What Is Colorado Payroll Tax?
Colorado payroll tax refers to the state and, in some cities, local payroll taxes that employers must withhold from employee wages or pay directly to state and municipal agencies. These taxes fund unemployment benefits, the state's paid family and medical leave program, and the state's (and certain cities') income and privilege tax systems.
Colorado's payroll tax system is administered by three separate bodies: the Colorado Department of Labor and Employment, or CDLE (unemployment insurance and, through its FAMLI Division, paid family and medical leave premiums), and the Colorado Department of Revenue, or CDOR (state income tax withholding). A small number of Denver-metro cities also administer their own local Occupational Privilege Tax.
Most Colorado employers are responsible for the following payroll tax requirements:
- Unemployment Insurance (UI), administered by the CDLE
- Colorado Personal Income Tax withholding, administered by the CDOR, at a flat rate
- Family and Medical Leave Insurance (FAMLI) premiums, split between employer and employee
- Occupational Privilege Tax (OPT), in Aurora, Denver, Glendale, Greenwood Village, and Sheridan
Because Colorado has no state disability insurance program separate from FAMLI and no statewide employment training tax, most of the payroll complexity here comes from FAMLI and, for employers with a presence in the Denver metro area, the local OPT.
Colorado Payroll Taxes at a Glance
| Payroll Tax | Paid By | Purpose |
|---|---|---|
| Unemployment Insurance (UI) | Employer | Provides temporary income for eligible unemployed workers |
| Personal Income Tax (state) | Employee (withheld by employer) | Flat-rate state income tax withheld from employee wages |
| Family and Medical Leave Insurance (FAMLI) | Employer and Employee (split) | Funds paid leave for medical, family caregiving, bonding, and safe-leave events |
| Occupational Privilege Tax (OPT) | Employer and Employee (both owe a flat monthly amount) | Local flat-dollar tax in five specific Denver-metro cities |
Understanding who pays each tax and which apply based on your work locations and employee count helps employers avoid the most common Colorado payroll mistake: treating FAMLI and OPT as optional add-ons rather than core parts of the payroll calculation.
Colorado Employer Payroll Tax Responsibilities
Every employer with workers in Colorado has payroll tax responsibilities beyond simply issuing paychecks. Depending on your business, you'll generally need to:
- Register your business with the CDLE (unemployment insurance) and the CDOR (withholding tax), typically in a single application through MyBizColorado.
- Register separately for FAMLI through the MyFAMLI+ Employer portal.
- Determine whether any work locations fall within one of the five Colorado cities that levy an Occupational Privilege Tax, and register with that city if so.
- Withhold state income tax, the employee's FAMLI contribution, and any applicable OPT amounts from every paycheck.
- Pay employer UI contributions and the employer's FAMLI contribution (if applicable to your business size).
- File quarterly UI wage reports, quarterly FAMLI wage reports, and periodic state withholding returns.
- Remit OPT amounts to the applicable city.
- Maintain payroll records for state and local compliance.
Many businesses automate these tasks using payroll software, particularly for tracking FAMLI contributions and OPT obligations tied to specific work addresses.
Types of Colorado Payroll Taxes
Unemployment Insurance (UI)
Unemployment Insurance is an employer-funded payroll tax administered by the CDLE that provides temporary financial assistance to eligible workers who lose their jobs through no fault of their own.
Employers pay this tax directly it is never deducted from employee paychecks.
Colorado's UI wage base has been rising steadily under a multi-year statutory schedule set by Senate Bill 20-207, which raised the wage base incrementally each year through 2026. Starting in 2027, rather than continuing on a fixed legislative schedule, the wage base will instead be indexed to Colorado's average weekly wage.
Key Facts
- Paid entirely by employers Colorado has no employee UI contribution
- New employers are assigned an industry-specific introductory rate rather than a single flat statewide rate
- Experienced employers are assigned a computed rate based on their individual reserve ratio, plus a support rate allocated to several state-managed funds that doesn't count toward the employer's own experience rating
- A solvency surcharge applies in years when the state UI Trust Fund's reserve ratio falls below 0.7% this surcharge remains in effect for 2026
- Rate notices are distributed to employers by late November each year
- Must be reported to the CDLE every quarter, via the MyUI Employer+ system
Colorado Personal Income Tax (PIT) Withholding
Colorado imposes a flat-rate personal income tax on wages, with taxable income reduced by a filing-status-based withholding allowance before the flat rate applies.
Employers are responsible for:
- Withholding the flat state rate from every paycheck, after applying the appropriate withholding allowance
- Reporting withholding to the CDOR
- Depositing withheld taxes on a weekly, monthly, or quarterly schedule based on total withholding liability weekly filers are required to remit via Electronic Funds Transfer
- Filing periodic withholding returns (Form DR 1094) and an annual reconciliation, including W-2 filing with the state
Family and Medical Leave Insurance (FAMLI)
FAMLI is Colorado's state-run paid family and medical leave insurance program, providing partially paid, job-protected leave for qualifying medical, family caregiving, bonding, military family, and safe-leave events. It's funded through a payroll premium split between employers and employees.
Key Facts
- The 2026 total FAMLI premium is 0.88% of gross wages, split evenly 0.44% paid by the employer and 0.44% withheld from the employee down slightly from 0.9% in 2025
- Employers with fewer than 10 employees are not required to pay the employer share, though they must still withhold and remit the employee share unless they choose to cover it themselves
- Premiums apply to wages up to the federal Social Security wage cap ($184,500 for 2026) there's no separate FAMLI-specific wage base
- By law, the FAMLI Division Director must review and can adjust the premium rate annually going forward; current law caps the total premium at 1.2%
- Employers cannot recoup missed employee premium withholding from later pay periods, and employees can never be required to pay more than 50% of the total premium
- Registration and filing happen through the MyFAMLI+ Employer portal, separate from the state's UI and withholding tax systems
- Beginning in 2026, FAMLI benefit payments to employees of employers with more than 10 employees became subject to federal FICA and FUTA tax, with FAMLI handling withholding of the employee's FICA share directly
Occupational Privilege Tax (OPT)
A small number of Colorado's Denver-metro cities levy their own local payroll tax called an Occupational Privilege Tax a flat monthly dollar amount owed by both the employer and the employee once the employee earns above a modest monthly threshold while working in that city.
Key Facts
- Currently levied in Aurora, Denver, Glendale, Greenwood Village, and Sheridan
- It's a flat-dollar tax, not a percentage of wages for example, Denver charges $5.75 per month from the employee, plus a separate $4.00 per month business OPT owed independently by the employer, while Aurora charges a lower flat amount
- OPT is owed based on where the work is physically performed, not where the employee lives
- An employee who works for more than one employer in the same OPT city only owes the employee-side portion once employees should submit an exemption form (such as Denver's Form TD269) to a secondary employer to avoid double withholding, though each employer still separately owes their own business-side portion
- Aurora repealed a portion of its OPT structure recently, so employers with an Aurora work location should confirm current requirements directly with the city rather than relying on older information
Employers with no work locations in any of these five cities can skip this section entirely the large majority of Colorado employers never encounter OPT.
Which Payroll Taxes Are Paid by Employers vs Employees?
| Tax | Employer Pays | Employee Pays |
|---|---|---|
| Unemployment Insurance (UI) | YES | NO |
| Personal Income Tax (state) | NO | Withheld from wages (flat rate) |
| FAMLI | 0.44% (waived for employers with fewer than 10 employees) | 0.44%, withheld from wages |
| Occupational Privilege Tax | Flat monthly business-side amount, in applicable cities | Flat monthly amount, withheld from wages, in applicable cities |
Colorado places the entire unemployment tax burden on the employer, splits FAMLI evenly between employer and employee (with a small-employer exemption on the employer side), and requires both sides to pay their own separate share of OPT where it applies.
Colorado Payroll Tax Rates for Employers
Understanding current Colorado payroll tax rates is essential for calculating payroll accurately. Several of these rates change annually always verify the latest figures before processing payroll.
Colorado Payroll Tax Rates at a Glance
| Payroll Tax | Who Pays | General Rate | Taxable Wage Base |
|---|---|---|---|
| Unemployment Insurance (UI) | Employer | Industry-specific rate for new employers; experience-rated for established employers, plus a support rate and, in 2026, a solvency surcharge | $30,600 for 2026, up from $27,200 in 2025 the final year of a scheduled multi-year increase |
| Personal Income Tax (state) | Employee | Flat 4.4% | Applies to wages after a filing-status-based withholding allowance |
| FAMLI | Employer and Employee | 0.88% total (0.44% each); employer share waived under 10 employees | Applies to gross wages up to the Social Security wage cap ($184,500 for 2026) |
| Occupational Privilege Tax | Employer and Employee | Flat monthly dollar amount, varies by city (e.g., Denver: $4.00 employer / $5.75 employee per month) | Applies once monthly earnings in that city exceed the city's minimum threshold |
Colorado's 2026 UI wage base of $30,600 completes the multi-year schedule set by SB 20-207; going forward, the wage base will be indexed to the state's average weekly wage rather than set by further fixed legislative increases. Employers should also note that current law caps the FAMLI premium at 1.2% and requires it to be reviewed annually, so the 0.88% rate for 2026 is not guaranteed to stay unchanged going forward.
Instead of memorizing a specific rate, employers should focus on reviewing their annual CDLE UI rate notice, checking the current FAMLI rate through the FAMLI Division, confirming applicable OPT rates for their specific city, and filing returns on time.
Understanding Taxable Wages
Not every Colorado payroll tax applies to wages the same way. Depending on the tax involved, taxable wages may include:
- Hourly wages
- Salaries
- Bonuses
- Overtime pay
- Commissions
- Tips and piece-rate pay (specifically included under FAMLI's definition of gross wages)
- Certain taxable fringe benefits
UI tax applies only up to the annual wage base, FAMLI applies up to the Social Security wage cap, state income tax applies broadly with no wage base cap, and OPT is a flat monthly amount rather than a percentage of wages at all understanding which wage rules apply to which tax helps avoid both under- and over-withholding.
Colorado Payroll Tax Filing Deadlines
Meeting payroll tax deadlines is just as important as calculating taxes correctly. Late filings or payments can lead to penalties and interest charges.
Unemployment Insurance and FAMLI (Quarterly)
| Reporting Quarter | Filing Deadline |
|---|---|
| January – March | April 30 |
| April – June | July 31 |
| July – September | October 31 |
| October – December | January 31 |
UI premiums are reported and paid through MyUI Employer + FAMLI premiums are reported and paid separately through MyUI FAMLI + Employer, on the same quarterly due dates.
State Income Tax Withholding
Colorado withholding tax is filed weekly, monthly, or quarterly depending on the amount withheld. Weekly filers must remit via Electronic Funds Transfer, which satisfies both the payment and filing requirement.
Occupational Privilege Tax
OPT filing frequency is set independently by each of the five taxing cities, generally on a monthly or quarterly basis. Employers should confirm the specific schedule with each applicable city.
If a deadline falls on a weekend or holiday, it generally moves to the next business day. Given that Colorado payroll can involve state, UI, FAMLI, and city filings running on separate schedules, tracking them independently helps avoid missed deadlines.
How to Register for Colorado Payroll Taxes
Before paying employees, businesses typically need to register at the state level, with FAMLI separately, and at the city level if applicable.
State registration: A single application through MyBizColorado registers employers for both CDOR wage withholding and the CDLE unemployment insurance account.
FAMLI registration: Employers register separately through the MyFAMLI + Employer portal.
Local registration: If any work locations fall within Aurora, Denver, Glendale, Greenwood Village, or Sheridan, employers also need to register with that city's tax office for OPT.
During registration, you'll generally need information such as:
- Legal business name
- Federal Employer Identification Number (EIN)
- Business entity type
- Business address and all Colorado work locations
- Owner or responsible party information
- Date employees first performed services in Colorado
- Estimated payroll information
How to File Colorado Payroll Taxes
Filing payroll taxes in Colorado involves managing state, FAMLI, and (where applicable) city obligations in parallel. A typical filing process includes:
Step 1: Calculate Employee Wages
Determine each employee's gross wages, including regular pay, overtime, bonuses, commissions, tips, and other taxable compensation.
Step 2: Determine Applicable OPT Cities
Confirm whether any work locations fall within Aurora, Denver, Glendale, Greenwood Village, or Sheridan, and identify each city's specific flat-dollar rates and thresholds.
Step 3: Calculate Payroll Taxes
Determine your employer UI contribution, calculate the FAMLI premium split (checking whether your employer share is waived based on employee count), and calculate employee withholding for state income tax and any applicable OPT.
Step 4: Withhold Employee Amounts
Deduct state income tax, the employee's FAMLI share, and any applicable employee-side OPT from each paycheck.
Step 5: Pay Employer Contributions and Remit Withholding
Pay employer UI and FAMLI contributions through MyUI Employer + and MyUI FAMLI + Employer respectively, remit withheld state income tax to the CDOR, and remit OPT amounts to the applicable city or cities.
Step 6: File Payroll Tax Returns
Submit quarterly UI and FAMLI wage reports, periodic state withholding returns (Form DR 1094), and applicable OPT filings with each relevant city.
Step 7: Maintain Payroll Records
Keep detailed payroll records, wage information, and payment confirmations in case of future audits or compliance reviews at any level.
Following a consistent payroll process helps reduce mistakes and makes year-end reporting significantly easier.
Frequently Asked Questions
Who is required to pay Colorado payroll taxes?
Most businesses that hire employees in Colorado are required to register with the CDLE, CDOR, and separately with FAMLI, and for employees working in certain cities to withhold and remit local Occupational Privilege Tax. Your responsibilities may include paying employer UI and FAMLI contributions, withholding state income tax, the employee FAMLI share, and applicable OPT amounts, filing returns, and maintaining payroll records.
What payroll taxes are employers responsible for in Colorado?
Colorado employers generally have responsibilities related to unemployment insurance (employer-paid), state personal income tax withholding at a flat rate, Family and Medical Leave Insurance premiums (split between employer and employee, with a small-employer exemption on the employer side), and for work locations in five specific cities a local Occupational Privilege Tax.
How often do employers file Colorado payroll tax returns?
Unemployment insurance and FAMLI are both reported quarterly, through MyUI Employer + and MyUI FAMLI + Employer respectively. State income tax withholding is filed weekly, monthly, or quarterly depending on the amount withheld. OPT filing frequency is set individually by each taxing city.
How do I register for Colorado payroll taxes?
Employers register for state withholding and unemployment insurance together through MyBizColorado, register separately for FAMLI through the MyFAMLI + Employer portal, and register with any applicable city if they have a work location in Aurora, Denver, Glendale, Greenwood Village, or Sheridan.
What happens if payroll taxes are filed late?
Late filings or payments at the state, FAMLI, or local level may result in penalties, interest charges, or other compliance issues. Filing accurately and on time across all applicable systems helps avoid unnecessary costs.
Does Colorado payroll tax apply to remote employees?
Yes, and both FAMLI and OPT depend on where an employee actually performs work. FAMLI premiums generally apply to Colorado-based employees regardless of specific city, while OPT applies only when work is physically performed within one of the five taxing cities so many remote and multi-location employees won't trigger any OPT obligation even though FAMLI still applies.
Are Colorado payroll tax rates the same every year?
Not always. The UI wage base rose every year through 2026 under a fixed legislative schedule and will now be indexed to the state's average weekly wage going forward. The FAMLI premium rate is reviewed annually by law and decreased from 0.9% to 0.88% for 2026, with a 1.2% statutory cap. OPT rates are set independently by each city. Employers should review current CDLE, FAMLI, and applicable city guidance each year before processing payroll.
Can payroll software calculate Colorado payroll taxes automatically?
Many payroll platforms automatically calculate Colorado UI contributions, flat-rate income tax withholding, FAMLI premium splits, and OPT amounts for the five applicable cities, and help employers meet filing deadlines across all these systems. While automation can significantly reduce manual work, employers are still responsible for ensuring payroll information is accurate and up to date.
Disclaimer
This article is for general informational purposes only and doesn't constitute legal, tax, or accounting advice. Payroll tax rates and rules especially FAMLI and local OPT rates, which are reviewed and can change annually change frequently. Consult a qualified CPA or tax professional for guidance specific to your business.
