Colorado Payroll Tax for 2023


As we enter the 4th quarter I want to ask about a change in payroll taxes for the state of Colorado that will be effective Jan 1,2023. Colorado is adding a new payroll tax for the FAMLI Leave Act. The tax will apply to both employees and the employer and the rate is suggested to be split between the two but the employer has the option to pay some or all of the employees share. My question, will the Businessworks payroll module for Colorado be updated to handle this new tax or will I have to create my own deductions to handle the recording of this new tax? 

I know it's early to ask this question but for someone who processes Colorado payroll this issue is already on my mind. a lot. Thank you. 

  • 0

    Hello stevenra

    Employers and their employees are both responsible for funding the program and may split the cost 50/50. The premiums are set to 0.9% of the employee’s wage, with .45% paid by the employer and .45% paid by the employee. Employers may also elect to pay the full amount if they choose to offer this as an added perk for their employees.  In Sage BusinessWorks, you will need to create two deductions.  One for the employee portion and a second for the employer portion.  See the article from our Sage Knowledgebase with the instructions on how to setup the Colorado FAMLI deduction

  • 0 in reply to Carol Albaugh

    Thank you for this info for FAMLI. I have a follow up question regarding setting up the deductions. Under Method (of calculation) the instructions state use either "Percent of State Taxable Pay" or " Percent of Gross". I question the Percent of Gross. Gross pay would include possible non-taxable reimbursements that may be included on an employees paycheck. The FAMLI tax limit is based on whatever the Social Security Taxable wages are for each year . Non-taxable reimbursements are not included as taxable pay for any tax so if Percent of Gross was used would that not be taxing non-taxable pay for this FAMLI tax?  Also I ask why the Method could not be Percent of Federal Taxable Pay as long as state and federal taxable pay are computed the same? Thank you.

  • 0 in reply to stevenra

    I received the same answer that I received from my first question. This is a different question regarding the actual set up of the deductions

  • 0 in reply to stevenra

    Hello stevera.  The method you select for your deduction should be based on the advice of your tax advisor so you are in complete compliance with the FAMLI requirements.  To answer your question, If Colorado FAMLI is based on State wages then you should use the percent of state taxable pay as the method for calculating.  If your Federal and State taxable wages are the same based on the non-taxable deductions, then you could use either Percent of Federal Taxable Pay or Percent of State Taxable pay.  The recommendation would be to consult your tax advisor for the correct selection. You mention there is a FAMLI tax limit that is based on the social security taxable wages for each year.  To meet this requirement you would want to set the limit on the deduction based on the social security wage limit.  

  • 0 in reply to Carol Albaugh

    Thanks again for your reply. I am the tax advisor. You did not address my question if using the Percent of Gross would overstate the FAMLI tax since gross pay would include non--taxable reimbursements. Am I correct in this?

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