Support for new Colorado Form DR 0004
For 2022, Colorado has created their own state-specific employee withholding form: the DR 0004 (previously, Colorado used the Federal Form W-4). This form is optional in 2022.
To accommodate this new form, a new miscellaneous state parameter for the Colorado State Tax has been added to the
engine: ANNUAL_WITHHOLDING_ALLOWANCE. This new parameter has an effective date of 1 January 2022 and will not function for prior payroll dates.
This parameter corresponds to the “Annual Withholding Allowance” dollar amount from line 2 of the Form DR 0004.
- If this new parameter is not set, or it is set to 0: the STE will use the previous behavior of subtracting $8,000 if the
employee is married filing jointly or is a qualifying widow(er) (FILINGSTATUS = ‘M’) or subtracting $4,000 for all other
- If this new parameter has a value set: the STE will deduct that amount instead of the $8,000/$4,000 amount based on the employee’s filing status
This logic corresponds to Step 2a in the calculation instructions from the DR 1098:
“2a. If the employee completed form DR 0004 Line 2, enter that amount. If the employee did not submit form DR 0004, or if form DR 0004 Line 2 is blank, enter the appropriate amount based on the employee’s expected filing status from IRS form W-4 Step 1(c): $8,000 if married filing jointly or qualifying widow(er); or $4,000 otherwise.”
Note: Employees may also designate “Additional Withholding Per Pay Period” on line 3 of the DR 0004. This corresponds to the “additionalWH” default parameter that is available when setting up the tax (i.e., not a miscellaneous parameter). This is pre-existing functionality – on the original Form W-4, it instead corresponded to Step 4(c), “Extra Withholding.”
DR 0004: https://tax.colorado.gov/sites/tax/files/documents/DR0004_2021.pdf
DR 1098: https://tax.colorado.gov/sites/tax/files/documents/DR1098_2021.pdf