23 Jan Colorado Filing Processes – the Good, Bad & Ugly
My friends at the Colorado Department of Revenue Tax Division have been hard at work amending and repealing several different personal and corporate income tax regulations with a handful of notable mentions for non-residents and part year residents alike.
The updated guidance on determining credits for taxes paid to other states maybe worth a look as well. Of interest to me is that the year in which the income is actually earned by the taxpayer rather than the year it was paid is the reporting year. This is a sneaker that can be huge for certain folks and is why we “plan” for transitions in our life as best we can.
What is of concern to me and will be monitored to the best of my ability is that mere presence in Colorado directly or indirectly via a pass through entity impacts source income.
As a guy who has been in Colorado long enough to shamelessly call himself a local I could blabber on about each of these points but maybe you should call or write me with questions or comments as you see fit.
The rest of this post is a top 10 list of tax hacks that I’ve picked up from various experiences working with our esteemed governing authorities in Colorado.
When it comes to credit for Income Tax Paid to Another State reported on Form 104CR Part II these are the most important things to remember:
- A copy of the tax return ﬁled for each state MUST be included with Colorado income tax return, unless the other state does not require a return.
- Include the portion of the return that shows tax paid to the other state or enough information for the deadbeats processing the form to see the net tax liability and credits.
- If you file electronically the tax returns for the other states must be included as attachments or submitted via Revenue Online.
- The total credit for taxes paid to other states may not exceed the Colorado tax attributable to the total non-Colorado source income.
- If taxes were paid to two or more states, or if income and/or losses are incurred in two or more other states, a separate credit must be computed for each state to which taxes are paid and a limitation computation must be done for all income and/or losses received from other states.
- The credit will be the lesser of the total of credits computed for each state to which taxes are paid or the credit computed using the combined tax paid, income, and losses from all other states
When it comes to the Child Care Contribution Credit (104CR Part III):
- If you claim the Child Care Contribution Tax Credit, the DR 1317 “Child Care Contribution Tax Credit Certiﬁcation” must be completed by the organization that receives the donation from the taxpayer.
- If you are uncomfortable providing the organization with your Social Security Number, you can get a Colorado Account Number (CAN) via Revenue Online.
- The CAN may be used on the certiﬁcation form instead of the SSN.
When it comes to Enterprise Zone Credits you must electronically file to claim these credits:
- Paper returns may be ﬁled ONLY if an electronic return would create a hardship as it seems we are clearly wanting to put chips in poor peoples heads next.
- If your software does not support the DR 1366, “2015 Enterprise Zone Credit and Carry forward Schedule,” try using Revenue Online’s document attachment feature.
- Not only must you enter on line 36 of the 104 income tax return the sum of all enterprise zone credits used but BOTH the DR 1366 and the applicable certiﬁcation form must accompany the filed return.
When it comes to Innovative Motor Vehicle and Innovative Truck Credits:
- Attach Form DR 0617 “Innovative Motor Vehicle Credit and Innovative Truck Credits”.
- Be aware the CDOR checks a county motor vehicle database to verify ownership of these vehicles.
- If the registration is not in the taxpayer’s name in this database, the Department tax examiners will ask for a copy of the purchase invoice and proof of Colorado registration.
When it comes to excess tax revenues, they must be distributed to Colorado’s residents:
- Anyone applying for this refund must live in Colorado from January 1 through December 31, 2015 and be age 18 or older as of January 1, 2015.
- Full-year residents must file a tax return to get the refund and is based on your Colorado MAGI.
When it comes to Capital Gain Subtractions:
- You must submit a DR 1316 form, “Colorado Source Capital Gain Aﬃdavit,” with the return and include as an attachments the following:
- A copy of the closing statements for both the purchase and sale of the property, or oﬃcial documentation from the county detailing purchase date and price and sale date and price
- Copies of the corresponding federal return, Schedule D, and any Schedule D attachments
- If the capital gain were received via a pass-through entity submit documentation that the interest in the underlying business were held for a minimum of 5 years
When it comes to the Colorado Marijuana Business Deduction on Form 104:
- This deduction is designed to allow businesses in Colorado engaged in retail or medical marijuana to claim a state tax deduction on expenses that would otherwise be allowed on the federal return but are forbidden pursuant to IRC 280 (e).
- To claim the deduction you must in essence ﬁle a pro-forma federal return showing tax liabilities as though expenses were allowed essentially as work papers attached to the actual Colorado tax return. Or you can call me for the secret of the golden flower to avoid this lunacy!
- This is becoming a huge problem, hire someone that knows what the hell they are doing. Remember there are a LOT of jackasses out there claiming certain prowess. Most are pusillanimous reprobates.
When it comes to Consumer Use Tax:
- YOU are required to pay either a sales tax on tangible personal property or a use tax on tangible personal property if no sales tax were assessed.
- In an eﬀort to make it easier for individuals to declare the amount of tangible personal property subject to use tax, the 104 form includes space to calculate the amount of use tax due.
- Refundable credits from Line 8 104CR go on Line 45 of the Form
- Nonrefundable credits from Line 35 104CR go on Line 35 of the Form
When it comes to Earned Income Tax Credit (104CR Part I):
- Beginning with tax year 2015, this credit is available to Colorado taxpayers who claimed the earned income tax credit on their federal returns.
- The Colorado credit is 10% of the amount claimed on the federal return.
- Returns that claim the Colorado earned income tax credit should include the federal tax return and associated schedules for determining the federal credit to avoid delays.
When it comes to Business Personal Property Tax Credit (104CR Part I):
- Businesses that have $15,000 or less of property may take an income tax credit for property taxes paid.
- Many practitioners miss this…