Newspaper article THE JOURNAL RECORD

IRS Prepares New Wage Withholding Form

Newspaper article THE JOURNAL RECORD

IRS Prepares New Wage Withholding Form

Article excerpt

WASHINGTON - The Internal Revenue Service has presented a new and longer W-4 wage withholding form that more than 100 million American workers will have to complete within the next several months.

The form, which is twice as long as the old version and somewhat more complicated, was mandated by the Tax Reform Act of 1986 to assure that individuals adjust the amount of tax withheld from their paychecks to reflect sweeping changes in the new tax law.

It will be the first time since withholding began in 1943 that all American workers at once will be required to fill out W-4's. Normally employees do not have to file new W-4's with their employer unless a significant change in their financial or family status has occurred.

A W-4 shows the employer how many exemptions to take into account in calculating how much tax to withhold from workers' paychecks.

In completing the new form, most workers will find they are able to claim the same number of withholding allowances as before. Most taxpayers will also find less tax withheld from their weekly paychecks because of the legislative changes.

Others, however, who claim extra withholding allowances will have to reduce the number since they will no longer be able to use certain tax benefits under the new law, such as income averaging, deductions for Individual Retirement Account contributions and various itemized deductions.

In either case, the task of filling out the W-4 forms is likely to create some confusion for millions of Americans. ``It's a lot harder to fill out than the 1040A or 1040EZ tax return forms,'' said David Keating, executive director of the National Taxpayers Union, a taxpayer lobbying group.

The W-4 form that workers file with their employer is only slightly altered. But the package of accompanying instructions and worksheets was increased in size to four pages - double the length of the old version.

The task will vary, depending on how complex or how simple each worker's tax situation is. Some people will be able to complete the new W-4 by just filling out five lines.

Lawrence B. Gibbs, the commissioner of internal revenue, said at a news conference that the possibility of confusion was unavoidable.

``Any time you have change, there is potential complexity and potential for confusion,'' he said. ``A simpler form might be more popular now. But the positive reception would be short-lived - indeed, come January 1988, when so many taxpayers would learn they owed thousands more in taxes and, in some cases, penalties as well.''

IRS officials said the forms would be shipped to employers over the next few weeks. Employers, in turn, will make the forms available to employees. The law technically gives a worker until next Oct. 1 to file a new W-4 with the employer. …

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