IRS Admits It: New W-4’s Just Too Confusing

The Internal Revenue Service today acknowledged that its new W-4 tax-withholding form is too confusing and promised an all-out effort to simplify the instructions--at least for most taxpayers.

IRS Commissioner Lawrence B. Gibbs refused to set any deadlines, but added: “I hope in the next several weeks we will be able to come out with something. . . . We are working night and day.”

Gibbs also said that the IRS is trying to figure out a way to avoid imposing penalties on taxpayers who conscientiously try to have the proper amount withheld from their paychecks but fall short because the form is too complex.

Month of Complaints

Gibbs testified before the Senate Finance and House Ways and Means subcommittees that oversee the IRS. His command performance followed a month of complaints about the new W-4 form, which all taxpayers are required to file by Oct. 1 in order to adjust their withholding to meet the changes brought about by the landmark tax overhaul of 1986.

“The length of the form and number of computations have worked against our efforts to assist taxpayers in an early adjustment of their withholding for the effects of tax reform,” Gibbs said.

“If this is the result, then our efforts toward accuracy are less production, and . . . we risk having the public’s perception of tax reform negatively affected,” he added.

The new W-4 form is just like the one that has been used for 20 years--one-third page long and quite simple. But the instructions and work sheet designed to assist taxpayers in determining how many withholding allowances they should claim have been increased from almost two full pages to almost four.

Working on Simplification

Gibbs said the IRS hopes to develop quickly a simpler set of instructions and work sheets that will be usable by most lower- and middle-income taxpayers.

He said a second, alternative form, for those with more complex tax situations, will come later.

Sen. David Pryor (D-Ark.), chairman of the Senate subcommittee, said the new W-4 is a disaster and a fiasco. “The taxpayers are now seeing their introduction to ‘Tax Simplification’--the W-4 form that has started a prairie fire across America that is leading to a taxpayer’s revolt,” he said.