Colorado residents, businesses, and other entities with income not subject to withholding are generally required to pay taxes on that income throughout the year. This process, applicable to various income types like self-employment earnings, interest, dividends, and capital gains, involves submitting periodic payments based on projected annual liability. For instance, an independent contractor receiving regular payments for services would likely fall under this requirement.
This system ensures consistent revenue flow for the state, facilitating essential public services. It also helps taxpayers avoid a large tax bill at the end of the year and potential penalties for underpayment. Historically, this pay-as-you-go system has evolved to accommodate changing economic realities and promote greater financial stability for both individuals and the state. By adhering to these requirements, taxpayers contribute to the overall financial health of Colorado and minimize their own financial burden at tax time.
