October 7, 2024
A Colorado payroll compliance checklist (FAMLI, SUTA, and local taxes)
Running payroll in Colorado means more than cutting checks — there is a stack of state and local obligations that catch employers off guard. Here is the checklist.
Payroll looks simple until you actually run it in Colorado. Beyond federal withholding and the IRS, the state and its home-rule cities layer on their own taxes, programs, and filings — and missing one usually means a penalty notice rather than a friendly reminder. Here is the checklist we walk Front Range employers through so nothing slips.
Federal basics
- Withhold federal income tax, Social Security, and Medicare from each paycheck, and pay the employer share.
- Deposit those taxes on your assigned schedule and file the quarterly 941.
- Issue W-2s to employees and 1099s to contractors after year-end — and classify the two correctly, because getting it wrong is expensive.
Colorado state payroll
- Register with the Colorado Department of Revenue for state income-tax withholding and remit on schedule.
- Pay state unemployment insurance (SUTA) to the Colorado Department of Labor and Employment — your rate depends on your experience as an employer, and new employers start at a standard rate.
- File the state withholding and unemployment reports on their required cadence.
FAMLI: Colorado’s paid-leave program
Colorado’s Paid Family and Medical Leave Insurance program — FAMLI — is the one that surprises employers most, because it is relatively new. It is a payroll premium funded by a percentage of wages, split between the employer and the employee, that funds paid family and medical leave for workers. You withhold the employee’s share, pay the employer’s share (small employers may be exempt from the employer portion), and remit and report quarterly. If FAMLI is not set up in your payroll, you are out of compliance and do not know it.
Local taxes: the OPT and beyond
Several Colorado cities levy an Occupational Privilege Tax — a small monthly per-employee “head tax.” Denver is the big one (we cover it in detail in our Denver OPT guide), but Aurora, Greenwood Village, Glendale, and Sheridan have their own versions. If your employees perform work in any of those cities, you likely owe it, register with the city directly, and file on the city’s schedule.
The pattern that catches employers: federal and state get set up at launch, and the local and newer obligations — FAMLI, the OPT, city registrations — get missed entirely, then surface months later as penalties.
Worker classification
One mistake underlies many payroll problems: treating someone as a 1099 contractor who is really a W-2 employee. Misclassification can mean back taxes, unpaid unemployment and FAMLI premiums, and penalties at both the federal and Colorado level. When in doubt, the test is about control and independence — and it is worth getting right before, not after, the state asks.
The bottom line
Colorado payroll is a stack: federal, state income tax, SUTA, FAMLI, and local taxes like the OPT, all on their own schedules. Set up correctly once and it runs quietly; missed pieces compound into notices. If you are not certain every layer is handled — especially FAMLI and the local taxes — that is exactly the kind of audit-and-fix we do for Front Range employers.
This is general information for Colorado employers, not specific payroll or legal advice, and rates, thresholds, and exemptions change. Confirm the current rules with the relevant agencies or a CPA.