Business Taxes in Colorado

October 4, 2013

Business taxes in Colorado can be complicated to calculate, as there are a number of additional factors that business owners have to consider when filing corporate income taxes.

Business taxes in Colorado can be complicated to calculate, as there are a number of additional factors that business owners have to consider when filing corporate income taxes.

Business taxes, also referred to as corporate taxes, in Colorado can be far more complicated to calculate as than individual income taxes, as there are a number of additional factors that business owners have to consider when filing corporate income taxes each year. Specifically, business taxes can involve sales taxes, unemployment insurance taxes and property taxes on any residential or commercial property owned by the business.

Methods for Calculating Corporate Taxes in Colorado

According to changes made to Colorado tax laws in 2008, which enacted single-factor legislation for business taxes in Colorado, corporate taxpayers can choose either of the following two methods by which to calculate the taxes for their business for the previous year (i.e., they can choose the method that results in the lesser tax liability):

  1. Two-factor formula: This calculates the average value of a business’ property and sales and then compares this average to the total property and sales to determine the amount of taxes the business will be liable for paying.
  2. Threefactor formula: With this method, which has been around since 1968, the business’ property, sales and the corporate income are averaged and compared to their respective totals to evaluate how much of the business’ profits will be eligible for taxation. This method may be referred to as the Multistate Tax Commission formula.

For businesses that are primarily operated abroad but that do have bases in Colorado, the “80/20” rule may apply. In order to qualify for this rule, at least 80 percent of the business’ property and payroll must be located in another country, and only 20 percent at most of the business’ assets  can be located in Colorado. For qualifying businesses, the Colorado income tax return will not comply; however, the business must pay taxes on the percentage of its profits that are generated from sources within Colorado.

Because calculating corporate taxes are complicated, it’s not uncommon that businesses miscalculate their tax obligations and put themselves at risk of facing IRS audits. When this occurs, businesses may find themselves obligated to pay massive amounts of back taxes (if they miscalculated their tax obligations for previous years), which could leave business owners in the position of having to consider filing business bankruptcy.

Colorado Bankruptcy Lawyers

If you are overwhelmed by seemingly insurmountable debt and are looking for a financial fresh start, contact the trusted Colorado debt relief and bankruptcy lawyers at the Law Office of Jon B. Clarke, P.C. For more than 35 years, Mr. Clarke and his diligent support staff have been successfully helping our clients resolve even the most complex bankruptcy cases for both individuals and businesses alike. Our experienced legal professionals are committed to providing each of our Clients with the personalized debt relief assistance they need, and we will work tirelessly to ensure that our Clients’ cases are resolved as favorably and efficiently as possible.

For a thorough assessment of your situation, along with expert advice regarding the best manner in which to move forward to unburden yourself from debt, call us at (866) 916-3950 or email us some details about your situation by clicking here.

Categories: Blog, Business Taxes, Colorado Bankruptcy Lawyers, Small Business Bankruptcy, Tax Debt