SUI) tax is an employer-paid tax that contributes to the state’s unemployment benefits fund. For 2025, the SUI taxable wage base is $27,200. New employers typically begin with an introductory rate: 3.05% for non-construction businesses and 3.08% for general construction or trades. Established employers receive an experience rating, meaning their SUI rate can vary based on their history of unemployment claims.

Colorado also has a Paid Family and Medical Leave (FAMLI) program, which provides paid leave for certain family and medical reasons. For 2025, the FAMLI contribution rate is 0.9% of an employee’s gross wages, up to the Social Security wage base of $176,100. This contribution is split evenly between the employer and employee, with each paying 0.45%. Employers with fewer than 10 employees are only required to collect and remit the employee’s 0.45% portion to the state.

Employers in Colorado are required to withhold state income tax from employee wages. This withholding is based on information provided by the employee on a federal Form W-4 and the state’s tax tables. Colorado has a flat income tax rate of 4.40% for 2025. The amount withheld is intended to cover the employee’s state income tax liability.

Calculating and Withholding Payroll Taxes

Calculating payroll taxes involves determining the gross wages paid to an employee and applying the relevant tax rates and wage bases. For FICA taxes, both employer and employee portions are calculated by multiplying gross wages by 6.2% for Social Security (up to the $176,100 wage base) and 1.45% for Medicare (no wage limit). If an employee’s annual wages exceed $200,000, an additional 0.9% Medicare tax is withheld from their wages.

FUTA tax calculation involves applying the 6.0% rate to the first $7,000 of each employee’s wages. This rate is often reduced to 0.6% after accounting for the state unemployment tax credit. For Colorado SUI, employers calculate contributions by applying their assigned SUI rate to employee wages, up to the $27,200 taxable wage base. Colorado FAMLI contributions are determined by multiplying gross wages (up to the Social Security wage base) by the 0.9% rate, with half paid by the employer and half withheld from the employee’s pay.

Colorado state income tax withholding is calculated using the employee’s gross wages and federal W-4 information, in conjunction with the state’s withholding tables. Maintaining accurate records of gross wages paid and applying the correct wage bases and rates are important steps in correctly determining payroll tax amounts.

Reporting and Remitting Payroll Taxes

Employers must report and remit payroll taxes to the appropriate federal and state agencies. Federal payroll taxes, including FICA and federal income tax withholding, are reported quarterly to the Internal Revenue Service (IRS) using Form 941. Federal unemployment taxes (FUTA) are reported annually on Form 940.

Federal payroll tax deposits are made based on a monthly or semi-weekly schedule, depending on the employer’s total tax liability. Monthly depositors remit by the 15th of the following month, while semi-weekly depositors follow a more frequent schedule. These deposits are made electronically through the Electronic Federal Tax Payment System (EFTPS).

Colorado SUI and FAMLI contributions are reported and remitted to the Colorado Department of Labor and Employment (CDLE). These payments are generally made quarterly. Colorado state income tax withholding is reported and remitted to the Colorado Department of Revenue (CDOR). Employers file forms such as Form DR 1094, and payment schedules can be quarterly, monthly, or weekly, depending on the employer’s total annual withholding liability. Employers with greater annual withholding liabilities are required to remit more frequently.