TAP F04-064

Form W-4 Employer Compliance

Statement of Issue:

Burden of Form W4 on employers and associated noncompliance with filing requirements.

Proposal:

The Committee recommended the following three-part approach to the employer’s W-4 responsibilities:

1. To ensure that the correct W-4 information is collected and proper withholding is made, (a) the employer would be responsible to perform a Form W4 check with the IRS and, in turn, the IRS would provide accuracy identification and whether or not to use the Employee W4; and (b) the IRS would ask for a Form W4 for a new employee, an employee claiming exempt status, and/or employee claiming over 10 allowances or increasing allowances by two or more.
2. To correct compliance problems using Form W2 information supplied by the SSA, the IRS would contact the employers of those employees who are underwithheld due to incorrect Form W-4 information, and ask the employer to change withholding.
3. To track problem Form W-4 filers, using prior tax information for those employees who have been identified as a problem, track them from one job to the next job using new hire data.

Thanked the SB/SE Payroll Reporting Subcommittee for its contributions to the study undertaken by the Withholding Compliance Task Force. The information gathered and the opinions expressed by the Subcommittee were an important part of the discussions within the task force and the recommendations are to be included in the task force report. While it can be anticipated that changes made to such a program will be debated over a lengthy period of time and the resulting initiatives will be subject to the resource constraints of the Service, the opportunity to receive input from stakeholders at the beginning of the process is of great value.