It is commonly called a head tax. It is a tax imposed on businesses operating in Denver (Business OPT) and on individuals who earn at least $500 in a month performing services in Denver (Employee OPT).
The Business OPT is the tax imposed on businesses that have employees who meet the $500-a-month earnings test, and on the owners, partners or managers of businesses that perform any business, trade, occupation or profession in Denver.
The rate is $4.00 per person per month.
The $500-a-month earnings test means that the employee performs sufficient services in Denver to earn at least $500 from all sources (wages, tips, commissions, bonuses, etc.). This is not comparable to taxable income for income tax purposes.
Example: if an employee makes $600 a month working in Denver, and has a 401K plan deduction for $200, the employee’s taxable wages for income tax purposes is $400. However, the employee’s earnings for OPT purposes would remain at $600, and the OPT would be due.
An employee who earns at least $500 in a month from performing services in Denver is liable for the Employee OPT, which is to be withheld from their wages at the rate of $5.75 a month and remitted to Denver by the employer.
An employer is liable for paying Business OPT at the rate of $4.00 a month per each employee who is liable for Employee OPT. In addition, an employer is liable for paying the Business OPT at the rate of $4.00 per month on each owner, partner, or manager performing services in Denver, for any month in which the business operates in Denver.
The OPT return is due on the last day of the month following the period in which the liability was incurred. The period is determined by the filing frequency, either monthly, quarterly, or annually.
Example: If a quarterly filer is paying the first quarter (January through March), the payment would be due on April 30.
If you are an individual, sole proprietor, or a partnership without employees who are subject to the tax, you may pay for the entire calendar year. This annual payment is due on January 31st of each year.
There is a 15% penalty on the total amount of tax that was paid late, with a minimum penalty of $25.00.
The interest rate for late filers is 1% each month or fraction of a month on the total amount of tax paid late, calculated from the time the return was due to the date the tax is paid.
Remit $5.75 Employee OPT for each employee who earns at least $500 in a calendar month from performing services in Denver . This tax amount should be withheld from the employee’s wages. Officers of corporations are considered employees, so the $5.75 would need to be withheld from their wages whenever they meet the $500 earnings test.
Also remit $4.00 Business OPT for each taxable employee. This tax amount is due from the employer.
If the business is a sole proprietor or a partnership, remit only the Business OPT portion at the rate of $4.00 a month for each owner or partner. Owners and partners are not considered employees and the $500 earning test does not apply. The business would still be liable for Business OPT on other taxable employees.
Individuals who work for more than one Denver employer are required to pay the Employee OPT only once. The employee should submit Form TD269 to the secondary employer, requesting that the Employee OPT not be withheld from their wages. However, the Business OPT of $4.00 would still be due from the secondary employer.
Individuals who work in Denver for more than one employer are required to pay the Employee OPT only once. The employee should submit Form TD269 to the secondary employer, requesting that the Employee OPT not be withheld from their wages. Alternatively, if more than one employer withheld the taxes, a Claim for Refund form may be submitted.
Your business is liable for paying a minimum of $4.00 Business OPT tax for each month in which it performs any business, trade, occupation or profession in Denver. If your employees earn at least $500 in a month from performing services in Denver, both Employee OPT and Business OPT are due for those months.
Two possible reasons are:
Your business is liable for paying a minimum of $4.00 Business OPT tax for each month in which it performs any business, trade, occupation or profession in Denver. The $500 earnings test does not apply to sole proprietors and partners.
You can find the guide to bulk OPT filing and payment here.