Form DR 0004 is the new Colorado withholding certificate that is optional for employees to complete starting in 2022. It is not meant to 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 asks about adjusting their withholding, the employer is required to provide form DR 0004 to them.
If an employee completes form DR 0004, the employer is required to calculate their Colorado withholding using the amounts entered on that DR 0004, as prescribed in the DR 1098 worksheet.
If an employee does not complete form DR 0004, the employer is required to calculate their Colorado withholding using the amounts prescribed in the DR 1098 worksheet based on their IRS form W-4.
An employee may want to complete form DR 0004 if:
- They earn most of their income from one job
- They expect significant income from sources that will not have withholding
- They expect to claim federal itemized deductions
- They expect to claim the new Colorado child tax credit
- An employee may want to complete a new Federal W-4 and/or Colorado DR 0004 if:
- Withholding certificate was last updated 3 or more years ago
- Wages or other income changes significantly
- Number of jobs changes
- Filing status changes (single, married filing joint, etc.)
- Federal deductions change significantly