Colorado UI Voluntary Payment Calculation & Instructions
Colorado allows employers to make a voluntary payment to essentially pre-pay or buy-down into a lower UI rate. Each employer's voluntary payment calculation is unique, but here is an example of one to help show the steps involved in calculating the voluntary payment amount & determining if it is a viable method of tax savings.
Voluntary Payment Instructions & worksheets arrive with the CO UI Rate notice letters mailed out each November & require referencing certain boxes of data on the rate notices.
Step 1: Figure out the excess you need to lower your rate
(A) - enter the amount from Item 5 on your rate notice
(B) - enter the multiplies that matches your percent of excess (item 6 on rate notice)
(C) - multiple to calculate excess needed to lower rate
Step 2: Figure out the amount of your voluntary payment (positive percent of excess example)
(D) - enter the amount from Box C of Step 1 above
(E) - enter the amount from item 4 on your rate notice
(F) - subtract E from D and result is amount of voluntary payment required to reduce rate
Step 3: Should you or shouldn't you make the voluntary payment? There likely are many methods to this evaluation, but a simple one is to take the voluntary payment amount & divide it by the savings per employee that the rate reduction would generate. This should show how many employees you would need to have to see any savings in the current calendar year. This also assumes you'll pay these employees at least the current year chargeable wage limit -- $13,600 in 2020.
In our example, the rate reduction of .0025 would allow this employer to see a $34/year savings per employee. Dividing the voluntary payment amount of $4842.36 by $34 = 142.42 employees required before the employer would see a savings in the current calendar year.
Where/How to Send in Voluntary Payments: at the top of the voluntary payment worksheet are the instructions which state these key items:
1) Mail a check payable to Colorado State Treasurer to Division of Unemployment Insurance, UI Employer Services, PO Box 8789, Denver, CO 80201-8789
2) Include a copy of your UI Rate notice
3) Include a letter stating that this is a voluntary payment in order to lower your rate
4) Payments must be received by March 14, 2020