39-22-604–3 Colorado Income Tax Withholding for Other Payments. 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 provide guidance to payers and payees for voluntary Colorado income tax withholding, including guidance regarding requirements to register with the Department, remit payments, file returns, and provide annual withholding information returns to both the Department and payees. (1) General Rule. If, by mutual agreement between the payer and payee, the payer voluntarily deducts and withholds Colorado income tax from a payment that is not otherwise subject to Colorado income tax withholding, the payer must comply with the requirements of this rule. (2) Scope. This rule does not apply to any payment for which Colorado income tax withholding is required, including but not limited to: (a) any payment of wages or winnings that is subject to withholding under section 39-22-604, C.R.S.; (b) any payment for services that is subject to withholding under section 39- 22-604(18), C.R.S.; (c) any distributive or pro rata share of partnership or S corporation income for which a payment of Colorado income tax is required pursuant to section 39-22-601(2.5), (2.7), (5), or (5.5), C.R.S.; (d) any net income of a nonresident beneficiary that is subject to Colorado income tax withholding pursuant to section 39-22-601(4), C.R.S., or (e) any proceeds from the sale of real estate that is subject to Colorado income tax withholding pursuant to section 39-22-604.5, C.R.S. (3) Registration to Withhold Tax. (a) Opening an Account. Every payer that voluntarily withholds Colorado income tax as described in paragraph (1) of this rule must apply for and maintain an active 1099 withholding account with the Department. (b) Closing an Account. A payer with an active 1099 withholding account who ceases to withhold Colorado income tax shall: (i) promptly notify the Department of such cessation either online at Colorado.gov/revenueonline or by submitting properly completed Business Tax Account Closure Form (DR 1108); (ii) by the applicable due date established in paragraph (4)(b) of this rule submit a return for tax withheld through the date of the final payment along with payment of any tax due; and (iii) furnish the applicable IRS Forms 1099s to all payees and the Department pursuant to paragraph (5) of this rule for the period from January 1 through the date of the final payment. (4) Withholding Tax Filing Periods and Due Dates. A payer that voluntarily withholds Colorado income tax as described in paragraph (1) of this rule must file returns and remit tax quarterly, monthly, or weekly based upon an annual determination made pursuant to this paragraph (4). (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 (4)(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 (4)(b). If a payer fails to file and remit any applicable tax within the time prescribed by this paragraph (4)(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 (4)(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 (4)(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. (5) Annual Withholding Information Returns. (a) Statements for Payees. If a payer voluntarily withholds Colorado income tax as described in paragraph (1) of this rule from any payment that must be reported on an IRS Form 1099, the payer must report the Colorado income tax withheld on the IRS Form 1099 provided to the payee. (b) Filing IRS Forms 1099 with the Department. Every payer must file with the Department any IRS Forms 1099 reporting Colorado income tax withholding pursuant to paragraph (5)(a) of this rule. Such IRS Forms 1099 shall be filed on or before the due date for filing such Forms 1099 with the Internal Revenue Service. (i) Mandatory Electronic Filing. Any payer required under section 6011(e) of the Internal Revenue Code to file any Form 1099 with the Internal Revenue Service electronically or by magnetic media shall electronically file such Form 1099 with the Department in accordance with published Departmental guidance. (ii) Any Forms 1099 a payer must file pursuant to paragraph (5)(b) of this rule but for which electronic filing is not required under paragraph (5)(b)(i) of this rule, the payer may file with the Department either: (A) electronically in accordance with published Departmental guidance; or (B) in paper form along with form DR 1106, “Annual Transmittal of State 1099 Forms”. (c) Correction of Statements. In the time prescribed by paragraph (5) of this rule, a payer shall furnish a corrected Form 1099 to both the payee and the Department to show 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.