Senate Tax Writer Asks for a Simpler W-4 Form

The Senate’s chief tax writer on Thursday urged the Internal Revenue Service to withdraw and simplify the W-4 withholding form that every employee is required to fill out this year.

The new form is too confusing, Sen. Lloyd Bentsen (D-Tex.), chairman of the Senate Finance Committee, said in a letter to IRS Commissioner Laurence B. Gibbs.

“Although I recognize that the IRS was working under a mandate from Congress to devise a more accurate form, our goals will not be realized if workers are unable to decipher the form because of its complexity,” Bentsen wrote Gibbs.

Bentsen asked the IRS to tell him if it could “devise a simpler process, such as making the new W-4 form optional or allowing taxpayers to choose a ‘short’ form instead.”

There was no immediate response from Gibbs, but IRS spokesman Rod Young said he knows of no plan to change the new form. About 300 million copies of it have already been distributed to employers.

Accuracy Is Goal

The new form was developed after Congress, in passing a sweeping tax overhaul measure last year, ordered the IRS to devise a system that would allow workers to estimate more closely how much of their incomes should be withheld to cover taxes.

“It’s a bit more complicated than before,” said Ira Shapiro, director of tax policy for the accounting firm of Coopers & Lybrand, “but that’s because Congress ordered the IRS to come up with something that will cause the amount withheld to be more equal to tax liability. To do that, you will have to project your income and determine your liability in advance.”

Tom Bloch, president of tax services at H & R Block, which prepares 10% of all individual tax returns, said the confusion this year will turn to disappointment next year, when many taxpayers won’t be getting the big tax refunds they are accustomed to.

Fewer Refunds Expected

“If they follow the instructions line by line, it’s unlikely they’ll get a refund,” Bloch said. “That’s because the new form is not designed to produce a refund; it’s designed to bring withholding and tax liability in balance.”

The tax law requires that employees fill out the new W-4 form by Oct. 1. Experts agree that a worker who waits until near the deadline to file the form is likely to find that withholding is out of balance, and might face a penalty.