Colorado Income Tax Withholding
The Employer’s State ID Number that Colorado employers should enter on IRS form W-2 is the eight-digit Colorado wage withholding account number assigned by the Colorado Department of Revenue.
Yes. Starting in 2022, an employee may complete a Colorado Employee Withholding Certificate (form DR 0004), but it is not required. If an employee completes form DR 0004, the employer must calculate Colorado withholding using the amounts the employee entered. If an employee does not complete form DR 0004, the employer must calculate Colorado withholding based on IRS form W-4.
For more information about the required withholding calculation, see the Colorado Withholding Worksheet For Employers (DR 1098) on the Withholding Tax Forms web page. Additional frequently asked questions about the DR 0004 are below.
Colorado no longer publishes withholding tables. Employers are required to calculate wage withholding according to the Colorado Withholding Worksheet for Employers (DR 1098). For assistance with completing this calculation, the DR 1098 Withholding Calculator is also available on the Withholding Tax Forms web page.
A household worker is your employee. Therefore, as the employer you must apply for a Colorado wage withholding account, using the Withholding Account Application (form CR 0100AP) on the Withholding Forms web page. Colorado withholding must be submitted at least quarterly and a form W-2 must be provided to the employee annually.
For federal tax information, including form W-4, go to IRS.gov. For information about other requirements and guidelines for Colorado employers, visit the Colorado Department of Labor and Employment website.
The Colorado Unemployment Insurance Surcharge is related to unemployment insurance premiums paid by employers and is not related to any tax collected or administered by the Department of Revenue. Questions regarding unemployment insurance and this "solvency surcharge" should be directed to the Colorado Department of Labor and Employment (CDLE).
If you need to obtain an unemployment insurance account number or you have other questions regarding unemployment insurance premiums and benefits, contact the Colorado Department of Labor and Employment (CDLE).
DR 0004 Frequently Asked Questions
Withholding tables are no longer created or furnished by the Department of Revenue and old withholding tables should not be used for current withholding calculations. Beginning in 2021, employers were required to transition to using the wage withholding calculation method prescribed by the Department of Revenue on the DR 1098 Withholding Worksheet. Employers still using the outdated withholding tables must now transition to using the calculation on the DR 1098 Withholding Worksheet.
Generally, new forms will not be required for all employees. New hires should complete the current version of all hiring forms on their date of hire. Current employees should only complete new forms if they are updating information or requesting changes to their withholding.
No. Colorado form DR 0004 is optional for employees to complete. It is not meant to completely replace form W-4 for Colorado withholding, but is meant to help employees in a few specific situations who may want to fine-tune their Colorado withholding. If an employee does not complete Colorado Form DR 0004, their wage withholding should be calculated using the default values on the DR 1098 Withholding Worksheet based on their IRS form W-4.
If an employee asks about adjusting their withholding, the employer is required to provide form DR 0004 to the employee. 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.
Colorado does not require withholding from pensions, so any amounts withheld from pensions are considered voluntary. At this time the Department of Revenue does not have, and has no plans to prescribe, withholding methods or calculations for voluntary withholding.
In general, IRS form W-4 and Colorado form DR 0004 are not submitted to the Colorado Department of Revenue. These forms are to be maintained as part of the employer’s records to be available to the Department upon request. The exception to this is when an employee claims exempt on their form W-4 and is earning more than $200 per week in wages. In this situation the employer is directed to promptly file the form W-4 with the Department of Revenue along with a cover letter listing the following information:
- Employer Name
- Federal Employer Identification Number (FEIN)
- Number of Federal W-4 withholding certificates submitted
Employers must submit the cover letter and specified W-4s to the following address:
Colorado Department of Revenue
PO Box 17087
Denver, CO 80217-0087
Following a review of the exempt certificate, the Department will advise the employer of any necessary adjustment to the employee’s withholding.
Yes, employees can still claim exempt using federal form W-4. Please note that the Colorado Department of Revenue may review and adjust Colorado withholding.
For exempt claims where the employee is earning more than $200 in wages per week, the employer is required to submit federal form W-4 to the Colorado Department of Revenue. Following a review of the exempt certificate, the Department will advise the employer of any necessary adjustment to the employee’s withholding.
No. Generally, an employee claiming exempt should do so on federal form W-4 and should not use Colorado form DR 0004. An employee with federal withholding could have zero Colorado withholding if the annual allowance on form DR 0004 Line 2 is greater than or equal to the employee’s income. A nonresident spouse of a U.S. servicemember may claim exempt for Colorado withholding by completing form DR 1059. Please note that the Colorado Department of Revenue may review and adjust Colorado withholding.
Generally, Colorado income tax is based on federal taxable income, so an employee claiming exempt should do so on federal form W-4 and should not use Colorado form DR 0004. An employee may claim exempt for federal withholding, but still request Colorado withholding by entering the amount per pay period on form DR 0004 Line 3.
Colorado form DR 0004 does not allow exempt claims, but an employee with federal withholding could have zero Colorado withholding if the annual allowance on form DR 0004 Line 2 is greater than or equal to the employee’s income. A nonresident spouse of a U.S. servicemember may claim exempt for Colorado withholding by completing form DR 1059.
Please note that the Colorado Department of Revenue may review and adjust Colorado withholding.
Continue including the amount the employee previously requested until they decide to submit a new withholding certificate. Starting January 1, 2022, Colorado form DR 0004 will be required for any new adjustments to Colorado Withholding. If the employee decides to submit only a new IRS form W-4, do not include any additional Colorado withholding.
For employees that complete their IRS form W-4 on or after January 1, 2022, the employer should only apply that additional withholding request to the employee’s federal withholding. If the employee wants additional Colorado withholding, they will need to complete Colorado form DR 0004.
Verify the line 2 value with the employee. If the employee intended the withholding allowance to be zero (0), then a zero (0) should be entered on the certificate and used for withholding calculations. If the employee intended line 2 to be left blank, use the default withholding allowance values on form DR 1098 based on their form W-4 filing status information.
No, a form W-4 submitted after January 1, 2022, will override the previous withholding request. Completing Colorado form DR 0004 will be the only way for an employee to request additional withholding once they complete a new IRS form W-4.
In this situation an employer may choose to verify the employee’s intent, by asking the employee if they still want an additional amount to be withheld for Colorado.
- If the employee does still want additional Colorado withholding, the employee must complete form DR 0004.
- If the employee does not want additional withholding, the employee’s Colorado withholding should be calculated using the default values from form DR 1098 based on the employee’s form W-4.