Project 01004

RECOMMENDATION TEXT:

Add a new section titled “Reconciling W-2 Withholding with Reported Income” after the income section (Form 1040, Line 9) and before the deductions or credits section on Form 1040-NR (or the corresponding section in electronic filing platforms).

Justification:
This section should address situations where W-2 Box 2 (Federal Income Tax Withheld) exceeds the income reported on:

Form 1040, Line 9 (Total Income), or
Form 1040-NR, Line 9 (Effectively Connected Income).

RECOMMENDATION TEXT:

Include a checkbox on Form 1040-NR (and corresponding e-filing system) that asks:
“Check this box if your W-2 Box 2 (Federal Income Tax Withheld) exceeds your total income as reported on Form 1040, Line 9.”

Justification:
It helps tax preparers and IRS agents identify cases requiring further review, which reduces the risk of incorrect tax calculations or processing delays.

RECOMMENDATION TEXT:

See recommendation above #1004-2
Below the checkbox, include a statement outlining the required supporting documentation that must be submitted in both Form 1040-NR and electronically:
• “If you checked the box above, please attach the following supporting documentation to explain the discrepancy:
1. An explanation of the nature of the discrepancy (e.g., reason for additional wage reporting, incorrect form details).
2. Copies of any related forms or statements that explain the situation (e.g., corrected W-2, 1099 forms, or other income-related documents).
3. Any other documents requested by the IRS to substantiate the discrepancy.”

Justification:
By requiring supporting documentation, taxpayers will provide the necessary information to resolve the discrepancy upfront.

RECOMMENDATION TEXT:

Provide clear instructions in Form 1040-NR (or as part of the e-filing process) explaining why the checkbox exists, what it means, and what the taxpayer must do if they check it:
“If you checked the box above, please attach a detailed explanation of the discrepancy and any relevant supporting documentation. Failure to do so may delay processing or result in incorrect tax calculations.”

Justification:
Clear instructions help ensure that taxpayers understand the purpose of the checkbox and the steps they need to take to resolve the issue.

RECOMMENDATION TEXT:

Allow electronic filers to upload supporting documentation directly through the e-filing platform (e.g., corrected W-2 forms, 1099 forms, or written explanations) when they check the discrepancy box

Justification:
Allowing taxpayers to upload all necessary documentation electronically ensures that the IRS has all relevant information at the time of filing. This reduces the need for additional follow-up and accelerates the review process for both paper and electronic submissions.

RECOMMENDATION TEXT:

Include an automatic flag in the IRS’s electronic processing system to alert IRS agents when a filer has marked the checkbox indicating a W-2 box 2 wages vs. Form 1040 total income discrepancy. This ensures IRS agents review these returns with extra attention and avoid processing errors.

Justification:
It would ensure that cases involving discrepancies between W-2 wages and total income are handled with the necessary scrutiny, reducing errors and taxpayer burden.