New Colorado Paid Family Leave Tax
Back in 2020, Colorado voted to implement its own Paid Family and Medical Leave Insurance (FAMLI) program. And beginning in 2023, the Colorado paid family leave program takes effect.
The Colorado paid family leave effective date for contributions is 2023, one year before Colorado employees can receive benefits.
Keep the following important dates related to paid family leave Colorado in mind:
- January 1, 2023: Contributions begin
- January 1, 2024: Qualifying employees can begin taking benefits
Colorado employees and qualifying employers pay FAMLI premiums. So, withhold the premium from employee wages. If applicable, you must make a matching employer contribution.
Here’s the breakdown:
- All employees contribute
- Employers with 10 or more employees must also contribute
The total Colorado PFL rate is 0.90% of employee wages, up to the Social Security wage base ($160,200 for 2023). Of this 0.90% rate, employees pay 0.45%, and qualifying employers (those with 10 or more employees) pay 0.45%. (Colorado Paid Family Leave | Contribution Rate (patriotsoftware.com))
Employers with nine or fewer employees are not responsible for the employer share of 0.45%.
The following steps will help you set up a permanent payroll tax that will calculate and post the amounts you will need to pay into the fund.
If you have fewer than ten employees, do only steps 1 through 17.
If you have ten or more employees, do all of the steps.
Step 1
Click on the Gear Icon (Setups) in the upper right corner of the MaxxTraxx screen.
From the center column, choose F Company Payroll
Step 2
Click on Add Payroll Item
Step 3
Click on Add Payroll Item
Step 4
Choose User define tax and click Next
Step 5
Choose Paid by the employee and click Next
Step 6
Click Select to choose the liability account.
Step7
Highlight the account you want to use to track the amount you will need to pay into the fund. If you do not already have an account to use, you can create a new one by doing the following:
Click on Add G/L Account
Step 8
Enter the account number you want to use (I chose 23550), enter a Description that works for you, and set the Type of account to Current Liability. Click Save.
Step 9
With the proper account highlighted, click Select.
Step 10
With the proper account showing, click Next.
Step 11
No change on this page. Click Next.
Step 12
No changes on this page. Click Next
Step 13
In Rate, enter 0.45% (Percentage)
The maximum Collected should be 720.90 (that's .45% of 160,200)
Maximum Earnings will calculate from the above.
Click Finish. It will look like you did nothing, but that's ok. On to the next step.
Step 14
Return to the Service Counter screen and click on Payroll, then on Employee List. One by one, open the master record of each employee and do the following:
Step 15
In the Employee record, click on the Payroll Items tab.
Step 16
Click on Add Payroll Item
Step 17
With the FAMLI item showing, click Select. Then click Save.
Repeat Steps 15 through 17 for each employee. Now we need to set up the Employer contribution side (if you employ more than 9 employees.)
Step 18
Repeat Steps 1 through 4
Then change to Paid by the company
Step 19
Fill in the Item Code and Description in a way that you prefer. Click Next.
Step 20
Select the GL Accounts you wish to use for both the Liability (most will use the same as was used for the Employee tax, but you can create and/or choose a different liability account if you prefer.) For the Expense Account, you might just use the existing "Other Benefits" from your list of Expense Accounts, or you can create a new one for this use. Click Next.
Step 21
This time, because it's a "Company Pays" item, it will appear in the list of "Other Payroll Deduction Items" as it will apply to all Employees. Therefore, you will not have to add it to each employee record. Click Select to see the final screen verifying that you have finished the setup.
The setup is now complete. In the following images you will see how the taxes will show up when you run payroll.
Other Deductions will be the amount withheld from the employee.
Click on the Edit button to see the name of the deduction.
Under the Employer Amounts will be the amount of the Employer's contribution.
Click on the Employer Amounts to see all the company's contributions.
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