Locum Tenens Taxes in Colorado

A nonresident with Colorado-source income who is required to file a federal income tax return generally must file a Colorado return: Form DR 0104, the standard individual return, with the DR 0104PN part-year resident/nonresident schedule attached. The DR 0104PN apportions your income so that Colorado tax lands only on the Colorado-source portion, computed at the flat rate on your apportioned share.

For a working locum physician there is no realistic threshold play: if you earned real money on a Colorado assignment and you file federally, you file in Colorado. That applies whether you were paid 1099 directly, through an agency, or through your own S-corp or LLC that put you to work at a Colorado facility.

Like most states, Colorado sources compensation for personal services to where the services are physically performed. Days worked at a Colorado facility generate Colorado-source income; days worked elsewhere do not, even if the agency, the patient records, or your LLC live somewhere else entirely. When an engagement spans states, a working-days allocation (Colorado days over total days, applied to the engagement's compensation) is the standard approach.

The record that protects you is the same one we recommend for every state: a contemporaneous day-by-day calendar of where you physically worked, backed by shift schedules and credentialing records. Colorado's flat rate makes the math easy, but the allocation is only as defensible as the log behind it.

W-2 agencies generally withhold Colorado tax on wages for Colorado work. 1099 physicians get no withholding, and Colorado expects quarterly estimated payments via Form DR 0104EP (or online through Revenue Online) once you expect to owe $1,000 or more for the year. At 4.4%, a physician sourcing $100,000 to Colorado owes roughly $4,400, well past the trigger, so build the quarterly habit from the first assignment.

Colorado has no percentage-based city income taxes, but five Denver-metro cities (Denver, Aurora, Glendale, Greenwood Village, and Sheridan) levy flat monthly occupational privilege taxes, informally called head taxes. In Denver, employees earning at least $500 in the city in a month owe $5.75 for that month (withheld by employers), and businesses, including self-employed physicians working in the city, owe a $4.00 business-side tax per month of activity. The dollars are trivial; the compliance is real, in that a 1099 physician working regularly in Denver technically registers with the city and files OPT returns. It is a five-minute problem, but only if you know it exists.

Resort-town assignments are Colorado's signature locum offer: an emergency department in Summit County for the ski season, agency-paid housing included, generous day rate, maybe a per diem. Every piece of that package runs through one federal concept: your tax home.

Travel costs, lodging, and meals on assignment are deductible (or excludable, when the agency pays them) only while you are traveling away from a tax home you maintain elsewhere, on work that is temporary, meaning realistically expected to last one year or less. Break either leg and the analysis flips: the assignment city becomes your tax home, and housing and per diems tied to it stop being tax-free travel benefits and start looking like taxable compensation.

The mountain-town patterns that cause trouble: stacking back-to-back seasonal contracts at the same facility year after year; giving up (or renting out) the residence you supposedly travel from; and extending a "five-month" contract until it quietly crosses the one-year expectation. None of these are Colorado-specific rules, but Colorado's lifestyle appeal makes them a Colorado-shaped problem: it is exactly the state where a temporary assignment turns into a life.

Colorado adds no entity-level penalty to the standard locum S-corp analysis: there is no California-style franchise tax on S-corps and no Tennessee-style excise trap. The federal self-employment tax math drives the decision, and Colorado's low flat rate keeps the state layer simple.

There is one affirmative opportunity: Colorado's SALT Parity Act lets an S-corp or partnership elect to pay Colorado tax at the entity level at the flat individual rate, making it deductible on the federal entity return instead of trapped behind the individual SALT cap. The election is made on the entity's Colorado return (DR 0106) or in advance on Form DR 1705. One wrinkle worth modeling: Colorado requires an addback tied to the federal QBI deduction for electing owners, which can eat into the benefit for physicians who still get QBI. Run the numbers; do not default.

As everywhere, the entity does not move the income. A Wyoming LLC or Texas S-corp performing services in Colorado still generates Colorado-source income to the physician who did the work, and the entity itself picks up Colorado filing obligations by doing business in the state.

Illustrative example, not a specific client outcome. A Michigan-resident hospitalist earns $300,000 of 1099 income for the year, with $90,000 allocated to a winter of Colorado assignments and the rest to Michigan work.