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?

  • 0 in reply to stevenra

    Hello stevera  I apologize for the misunderstanding.  Sage Customer Support does not provide assistance for issues related to state or federal tax-related questions, or specific accounting questions. Every state is different and that is why we give suggestions only and advise to seek assistance from the tax advisor. If you feel for Colorado FAMLI this is confusing to customers, we can update the article to remove any mention of suggested methods and only have customers seek the advice of the tax advisor.  Let us know your thoughts on this as we appreciate your feedback. Thank you.

  • 0 in reply to Carol Albaugh

    I understand. Can you answer this.? Am I correct that in BW the Gross Pay amount would include all pay including non-taxable reimbursements. If I am correct in this then as a tax advisor I would chose not to use Gross Pay as it would apply the tax to non-taxable paycheck items. I am not asking for tax advice but clarification of what BW includes in Gross Pay. Thank you

  • +1 in reply to stevenra
    verified answer

    Hi Stevera   You are correct that in Sage BusinessWorks, gross wages includes non-taxable wages.  If the Colorado FAMLI is based on State taxable wages, you would NOT want to use the percent of gross wages.  I have updated our article to remove the 'percent of gross wages' and have only the suggestion of 'percent of state taxable pay' but to seek advice of Tax Advisor.  I think this will be much clearer for customers.  Thank you again for your feedback.  Always appreciated.

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