Colorado has revised its non-wage withholding regulations, specifically for gambling payments, real estate withholding, and optional non-wage withholding.
For gambling withholding, rule 39-22-604-2 has been added. The rule relies on statutory requirements for gambling withholding. The regulations make it clear the gambling withholding rate is 4%, that payors of winnings must register to open a withholding account, that payors must report and pay the withholding on a regular basis, and provide direction on issuing forms W-2G and 1042-S to the state. Payors of winnings reporting less than $7000 of Colorado withholding can make their withholding reports and payments quarterly, those reporting between $7000 but not more than $50,000 must report and pay the withholding monthly, and those reporting $50,000 or more of annual withholding must report and pay weekly. Issuers of forms W-2G and 1042-S reporting gambling winnings must file these forms with Colorado if the form is required federally or if reporting Colorado withholding.
For voluntary non-wage withholding, rule 39-22-604-3 has been added. The revised rules set the same reporting and payment threshold as discussed for payors of winnings: quarterly if less than $7000 annual withholding, monthly if between $7000 and $50,000, and weekly if $50,000 or more. Affected payment types subject to voluntary withholding include payments for wages or winnings; payments for services; partnership distributions; payments to non-resident beneficiaries; and withholding from real estate sales. Form 1099 information returns will be required to be reported to the state when reporting Colorado withholding.
For real estate withholding, rule 39-22-604.5 has been added. The rule describes the reporting and payment obligations for withholding against real estate sales made to non-residents. The obligation to conduct withholding for transfers to non-residents is not new; this rule merely ensures the reporting rules for such withholding are similar to other withholding reporting rules.
In addition, rule 39-22-604-4 has been added discussing employer notice of federal and state credits. This obliges employers to report credits as per Colorado form DR 0995.
The Colorado Department of Revenue has not yet revised its public guidance in line with these rules, which come into effect March 2026.
To review these rules, follow this link.
