TaxSlayer Guide for Colorado Table of Contents Tax …cotaxaide.org/docs/2016 TaxSlayer guide for Colorado.pdfTaxSlayer Guide for Colorado Revised 11/13/2017 11/13/2017 Page 1 Table

TaxSlayer Guide for Colorado Revised 11/13/2017

11/13/2017 Page 1

Table of Contents

Tax Year 2016

Adding the Colorado return ......................................................................................................................2 Colorado resident main menu .........................................................................................................................3 Colorado part-year resident main menu .........................................................................................................4 Colorado non-resident main menu ..................................................................................................................5 Income Subject to Tax ......................................................................................................................................6

Colorado Tax Forms .................................................................................................................................7 CO 104 ..............................................................................................................................................................7

Taxpayer information ..................................................................................................................................7 Taxable income ............................................................................................................................................7 Payments – withholding & estimated..........................................................................................................8 Credits ..........................................................................................................................................................8 Refund ..........................................................................................................................................................9

Prepayments for next year and donations ..............................................................................................9 Tax due ...................................................................................................................................................... 10 Third party designee ................................................................................................................................. 10

DR 0104AD – Subtractions from Income ...................................................................................................... 11 State Income Tax Refund .......................................................................................................................... 11 Government Interest ................................................................................................................................ 12 Other subtractions .................................................................................................................................... 13

Form 104CR – Credits .................................................................................................................................... 14 Part I – Refundable Credits ....................................................................................................................... 15 Part II – Taxes Paid to Another State ........................................................................................................ 16 Part III – Other Credits .............................................................................................................................. 17

DR 0104US – Consumer Use Tax Reporting Schedule .................................................................................. 18 DR 0104PTC – Property Tax Credit ................................................................................................................ 19

Filing an extension ................................................................................................................................. 20 Amended returns ................................................................................................................................... 21 Selected Topics ...................................................................................................................................... 24

Railroad Retirement Board pensions ............................................................................................................ 24 Early pension distribution not subject to penalty ......................................................................................... 25 CO withholding on 1099-DIV/OID/INT .......................................................................................................... 25 State sales tax deduction on Schedule A ...................................................................................................... 26 Enterprize Zone credits ................................................................................................................................. 26 State income tax payments – current year ................................................................................................... 27 State income tax payments – for next year .................................................................................................. 28 Estimated payment vouchers ....................................................................................................................... 28 State income tax refund ................................................................................................................................ 29

Index ..................................................................................................................................................... 30


11/13/2017 Page 2

Adding the Colorado return

After completing the Federal return, click on the “State Section” menu item and then “Add State Return”.

Then, select Colorado from either the map or the text “drop down” selector box

Next, select the type of return to be created

This will take you to the state main menu for the residency type (next 3 pages)


11/13/2017 Page 3

Colorado resident main menu

For many taxpayers, all necessary information is carried to the state form and all is needed is to click “Continue”. For Credits, see page 8 For Payments, see page 8 and 27 For Tax see page 18 For Misc Forms see page 10, 20 and 28

Answer the presented questions, which may differ depending on the return type. Supporting Documentation is “Mail With DR-1778” until document scanning is made available.

Additions to Income is rarely used. This carries to line 3 on CO Form 104 and TaxSlayer already inserts the more common entries on line 3.


11/13/2017 Page 4

Colorado part-year resident main menu TaxSlayer does not calculate any income figures for a part-year resident. You will need to use a worksheet to calculate each income entry as you enter it in the Federal return so that you can accurately fill out the state return. Determine the dates of residence in Colorado before you do the Federal return. Also, if the other state(s) involved also have state income tax returns to be completed, they are out of scope for us. Do not add them in TaxSlayer because there are usually questions that must be answered before you can proceed.

At the very least, you will need to fill in the “Basic Information”, and the “Income Subject to Tax” screen – see page 6. Other options are the same as for a resident.

Answer the presented questions, which may differ depending on the return type. Supporting Documentation is “Mail With DR-1778” until document scanning is made available.


11/13/2017 Page 5

Colorado non-resident main menu If a person earns income in Colorado, they must pay Colorado tax on that income. This amount then is usually a tax credit on their home state’s tax return. Most of the forms that branch from the main menu are the same as the part-year resident forms.

At the very least, you will need to fill in the “Basic Information” and the “Income Subject to Tax” screen – see page 6. Other options are the same as for a resident however many will not apply.

Supporting Documentation is “Mail With DR-1778” until document scanning is made available.


11/13/2017 Page 6

Income Subject to Tax

For both part-year resident and non-resident, you will have to manually enter the proper amounts on this TaxSlayer page. Tip: Keep track of the Colorado portion as you enter the amounts in the Federal Section.


11/13/2017 Page 7

Colorado Tax Forms CO 104

Taxpayer information Names and address are populated by TaxSlayer. This information is entered in the final e-file section tab area.

Taxable income

Federal Section > Income > Interest and Dividends > Tax Exempt…

Lines 1-4 are completed by TaxSlayer. Tax exempt interest and dividends carry to line 3 from the Federal forms if taxable in Colorado (eg: other state municipal bonds) Line 5 is completed by using the CO DR 0104AD form. See page 11.

Lines 8 and 9 are Out of Scope although supported by TaxSlayer. For line 11, see Form 104CR on page 17. For line 12, Form DR 1366 is not supported by TaxSlayer but see Enterprise Zone credits on page 26. For line 14, see Use Tax (unpaid sales tax) on page 18.

OOS

OOS


11/13/2017 Page 8

Payments – withholding & estimated

Lines 16-18 are completed by TaxSlayer. See the page 27 for more information. Line 19 is entered on the TaxSlayer state “Payments” page. See also, page 20 for filing an extension. Line 20 is entered on the TaxSlayer Payments > Prepayments page. These prepayments are made on behalf of the taxpayer but not made by the taxpayer and thus not deductible on Schedule A. Rarely seen in tax aide: 104BEP – Colorado nonresident Beneficiary Estimated Income Tax Payment DR 0108 – Nonresident Partner/Shareholder Agreement DR 1079 – Payment of Withholding Tax on Certain Colorado Real Property Interest Transfers

Credits

Lines 21 and 22 are Out of Scope. TaxSlayer does not support forms DR 1305G or DR 0617. Line 23 – completed by TaxSlayer. See page 15 on credits.


11/13/2017 Page 9

Refund

Prepayments for next year and donations

TaxSlayer completes most lines. Line 27 – designate part of the refund to the next tax year. Line 28 – designate voluntary contributions. This creates the CO DR 0104CH form. TIP: Check last year’s Colorado state tax return to see if such contributions were made and include them in this year’s Federal Schedule A charitable contributions.


11/13/2017 Page 10

Tax due

Tax penalties and interest are Out of Scope. TaxSlayer should not create entries for them. Inform the taxpayer that the CO Dept of Revenue may assess the penalty if they owe more than $1,000.

Third party designee

DO NOT enter any Tax-Aide person as a third party designee (unless it’s your friend/relative for whom you are preparing taxes and wish to be so designated.) From the Colorado main menu, select Miscellaneous Forms > Third party Designee.


11/13/2017 Page 11

DR 0104AD – Subtractions from Income

State Income Tax Refund

Federal Section > Income > State and Local Refunds

TaxSlayer automatically completes the state refund amount claimed as taxable on Form 1040. Use the Bypass State Refund Worksheet if you don’t have last year’s return available or if you are using the Refund Calculator. Use the TaxSlayer calculator if you do have last year’s return. (It may not give the best result if the Federal taxable income was 0 or if the taxpayer made estimated state tax payments. See the discussion later on state refunds, page 29.)

http://cotaxaide.org/tools/Refund%20Calculator.html


11/13/2017 Page 12

Government Interest

Federal Section > Income > Interest and Dividends > …

TaxSlayer completes line 2 from entries in the Federal Interest income page. There’s also a similar box on the Dividend income page


11/13/2017 Page 13

Other subtractions

TaxSlayer completes lines 3 and 4 from 1099-Rs and 1099-SSAs that have been entered. But see page 25 on early distributions. TaxSlayer completes line 7 from the Federal Schedule A contributions entry if Schedule A is not used. If there are Railroad Retirement benefits, see page 24 about adjustments that may be required. TaxSlayer incorrectly includes the Tier 1 benefits in the Pension/Annuity line. Line 12, Marijuana Business Deduction is out of scope due to complex interactions with the Federal return. Other entries require direct input in the Colorado “Subtractions from Income” TaxSlayer screen from the main menu. Each has an FYI document on the CO Department of Revenue web site that explains the item. If a taxpayer has sold an asset that was acquired on or after 5/9/1994 and held for at least 5 years, consider this credit. It includes stock in a Colorado company, and home or land sales (which may be within or outside Colorado if taxed by Colorado).

OOS


11/13/2017 Page 14

Form 104CR – Credits

The Colorado credits menu is reached by clicking the “Credits” entry on the state’s main menu. See DR 0104PTC, page 19. Refundable credits, see next page See page 16. Non-refundable credits will be discussed on pages 17. Most credit options lead to a screen that only has a box to in which to enter the amount of the credit. Do not enter credits if they cannot carry across to the CO104 to reduce the state income tax. Carry-forward of credits is out of scope. Most credits require submission of documentation to substantiate the credit. At this time, TaxSlayer does not support scanned attachments submitted with the return. Print a DR 1778 for the taxpayer to mail in with the documentation..


11/13/2017 Page 15

Part I – Refundable Credits

TaxSlayer completes the Child Care Expenses Credit and COEITC based upon the Federal credits for those items. Child care credit does not apply to disabled persons over age 12. Business Personal Property Credit and Refundable Renewable Energy Tax Credit are out of scope – Form DR 1366 is not supported by TaxSlayer. When you click the “Begin” button for Child Care Expenses Credit, this form is used if an adjustment is needed to that calculated on the Federal return and used in Form DR 0347. Add any additional earned income as an increment (not a new total). This is rarely, if ever, used.


11/13/2017 Page 16

Part II – Taxes Paid to Another State

Since the credit requires completion of the other state’s tax return, this will be an uncommon credit for the Tax-Aide program because we cannot prepare that state’s return. That state’s tax return or an S corporation pass-through document must be submitted to substantiate the claim. From the “Credits” menu… This credit is not available to non-resident taxpayers (their home state will likely have a similar credit for income tax paid to Colorado).


11/13/2017 Page 17

Part III – Other Credits

Several Colorado tax credits are for business owners. Only the more common individual credits are listed here. Each has an “FYI Income” document on the Colorado Department of Revenue website that explains the qualifications and limitations. Do not use the LTC credit if Federal taxable income is $50K ($100K if 2 policies). TaxSlayer does not check the Federal taxable income amount.


11/13/2017 Page 18

DR 0104US – Consumer Use Tax Reporting Schedule Consumer Use Tax is the state’s way of collecting sales tax on items purchased from other than a local retailer (eg: on-line). It is up to the taxpayer to determine if such purchases were made.

Select the “Tax” option from the main menu. Recapture of prior year credits is out of scope


11/13/2017 Page 19

DR 0104PTC – Property Tax Credit The Colorado PTC cannot be e-filed and is only available for the current and one previous tax year. Requirements are:

1. Either taxpayer is 65 or older (at year end), or a surviving spouse at least 58, or disabled with benefits for the entire year.

2. Resided in Colorado for the entire year (both if married). 3. Lawfully present in the United States. 4. Must have a Colorado driver’s license or ID card. 5. Not claimed as a dependent on any other person’s tax return. 6. Total income for all sources less than:

2015 2016

Single: 12,953 13,234

Married: 17,460 17,839

If the taxpayer qualifies… If there are any Medicare D payments, remove them from the Social Security input page and add them to the Schedule A medical deductions. After completing and printing the return, separate the 104PTC form from the return and mail it to the CO Department of Revenue. Driver license or state ID information is required. The rest of the return can be electronically filed as usual.


11/13/2017 Page 20

Filing an extension

From the state main menu, select “Miscellaneous Forms” Select “Yes” Enter the amount to be paid with the extension Then, print the Form 158-I extension and have the taxpayer mail it in with a check attached.


11/13/2017 Page 21

Amended returns

Continued on next page

After making Federal return changes (if any), work through the progression of menus… After completing changes, return to the Amended Tax Return menu to explain changes and print the amended return(s). Select “Yes” and click


11/13/2017 Page 22

Answer questions and fill in the information requested. TaxSlayer does not bring information from the original return like it does with the federal amendment. See next page. Explanation of Changes uses the same information as the federal amendment – nothing to enter here. Amendments cannot be e-filed. Have taxpayer mail the amended return to the Colorado Department of Revenue.


11/13/2017 Page 23

After entering data from the original tax return, return to the Amended Tax Return menu (top of page 19) to enter explanation of changes and print the amended return.


11/13/2017 Page 24

Selected Topics Railroad Retirement Board pensions

TaxSlayer incorrectly merges the Railroad Retirement payments with all other pensions and annuities. Tier 1 payment (RRB_1099) is equivalent to Social Security Tier 2 payment (RRB-1099-R) is the pension Because Colorado limits the annuity/pension, including taxable Social Security, to $24K ($20K if under 65), the taxpayer may be unfairly limited because the RRB benefits has its own credit line.

Colorado DR 0104AD:

Federal 1040:

To correct this: 1. Determine if the annuities/

pensions have been limited. If not, no further action is needed. (Are totals 20K/24K?)

2. Determine how much of the Tier 1 and Tier 2 benefits are federally taxable. Separate from other Social Security amounts.

3. Remove the Tier 1 and Tier 2 taxed benefits from the annuity/pension line and determine what each exclusion should be.

4. Add corrected information into TaxSlayer Subtractions from Income page. (New correct totals, not differences.)

TIP: Use the RRB Worksheet to do the calculations.

http://cotaxaide.org/tools/RRB%20Worksheet.html


11/13/2017 Page 25

Early pension distribution not subject to penalty TaxSlayer does not include early pension distributions in Colorado’s retirement subtraction from income. Colorado allows this if the recipient is at least 55 and not subject to federal penalties (i.e. Code 2 on 1099-R). CO CR 0104AD:

To correct this: 1. Determine if the recipient is

at least 55,

2. Determine what the current distribution total for the recipient is.

3. Add the taxable portion of

the distribution to the eligible pension income and enter the new total on the TaxSlayer Subtractions from Income page. Do not exceed the $20K limit.

CO withholding on 1099-DIV/OID/INT Federal Section > Payments & Estimates > Other State Withholdings

In the rare case where state withholding appears on a 1099-DIV, 1099-OID or 1099-INT, enter the amount in this form. Since this does not create the documentation that Colorado requires, you must file Colorado on paper and attach all forms with withholding shown.


11/13/2017 Page 26

State sales tax deduction on Schedule A The sales tax deduction consists of two parts:

1. A state sales tax table indexed by income and exemptions 2. A series of local tables, “A”, “B”, or “C” also indexed by income and exemptions

The A, B or C table to use is based on the taxpayer’s city and/or county and the result of that chosen table is multiplied by the local tax rate and added to the state result. TaxSlayer uses the taxpayer’s zip code to determine the local tax rate to use for the sales tax deduction. This may result in an incorrect deduction because zip code boundaries do not always fall along municipal boundaries (the IRS sales tax calculator does ask additional questions to make the correct distinction). To correct this:

1. Go to the local sales tax table and determine the A, B, or C code for the city with the taxpayer’s zip code

2. Determine what code should be used for that taxpayer (the county code in most cases) 3. Use the zip code for any other city that will provide the correct A, B or C code.

Or, use the IRS calculator and enter the result directly in the Sales Taxes Deduction Override page. TaxSlayer also does not provide a way to include other non-taxable income when calculating the sales tax credit. Use the Sales Tax Worksheet to assist in adding this additional income.

Enterprise Zone credits Most enterprise zone credits are out of scope except for the Contributions to Zone Projects which have been allowed in the past. However, the required Form 1366 Section III, PartB is not supported by TaxSlayer. There are several options for a taxpayer with an individual EZC:

1. Forgo the EZC; the tax return is in scope. 2. Advise the taxpayer to see a paid preparer. 3. Prepare the return without the EZC and paper file the return. If the taxpayer wants the credit they

can self-prepare a DR1366 and a new Colorado return to add the credit. 4. Prepare the return without the EZC and file electronically. Then prepare an amended return to add

the EZC and paper-file the amended return with a Form DR1366 prepared by the taxpayer.

A work-around: 1. Manually prepare the DR1366 2. Enter the EZC as a Child Care Contribution Credit so that the other return amounts are calculated 3. Print, do not e-file, the Colorado return and white-out the Child Care Contribution Credit and write it

in the Enterprise Zone credit line. Decrease the credit line total if necessary. 4. Paper file the return (with all CO withholding statements and DR1366) and attach a note explaining

that the IRS chosen TaxSlayer software does not support e-filing of DR1366.

http://cotaxaide.org/ta/co-sales-tax/

http://cotaxaide.org/tools/Sales%20Tax%20Worksheet.html


11/13/2017 Page 27

State income tax payments – current year Federal Section > Deductions > Itemized Deductions…

Federal Section > Payments & Estimates…

Included in the federal state tax deduction on Schedule A, but not in payments to Colorado for the current tax year:

4Q prior tax year estimated payment1

Tax due payment with tax return

Colorado extension payment made with Form 158-I in this calendar year. (see below)

Included in the Schedule A deduction and in payments to Colorado:

W-2/W-2G/1099-R withholding

Other State Withholdings (see page 25)

Amount from prior year refund

1Q current tax year estimate



4Q current tax year estimate paid by December 31st

Not included in the Schedule A deduction but are included in payments to Colorado:

4Q current tax year estimate paid in January of this calendar year.

Colorado extension payment made with Form 158-I in this calendar year. (see above)

1 If a state tax refund was received in that prior year, the 4Q payment must be pro-rated. See page 25 for more details.


11/13/2017 Page 28

State income tax payments – for next year

From the state main menu, select “Payments”. Enter the amount of refund to be used for next year’s taxes

Estimated payment vouchers

From the state main menu, select “Miscellaneous Forms”. Select “Yes” Enter amounts for the vouchers Automatic withdrawal is not supported by TaxSlayer


11/13/2017 Page 29

State income tax refund Taxability of the state income tax refund is reduced by the lesser of the following (all figures are for the previous tax year):

a. A pro-rated share of the refund (ie: ratio of the amount paid in each of the two years) – not relevant if no 4Q estimated payment in January

b. The difference between sales tax and state withholding c. The amount itemized deductions exceeds the standard

deduction d. A taxable amount that is negative (may be shown as 0 on the

return) e. The taxable income change which would allow tax credits that

were available but not fully used to reduce tax. TaxSlayer only considers items b and c which is the typical case. Item e is difficult and requires access to the prior year return software. If estimated taxes were paid, only use the pro-rated amount of the refund:

And, also pro-rate the 4Q payment used in the current tax year as a subtraction (see page 27):

Refunds involving multiple years are out of scope.:w

Tax year state tax payments:

GROUP A: For the year prior to the current tax year paid in that year:

1Q previous year estimate



4Q previous year estimate paid by December of that year

W-2/1099 withholdings

Prepayments (see page 8)

GROUP B: Paid for the year prior to the current tax year, but paid in the current tax year:

4Q previous year estimate paid in January

Amount paid with a current tax year extension request

TIP: Use the Refund Calculator to do the math.

http://cotaxaide.org/tools/Refund%20Calculator.html


11/13/2017 Page 30

Index 104BEP ............................................. 8

104CR ............................................. 15

annuity ........................................... 14

business personal property credit . 16

charitable contributions ................ 14

child care expenses credit .............. 16

Colorado donations ....................... 10

Colorado source capital gain .......... 14

credits ...........................................7, 9

DR 0104AD ..................................7, 12

DR 0104CH ..................................... 10

DR 0104PTC ..............................15, 20

DR 0108 ........................................... 8

DR 1079 ........................................... 8

DR-1778 .................................... 3, 4, 5

early pension distribution .............. 26

EITC credit ...................................... 16

enterprize zone credit .................7, 27

estimated payments ....................... 29

extension ........................................ 21

government interest ....................... 13

Income Subject to Tax ...................... 6

interest ........................................... 11

municipal bonds ............................... 7

non-resident ..................................... 5

part-year resident ......................... 4, 5

payments ........................ 8, 10, 28, 29

payments - extension ................. 8, 21

penalties ......................................... 11

pension ........................................... 14

PERA/DPSRS contributions ............. 14

property tax credit (PTC) ................ 20

Railroad Retirement benefits ... 14, 25

refund ....................................... 10, 30

refundable credits .......................... 16

renewable energy tax credit ........... 16

reservation income ........................ 14

resident ............................................ 3

retirement income ......................... 14

sales tax deduction......................... 27

state income tax refund ................. 12

supporting documentation 3, 4, 5, 15

tax .................................................. 19

tax due ........................................... 11

taxable income ................................. 7

taxes paid to another state ............ 17

third party designee ....................... 11

tuition program contributions........ 14

use tax ............................................ 19

vouchers ......................................... 29

wildfire mitigation .......................... 14

withholding on interest/dividends . 26

TaxSlayer Guide for Colorado Table of Contents Tax …cotaxaide.org/docs/2016 TaxSlayer guide for Colorado.pdfTaxSlayer Guide for Colorado Revised 11/13/2017 11/13/2017 Page 1 Table

Documents