Quarterly Estimated Taxes for Colorado LLCs

If your Colorado LLC generates income that will result in owing $1,000+ in either federal or Colorado state taxes, you must make quarterly estimated tax payments throughout the year. Missing these payments triggers penalties — even if you pay in full at tax time. For the full tax picture, see our Colorado LLC tax guide. For formation, see how to form a Colorado LLC.

When Quarterly Payments Are Required

Federal requirement: Pay quarterly if you expect to owe $1,000+ in federal tax for the year (after withholding and credits).

Colorado requirement: Pay quarterly if you expect to owe $1,000+ in Colorado income tax for the year (Form DR 0104EP).

Most Colorado LLC owners who earn a profit will need to make quarterly estimated payments because LLC income has no automatic withholding — unlike W-2 wages.

Due Dates

Note: If a due date falls on a weekend or holiday, payment is due the next business day.

How to Calculate Your Payments

Safe harbor methods (to avoid underpayment penalties):

1. 100% of prior year tax / 4 — Pay at least 25% of last year's total tax liability each quarter. Works well if income is stable or growing.
2. 90% of current year tax / 4 — Estimate current year's liability and pay 90% divided into quarters. Works if you can accurately forecast.
3. 110% of prior year — If your prior year AGI exceeded $150,000 (married filing jointly), use 110% of prior year tax divided by 4 for safe harbor.

For Colorado specifically:

• Start with estimated federal taxable income attributable to Colorado
• Apply the 4.4% flat rate
• Subtract any Colorado withholding (if you have a W-2 job too)
• Divide the remaining tax owed by 4

How to Pay

Federal estimated taxes:

• IRS Direct Pay at irs.gov/payments (bank account; free)
• EFTPS (Electronic Federal Tax Payment System; enrollment required)
• Credit/debit card (processing fee applies)
• Mail Form 1040-ES voucher with check

Colorado estimated taxes:

• Revenue Online at colorado.gov/revenueonline (bank account; free)
• Credit card (through Revenue Online; processing fee applies)
• Mail Form DR 0104EP voucher with check to Colorado Department of Revenue

Underpayment Penalties

Federal: The IRS charges a penalty calculated on Form 2210 for each quarter you underpaid. The rate is the federal short-term interest rate plus 3% (approximately 8% in 2024-2025).

Colorado: Colorado calculates its underpayment penalty on Form DR 0204. The penalty rate mirrors the federal calculation methodology. Colorado also charges interest on underpayments.

How to avoid penalties:

• Make payments on time using one of the safe harbor methods above
• If income is seasonal (common for Colorado tourism, construction, and ski industry businesses), you can use the annualized income installment method to adjust payments by quarter

Colorado-Specific Considerations

Seasonal businesses: Colorado has many seasonal businesses (ski industry, summer tourism, construction limited by winter weather). If your LLC earns most of its income in specific months, the annualized income installment method (Schedule AI on Form DR 0204) lets you pay more in profitable quarters and less in slow ones.

First-year LLCs: If this is your first year in business, you have no prior year tax to base safe harbor on. Estimate current year income as accurately as possible. If you underpay, first-year penalties are typically small.

Multi-state members: If you live in another state but have a Colorado LLC, your quarterly payment to Colorado covers only the Colorado-source income. You may also owe quarterly payments to your home state.

FAQ

What if I can't afford the quarterly payment?

Pay what you can. The penalty is calculated on the underpaid amount — so paying something is better than paying nothing. The IRS and Colorado DOR don't waive filing requirements, but partial payments reduce the penalty.

Do I need to make quarterly payments if I have a W-2 job too?

Only if your W-2 withholding doesn't cover your total tax liability (including LLC income). If you can adjust your W-2 withholding (Form W-4) to cover the additional tax from LLC income, you may not need separate quarterly payments.

How do I estimate income for a new LLC?

Make your best projection based on contracts, market research, or industry averages. Conservative estimates are fine for the first year — adjust as actual numbers come in. Being slightly over in quarterly payments results in a refund, not a penalty.

When do quarterly payments start for a new LLC?

The first quarterly payment is due for the quarter in which your LLC first generates income. If you form in July and earn income in Q3, your first payment would be due September 15.