The Colorado Department of Revenue (DOR) has released a new employee withholding certificate known as DR 0004. Prior to the DR 0004 release, Colorado did not provide a state form and the federal Form W-4 was used to calculate state tax withholding. ADP is actively working to complete development necessary to help support clients when an employee submits a DR004. We will keep you informed of these efforts.
The details:
The DOR released DR 0004 to assist employees in more accurately withholding from wages in relation to Colorado state income tax liability. DR 0004 is optional for employees, but as of January 1, 2022, if an employee gives the employer a completed and signed DR 0004, the employer is required to use the values entered on the DR 0004 to calculate that employee’s withholding.
If an employee does not submit a DR 0004, the employer should calculate the employee’s state income tax withholding utilizing the default values based on the employee’s federal Form W-4 provided on DR 1098 titled “Colorado Withholding Worksheet for Employers.”
Where an employee fails to provide neither a federal Form W-4 nor a state DR 0004, employers should calculate Colorado state income tax withholding as if the employee were single with no other adjustments.
Additional information from the CO Department of Revenue including frequently asked questions can be found here.
Next steps:
When Colorado employers receive a DR 0004 from an employee, the employer should utilize the information contained on this form when calculating the employee’s state tax withholding utilizing DR 1098.
If DR 0004 is not submitted by the employee, state income tax withholding should be calculated by using the default values from the employee’s federal Form W-4.
ADP® is actively working to complete development necessary to help support clients when an employee submits a DR004. We will keep you informed of these efforts.
Have questions?
Please contact your ADP Service Representative with any questions.