Form DR 0004: Colorado Employee Withholding Certificate

Form DR 0004 Colorado Employee Withholding Certificate: Key Takeaways

Form DR 0004 is an optional Colorado state tax withholding certificate for employees to adjust income tax withholding amounts.
Employers use the form’s information to calculate withholding but only submit it to the state if requested.
The form was updated for the 2025 tax year with increased allowances and expanded credits.

Form DR 0004 allows Colorado employees to customize their state income tax withholding amounts beyond federal Form W-4 data.

This guide explains who should use the form, how employers must handle it, and recent updates for 2025 to help ensure accurate withholding and tax compliance.

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1. What Is Form DR 0004 Colorado Employee Withholding Certificate?

Form DR 0004, the Colorado Employee Withholding Certificate, is an optional state form employees complete to adjust how much Colorado state income tax is withheld from their wages.

While it is not mandatory, completing this form helps employees fine-tune withholding to better match their actual Colorado income tax liability.

If an employee does not submit Form DR 0004, the employer calculates Colorado withholding based on the employee’s federal Form W-4 data.

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2. Who Should Consider Completing Colorado’s Form DR 0004?

Certain employees may benefit from using Form DR 0004 to adjust their Colorado withholding.

Key situations include:

Employees who earn most of their income from a single job and want precise withholding.
Those expecting to claim federal itemized deductions or the Colorado child tax credit.
Employees anticipating significant income from nonwage sources that don’t have automatic withholding.

Using Form DR 0004 may help avoid underpayment penalties or a large tax refund after filing state income taxes.

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3. How to Submit and Use Form DR 0004

Employees who want to use Form DR 0004 should complete and submit it directly to their employer.

Employers then must use the form’s information to calculate the correct Colorado withholding amount for the employee’s wages.

Employees holding multiple jobs should submit a separate Form DR 0004 to each employer to ensure withholding is accurate across all positions.

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4. Employer Responsibilities for Colorado Form DR 0004

Employers in Colorado must comply with specific requirements when an employee provides Form DR 0004.

Provide the Form: Employers must offer Form DR 0004 if an employee requests it to adjust withholding.
Use Updated Withholding Worksheets: Employers use Form DR 1098, the Colorado Withholding Worksheet for Employers, updated to incorporate entries from DR 0004, to calculate withholding.
Record Retention: Completed Form DR 0004s must be kept on file by the employer and provided to the Colorado Department of Revenue upon request, although they are not routinely submitted to the state.

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5. Recent Updates to Colorado Form DR 0004 for 2025

In December 2024, Colorado updated Form DR 0004 for the 2025 tax year.

Key changes include increased standard allowances and an expanded worksheet to account for additional tax credits, helping employees further optimize their withholding amounts.

Existing employees can choose to update their withholding certificate for 2025 but are not required to do so.

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6. Additional Considerations on Exemptions and Multiple Jobs

Employees claiming exempt status for withholding can do so by using the federal Form W-4 rather than Form DR 0004.

However, if an employee claims exempt and earns more than $200 per week, employers must submit a copy of their W-4 to the Colorado Department of Revenue for review.

For employees holding multiple jobs, completing a separate Form DR 0004 with each employer is recommended to maintain accurate withholding and avoid under- or overpayment of taxes.

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7. Best Practices for Employees and Employers Using DR 0004

Employees should review their overall tax situation annually and update Form DR 0004 as needed to reflect changes like income variations, tax credits, or itemized deductions.

Employers should stay current with Colorado Department of Revenue updates, provide the DR 0004 form promptly upon request, and accurately apply the amounts when calculating withholding.

Maintaining organized records of all withholding certificates can also help ensure compliance and speed responses if the state requests documentation.

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Additional Resources for Form DR 0004 Colorado Withholding

01. Is Form DR 0004 mandatory for Colorado employees?

No, Form DR 0004 is an optional form that allows employees to adjust their state income tax withholding but is not required.

02. Who should consider using Form DR 0004?

Employees who have multiple income sources or anticipate tax credits like the Colorado child tax credit may want to use Form DR 0004 to better match their withholding to their tax liability.

03. Do employers submit Form DR 0004 to the state routinely?

No, employers retain Form DR 0004 but only submit it to the Colorado Department of Revenue if specifically requested.

04. How often should employees update Form DR 0004?

Employees should review and update Form DR 0004 annually or when their tax situation changes significantly to ensure accurate withholding.

05. What are employer responsibilities regarding Form DR 0004?

Employers must provide Form DR 0004 upon request, use updated withholding worksheets for calculations, and retain submitted forms for potential review by the Colorado Department of Revenue.