Simplified Version Should Be Available by May 1 : OMB Still Tinkering With W-4 Form

WASHINGTON —  The new streamlined W-4A withholding form has one more hurdle to clear before it can be sent to taxpayers, but officials at the Office of Management and Budget indicated Friday that it should win final approval next week after a few minor changes.

“Our suggestions (for changes) are not radical,” Wendy Lee Gramm, administrator of the OMB office responsible for reviewing federal forms, told a Senate subcommittee. The Internal Revenue Service, she said, “has done an excellent job of simplifying a complex form.”

The new forms should be distributed around May 1, government officials said, making it easy for taxpayers who have just completed their tax filings to compute their new withholding allowances.

Quick Approval Urged

The IRS, which was heavily criticized over the four-page version of the withholding form that it released earlier, defended the new document as a marked improvement and urged quick approval.

“We hope that no one loses sight of the fact that there is a cost to further delays . . . “ said Deputy Commissioner James I. Owens. “As long as the simpler alternative is not available to taxpayers, they must continue using the four-page form.”

But even the new form could be improved, OMB’s Gramm suggested, to make it clear to taxpayers that they may use the shorter W-4A, even if they have some interest and dividend income. It could also be modified to alert an estimated 48 million taxpayers with relatively simple tax situations that they have to complete only a few lines of the form.

The IRS expects more than 94 million wage-earners to file withholding forms this year.

Any taxpayer may use either of the forms, but the agency has recommended use of the longer W-4 form for those who have large amounts of non-wage income, saying it will provide a more accurate withholding.

The new W-4A form was developed by the IRS in response to harsh criticism about the earlier W-4 form’s complexity.

At the hearing, Sen. Warren B. Rudman (R-N.H.) told Gramm that, in his travels among his constituents: “I didn’t hear much about Iran and diversion of funds to the contras in the last few weeks, but I’ve sure heard a lot about this.”