IRS to Introduce Alternative W-4 Form Monday

The Internal Revenue Service plans to introduce a second W-4 form, giving taxpayers two choices of how to calculate the amount of federal income tax withheld from their paychecks, an IRS official said Friday.

The IRS, peppered with complaints since unveiling a new four-page W-4 package last November, promised that the second form, to be introduced on Monday, will be considerably less confusing.

The official, who spoke on condition of anonymity, said every employee would be allowed to choose which form to use.

Less Risk in Long Form

For millions of taxpayers, the longer form would increase chances that the taxes withheld would be close to their actual tax liability.

The shorter version would be much easier to calculate but, the official said, there would be a greater chance that too much or too little tax would be withheld, especially for those with non-wage income.

Under the 1986 tax overhaul, every person who works for another is required to file a W-4 by Oct. 1. The IRS has cautioned that a worker who waits until the deadline to fill out the form risks underwithholding, which could result in having to pay a penalty.

IRS Commissioner Lawrence B. Gibbs, in answering complaints from Congress about the W-4 problems, promised to look for a way to waive those penalties for taxpayers who conscientiously try to have the right amount withheld but fail because the form is too confusing.

Sen. David Pryor (D-Ark.), chairman of the Senate Finance subcommittee that oversees the IRS, had said: “The new W-4 form is a disaster. It is an absolute fiasco.” He added that the form “has started a prairie fire across America that is leading to a taxpayers’ revolt.”