December 6, 2021
Colorado creates new state certificate employees can use for the employer's calculation of state income tax withholding
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:
Reasons an employee may want to complete a new Federal W-4 and/or Colorado DR 0004:
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.
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
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