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The Colorado Department of Revenue announced that starting in 2022, employees can use the new Form DR 0004, Colorado Employee Withholding Certificate. If employees request that their Colorado state income tax withholding be adjusted, their employer must give them Form DR 0004.

Currently, employees use the federal Form W-4 for both federal and Colorado income tax withholding purposes. The new Form DR 0004 does not replace the federal Form W-4; rather, it gives Colorado employees the ability in specific situations to direct employers to fine-tune the amount of Colorado income tax withheld.

Reasons an employee may want to complete Form DR 0004:

• They earn most of their income from one job
• They expect significant income from sources that will not have Colorado income tax withheld
• They expect to claim federal itemized deductions
• They expect to claim the new Colorado child tax credit

Reasons an employee may want to complete a new Federal W-4 and/or Colorado DR 0004:

• Withholding certificate was last updated three or more years ago
• Wages or other income has changed significantly
• Jobs have changed
• Filing status has changed (single, married filing joint, etc.)
• Federal deductions have changed significantly
• Colorado child tax credit qualifications have changed

Employer instructions

Form DR 1098, Colorado Withholding Worksheet for Employers, which includes the calculation employers are required to use for determining Colorado income tax withholding, has been updated for use in 2022 with directions for entering the amounts from Form DR 0004 into the existing calculation steps.

• If an employee completes Form DR 0004, the employer is required to calculate Colorado income tax withholding using the amounts entered on that DR 0004, as prescribed in the DR 1098 worksheet.
• If an employee does not complete Form DR 0004, the employer is required to calculate Colorado income tax withholding using the amounts provided in the DR 1098 worksheet based on their federal Form W-4.

Additional Information

• DR 0004 Employer Resources
• DR 0004 Employee Resources
• DR 0004 Frequently Asked Questions
• Video - Transitioning to Colorado Wage Withholding Certificate DR 0004

Ernst & Young LLP insights

Employers are required to submit copies of federal Form W-4 to the Colorado Department of Revenue if the Colorado employee is expected to earn more than $200 per week and claims exemption from income tax withholding or more than 10 withholding allowances. Copies of Form W-4 should be submitted with a cover letter that includes the employer's name, address, federal employer identification number, and the number of Forms W-4 included. The Colorado Department of Revenue will contact the employer if the requested exemptions must be modified. (Colorado Income Tax Withholding Tables for Employers, p. 4.)

Withholding Allowance Certificates should be mailed to:

Colorado Department of Revenue
Discovery Section
Room 634 PO Box 17087
Denver, CO 80217—0087

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