The Colorado Department of Revenue (Department) has adopted Rule 39-22-604-4 (1 CCR 201-2) clarifying the written notice employers must provide to employees regarding certain federal and state refundable income tax credits (Earned Income Tax Credit or "EITC notices"). The rule specifies that employers must provide either Form DR 0995, Notice of Federal and State Refundable Tax Credits or the entire written content of Form DR 0995, and clarifies that providing only a hyperlink does not satisfy the statutory notice requirement.

Background

Colorado House Bill 23-1006 established an annual employer obligation, effective beginning with tax year 2023, to notify employees about the availability of certain federal and state refundable tax credits, including the earned income tax and child tax credits. The Department's adopted rule clarifies the content, format and method of delivery required to satisfy the written notice requirement under C.R.S. section 39-22-604(6)(c).

Adopted rule's requirements

Employees covered. An employer must give the required EITC notice to all employees to whom the employer provides an annual wage and tax statement. The notice may accompany the employee's Colorado Form W-2.

Content. An employer must give employees either Form DR 0995 or the entire written content of Form DR 0995, reproduced in full.

Format and delivery rules. Giving employees only a hyperlink or posting the notice at a worksite does not satisfy the requirement. If provided in paper form (when reproducing the content rather than providing the form), the notice must be at least 5.5 by 8.5 inches. If provided electronically, the notice must include the entire written content of Form DR 0995 (not merely a link).

Effective date and application to the annual EITC notice cycle

The adopted rule is effective March 2, 2026, as reflected in CCR eDocket Tracking No. 2025—00399. Because the rule is effective after employers have met the EITC notice requirement for 2025, the adopted rule applies prospectively to the next full annual notice cycle, i.e., the 2026 employee notice furnished with 2026 Forms W-2. Accordingly, employers should apply the adopted rule's content and delivery standards to the 2026 employee EITC notice due with 2026 Forms W-2 furnished on or before February 1, 2027.

Ernst & Young LLP insights

Although Colorado's annual employee notice requirement has been in effect since tax year 2023, the adopted rule is more prescriptive and narrows acceptable compliance approaches.

Employers should consider taking the following actions:

• Confirm that the annual notice process provides employees with either Form DR 0995 or the entire written content of Form DR 0995 (in full)
• If delivering electronically, confirm that employees receive the full notice content rather than a hyperlink to the form or to a webpage
• If delivering by paper using reproduced content, confirm the notice meets the minimum size requirement (at least 5.5by 8.5inches)
• Coordinate with third-party W-2 vendors to confirm who will deliver the notice and that the required content will be included with 2026 Forms W-2

Several states and localities impose employee EITC notice obligations, and those requirements vary by jurisdiction with respect to timing, content and method of delivery. Because state employee EITC notice requirements may change from year to year, employers — particularly those with multistate workforces — should review applicable state EITC notice requirements each year with their employment tax advisor.