IRS Strengthens Withholding Compliance Program; Reduces Paperwork for Employers
(Original Release 4/13/2005)
The IRS has stepped up its withholding compliance program by making more effective use of information reported on W-2 wage statements to ensure that employees have enough federal income tax withheld from their paychecks. At the same time, employers are no longer required to submit potentially questionable Forms W-4 to the IRS. (refer to citation IR-2005-45, April 13, 2005)
WASHINGTON —
Employers will no longer be required to send copies
of potentially questionable W-4 withholding forms to
the Internal Revenue Service, the IRS announced
today.
At the same time, the IRS will step up its withholding
compliance program by making more effective use of
information reported on W-2 wage statements to
ensure that employees have enough federal income tax
withheld from their paychecks.
“We can eliminate this reporting requirement without hurting
our enforcement efforts,” said IRS Commissioner Mark
W. Everson. “Wherever we can, we try to reduce
burden.”
Temporary and proposed regulations, issued today by the
Treasury Department, eliminate the requirement that
employers send copies of potentially questionable
Forms W-4, Employee’s Withholding Allowance
Certificate, to the IRS. The new regulations take
effect on April 14, 2005.
In the past, employers had to send to the IRS any Form W-4
claiming more than 10 allowances or claiming
complete exemption from withholding if $200 or more
in weekly wages was expected.
Forms W-4 are still subject to review by the IRS. However,
employers will no longer have to submit them to the
tax agency, unless directed to do so in a written
notice to the employer or pursuant to specified
criteria set forth in future published guidance, the
IRS said.
This change follows a comprehensive review of the withholding
compliance program conducted recently by the IRS,
which found that withholding noncompliance remains a
problem with some employees.
Subsequently, the IRS has developed a process to use
information already reported on Forms W-2 to more
effectively identify workers with withholding
compliance problems. In some cases where a serious
under-withholding problem is found to exist for a
particular employee, the IRS will notify the
employer to withhold income tax from that employee
at a more appropriate rate. The new process will
also enable the IRS to more effectively address
situations in which employees fail to file a federal
income tax return.
