39-22-604–2 Colorado Income Tax Withholding for Gambling Winnings. Basis and Purpose. The statutory bases for this rule are sections 39-21-112(1), 39-21-

119(3), and 39-22-604, C.R.S. The purpose of this rule is to establish the withholding percentage for gambling winnings and to provide guidance regarding Colorado income tax withholding requirements for payers of gambling winnings, including requirements to register with the Department, withhold Colorado income tax from gambling winnings, remit payments, file returns, and provide annual withholding information returns to both the Department and payees. (1) General Rule. Any payer making any payment of winnings within Colorado shall deduct and withhold from such winnings Colorado income tax at a rate of four percent if: (a) the winnings are subject to withholding for federal income tax purposes under paragraph (3) of this rule; and (b) the winnings are not exempted from Colorado income tax by either state or federal law. (2) Payer Defined. For the purpose of this rule, the term “payer” means any person making any payment of winnings which are subject to withholding for federal income tax purposes. The term “payer” includes only those persons that are subject to the civil jurisdiction of the State of Colorado. (3) Winnings that are Subject to Withholding for Federal Income Tax Purposes. For the purpose of this rule and section 39-22-604(17), C.R.S., winnings are subject to withholding for federal income tax purposes if the payer is required to withhold federal income tax from such winnings pursuant to: (a) section 3402(q) of the Internal Revenue Code; (b) section 3406 of the Internal Revenue Code; (c) section 1441 of the Internal Revenue Code; or (d) section 1442 of the Internal Revenue Code. (4) Registration to Withhold Tax. (a) Opening an Account. Every payer subject to the withholding requirements prescribed by this rule and section 39-22-604(17), C.R.S., shall apply for and maintain an active gaming withholding account with the Department. (b) Closing an Account. A payer with an active gaming withholding account who ceases to pay winnings subject to withholding under this rule shall: (i) promptly notify the Department of such cessation either online at Colorado.gov/revenueonline or by submitting a properly completed Business Tax Account Closure Form (DR 1108); (ii) by the applicable due date established in paragraph (6)(b) of this rule submit a return for tax withheld through the date of the final winnings payment along with payment of any tax due; and (iii) furnish Internal Revenue Service Forms W-2G and 1042-S, as applicable, to all payees and the Department pursuant to paragraph (7) of this rule. (5) Payer’s Liability for the Tax. Every payer, irrespective of whether or not that payer deducts and withholds the amounts required by this rule, is liable for the amounts required to be deducted and withheld. If the payer, in violation of the provisions of this rule, fails to deduct and withhold the amounts as provided in this rule and thereafter the tax against which such deducted and withheld amounts would have been credited is paid, the payer is relieved of liability for the tax that they failed to deduct and withhold; but in no such case, unless due to reasonable cause, shall the payer be relieved from liability for any penalties or additions to the amounts required under this rule to be deducted and withheld otherwise applicable to any such failure to deduct and withhold. (6) Withholding Tax Filing Periods and Due Dates. A payer required to withhold Colorado income tax from winnings must file returns and remit tax quarterly, monthly, or weekly based upon an annual determination made pursuant to this paragraph (6). (a) Determination of Status. The determination of whether a payer is required to file and remit tax quarterly, monthly, or weekly is based initially on the payer’s estimated annual Colorado income tax withholding. Thereafter, if the actual aggregate amount of Colorado income tax withholding reported by the payer for any calendar year exceeds the amount established under this paragraph (6)(a) for the payer’s required filing frequency, the payer’s required filing frequency shall be redetermined based upon the actual aggregate amount of Colorado income tax withholding reported by the payer for that calendar year. Any change in a payer’s required filing frequency based upon a review of the aggregate amount of Colorado income tax withholding reported during a calendar year shall become effective on January 1 of the following year. (i) Quarterly Filing and Remittance. A payer is required to file and remit tax quarterly for the entire calendar year if the payer’s annual Colorado withholding tax is less than $7,000. (ii) Monthly Filing and Remittance. A payer is required to file and remit tax monthly for the entire calendar year if the payer’s annual Colorado withholding tax is at least $7,000, but not more than $50,000. (iii) Weekly Filing and Remittance. A payer is required to file and remit weekly for the entire calendar year if the payer’s annual Colorado withholding tax is more than $50,000. (b) Due Dates. A payer must file returns and remit any applicable taxes on or before the due dates prescribed in this paragraph (6)(b). If a payer fails to file and remit any applicable tax within the time prescribed by this paragraph (6)(b), penalty and interest shall apply in the manner prescribed by section 39-22-621, C.R.S. (i) Quarterly Filing and Remittance. A payer that is required to file and remit tax quarterly must file a Colorado withholding tax return and remit the total Colorado tax due for the calendar quarter on or before the last day of the month following the close of the calendar quarter. Except as provided in paragraph (6)(b)(iv) of this rule, a payer that is required to file quarterly must file a return for each calendar quarter, even if no taxes have been withheld. (ii) Monthly Filing and Remittance. A payer that is required to file and remit monthly must file a Colorado withholding tax return and remit the total Colorado tax due for the month on or before the fifteenth day of the following month. Except as provided in paragraph (6)(b)(iv) of this rule, a payer that is required to file monthly must file a return for each month, even if no taxes have been withheld. (iii) Weekly Filing and Remittance. A payer that is required to remit tax weekly must remit the total Colorado withholding taxes accumulated as of any Friday on or before the third business day following such Friday. (iv) Seasonal Rule. A payer whose business does not operate continuously throughout the year may request permission from the Department to file returns for only those periods that the business is in operation. If the Department grants such approval, the payer is not required to file returns for those months for which the business does not operate. (v) If the due date for filing a return and remitting tax falls upon a Saturday, Sunday, or legal holiday, the return and tax shall be deemed timely if filed and remitted on the next business day. (7) Annual Withholding Information Returns. (a) Statements for Payees. On any Form W-2G or Form 1042-S a payer provides, as required by the Internal Revenue Service, to report gambling winnings and withholding for a payee who is either a Colorado resident or who received winnings from games conducted in Colorado, the payer shall report: (i) the payee’s winnings subject to Colorado income tax as described in paragraph (3) of this rule; and (ii) the amount of Colorado income tax deducted and withheld from the payee’s winnings. (b) Filing Forms W-2G and 1042-S with the Department. Every payer shall file with the Department any Forms W-2G or 1042-S reporting Colorado winnings pursuant to paragraph (7)(a) of this rule. Such Forms W-2G and 1042-S shall be filed on or before the due date for filing such Forms W-2G and 1042-S with the Internal Revenue Service. Any Forms W-2G or 1042- S a payer must file pursuant to this paragraph (7)(b) of this rule may be filed with the Department either: (i) electronically at Colorado.gov/revenueonline; or (ii) in paper form along with form DR 1101, “Annual Reconciliation of Income Tax Withheld on Gaming Winnings”. (c) Correction of Statements. 1(i) In the time prescribed by paragraph (7) of this rule a payer shall furnish a corrected Form W-2G or 1042-S to both the payee and the Department to show: (A) the correct amount of winnings paid during the prior calendar year if the amount of such winnings reported on a statement previously furnished to the payee for such year is incorrect; and (B) the amount actually deducted and withheld as Colorado income tax if such amount is less or more than the amount reported as tax withheld on the statement previously furnished to the payee for such year.