Earned income from wages or self-employment is taxable in Colorado. Other forms of unearned income, such as unemployment compensation, lottery winnings, and pension payments also need to be reported on your return. The instruction booklet contains a full list of taxable income sources. Colorado state tax returns for the 2010 tax year are due April 18, 2011.http://www.colorado.gov/cms/forms/dor-tax/CY104.pdf

Before you begin working on your state return, though, check the state filing requirements to see if you are obligated to file a tax form at all. If you earn less than the income threshold, you may not have to submit a return this year. The income threshold is adjusted annually, so even if you did not have to file last year, you'll need to see the tax instructions to check the updated limits.http://www.colorado.gov/cms/forms/dor-tax/CY104.pdf

To start your return, you should first gather the tax-related documents needed to prepare your tax form. This will include the following:

1. Your Social Security number
2. Your complete mailing address
3. The full name and Social Security number of your spouse, if you will be filing a joint tax return
4. Your earned income for the year - Employees will use the total taxable wages reported to them on Form W-2 or Form 1099. Self-employed taxpayers will need to use the total of their gross earnings minus any applicable business expenses.
5. Your unearned income that is also subject to state taxes - Examples of this include rental property income, capital gains, bank interest, etc.
6. The state income taxes you have already paid - If you are employed, this will appear on Form W-2 as state taxes withheld. If you are self-employed, use your total estimated state tax payments made.
7. A copy of your completed federal income tax return, if you are filing onehttp://www.colorado.gov/cms/forms/dor-tax/CY104.pdf 
   

The Colorado state tax form will use the amount of your federal taxable income as the basis for calculating your state tax liability, so you need to complete your federal tax form before you begin your state return. If you will not be filing a federal return at this time, you may wish to consult a tax professional for assistance figuring your taxable income.http://www.irs.gov/pub/irs-pdf/f1040.pdf 

Your next step is to get a tax return and begin preparing it. If you have Internet access, you should consider filing electronically if at all possible. E-filing is the quickest and most convenient method for submitting your tax return. If you will be receiving a refund, electronic filing will help you to get your payment up to six weeks sooner.http://www.colorado.gov/cs/Satellite/Revenue/REVX/1177017551291  

The Colorado Department of Revenue offers free e-filing for most of its residents through the NetFile service available on the state website. If you will be filing your federal tax return through tax software or a tax preparation website, you will usually be given the option to include your state return for an additional fee. Some taxpayers may even be able to file both forms for free. To file your return using any of these providers, simply follow the program instructions using the information you assembled in step 1.http://www.colorado.gov/cs/Satellite/Revenue/REVX/1177017551291  

The following directions will explain how to file your Colorado state tax return by mail. If you have access to the Internet, you can download Form 104 "Colorado Individual Income Tax Return" and the tax form instruction booklet from the department of revenue website. If you do not have Internet access, you can pick up paper copies of these at your local library.http://www.colorado.gov/cms/forms/dor-tax/CY104form.pdf  

Begin the form by writing in your full name and Social Security number as well as your spouse's if applicable. Complete the address section and select the appropriate residency status for your return.http://www.colorado.gov/cms/forms/dor-tax/CY104form.pdf  

Now is a good time to stop and examine the tax form instruction booklet. Pay special attention to the sections dealing with income adjustments and tax credits. Adjustments to income may be necessary to account for income that is taxable by the state but not the federal government and vice versa. Tax credits you are eligible to claim will directly reduce your state tax liability.http://www.colorado.gov/cms/forms/dor-tax/CY104.pdf 

Enter the amount of your federal taxable income as shown on IRS Form 1040 on line 1 of the Colorado return. Make any necessary additions and subtractions to income on lines 2 through 13 to arrive at your Colorado taxable income on line 14. Now consult the tax table located in the instruction booklet to assess the state tax owed on your income. Enter this as your tax on line 15. http://www.colorado.gov/cms/forms/dor-tax/CY104.pdf 

Subtract any state income taxes you have already paid through withholding or estimated state tax payments as well as any state tax credits you are eligible to claim. Your end result will be either an overpayment entitling you to a refund on line 43 or an underpayment requiring an additional balance due on line 47.http://www.colorado.gov/cms/forms/dor-tax/CY104form.pdf 

If you will be receiving a refund, you can choose to accept it via direct deposit by entering your bank routing number and personal account number in the boxes provided. Sign and date the form, and have your spouse do the same, if necessary. Make a copy of the completed return for your records.http://www.colorado.gov/cms/forms/dor-tax/CY104form.pdf

Make out a check or money order for any balance you owe and enclose it with your return. Send both to the address listed on the form by April 18, 2011. If you need additional time to file your forms, you can find out how to get a state tax extension in Colorado.