Temporary and proposed regulations issued by the Treasury Department eliminate the requirement for employers to 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. This does not mean that Forms W-4 are not still subject to review by the IRS. However, employers will no longer have to submit them unless directed to do so in a written notice or as required in future published guidance.

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. As a result, the IRS will use information already reported on Forms W-2 to identify workers with withholding compliance problems more effectively. 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 Treasury Department and the IRS are inviting comments on these new regulations by July 5, 2005.

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...back to 14 April 2005

Further information:
IRS Strengthens Withholding Compliance Program; Reduces Paperwork for Employers
April 2005 Plain Language Regulations