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Colorado has enacted HB 12-1006, which requires that, effective for tax year 2023, employers provide a written annual notice to their employees about available federal and state tax credits, including:

• The Colorado earned income tax credit
• The federal earned income tax credit
• The Colorado child tax credit
• The federal child tax credit
• Any other information required in regulations issued by the Colorado Department of Revenue (Department)

This annual notice must be provided to employees at the same time as the state Form W-2, which is due on or before January 31 for the previous tax year. (Colorado Withholding Tax Guide.)

The notice must be written in English or any other language the employer typically uses to communicate with its employees and may be provided to employees electronically, including via email or text message.

Ernst & Young LLP insights

Although the IRS, several states and Philadelphia mandate that employers provide their employees with a notice about the earned income tax credit, Colorado is unique in requiring that information about the federal and state child tax credit also be included in the notice.

It is hoped that, like New Jersey, the Department will issue a sample annual notice that employers can use to meet this new requirement.

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Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor