TAP 05-017

Form W-4 Changes/Multi-job Households

Statement of Issue:

Underwitholding by multiple-job households is likely because of the difficulty of correctly completing Form W-4, Employee's Withholding Allowance Certificate, and/or because taxpayers are unaware of the need to complete additional Forms W-4 with their other employer(s) when a second or third job is acquired.

Proposal:

TAP recommended that Forms and Publications make changes to Form W-4, as follows:

Recommendation 1:
Delete the current IRS warning titled “Form W-4 Warning: Two earners/Two Jobs” because it is inaccurate in many situations and substitute more accurate language such as suggested in Recommendation 2.

Recommendation 2:
Prominently display on the top of Form W-4 a statement along the lines of the following:

CAUTION: Two Earners/Two Jobs
If you have two or more jobs, or if your spouse is also working, you may be subject to owing tax at the end of the year.

To claim the correct number of allowances, either:

1. Fill out the worksheet on page 2;
2. Consult with your tax advisor;
3. Call the IRS at 1-800-829-1040 for assistance; or
4. Go to (use an alias for the IRS withholding calculator, such as www.irs.withholdingcalculator.gov).

Recommendation 3:
Revise the last sentence under the heading “Purpose” on Form W-4 to a statement along the lines of the following:” Because your tax situation may change, you may want to refigure your withholding with any employer at any time during the year.”

Response Notes: