Publication 15-A and Publication 15-T specified new guidelines for 2022 concerning what an electronic Form W-4 system must provide to an employee. Treasury and the IRS have received questions concerning these new guidelines. This additional guidance clarifies some issues regarding Form W-4. Electronic Substitute to Form W-4 For 2022, general guidelines for electronic substitutes to paper Forms W-4 can be found in the 2022 Publication 15-A, Employer's Supplemental Tax Guide. Additional information concerning electronic substitutes to paper Forms W-4 can be found in the 2022 Publication 15‑T, Federal Income Tax Withholding Methods. The allowance of an electronic substitute for Form W-4 is not a license to simplify or modify the Form W-4. In particular, an electronic substitute must provide exactly the same information as the paper Form W-4, including the exact same wording from Steps 1c-4c (inclusive), and must allow an employee access to and use of all parts of the calculation shown on the paper Form W-4 and its worksheets. Implementation of new guidelines Some employers have asked how much time they have to implement a guideline specified by the IRS in Publication 15-A, Publication 15-T, or other forms, publications, or guidance when an effective date is not given. Employers are not required to set up a system to electronically receive Form W-4 from an employee. If set up, however, the electronic system must meet all the requirements and guidelines set forth in regulations and specified by the IRS in forms, publications, and other guidance. When a guideline concerning what an electronic Form W-4 system must provide the employee is specified without an effective date, it is effective immediately, and an employer must implement it in a reasonable amount of time. In most cases, a reasonable amount of time will not extend beyond 90 days. For example, if such a requirement is first published in IRS forms, publications, or other guidance, such as Publication 15-T, on December 1, 2022, a reasonable amount of time to implement the requirement will not normally extend beyond February of 2023. References to page numbers Some employers have asked whether substitutes to the paper form must replicate references on the face of the form to "page 2" or "page 3" of the Form W-4 when those references are not applicable. References to pages 2 and 3, when not applicable to the substitute form, should be replaced by appropriate references. For example, an electronic substitute form that links directly to the deductions worksheet should not reference "page 3" but should provide a link to the deductions worksheet. Requiring social security number and other personal information already stored in employer's electronic system Due to data privacy and cyber security concerns, some employers have asked whether electronic substitutes to Form W-4 must require employees to provide social security numbers and other personal information that is already stored in the employer's electronic Form W-4 system. An employer need not require an employee to resubmit a social security number or other personal information when completing an electronic Form W-4 as long as: The social security number and other personal information is stored in the employer's electronic system and the action being taken by the employee in the system is directly or indirectly linked to the electronically stored personal information, and The source of the social security number and other personal information stored in the employer's electronic system is a prior submission of a complete Form W-4 or USCIS Form I-9 (Employment Eligibility Verification) that is signed by the employee under penalty of perjury. The employer's electronic Form W-4 system must continue to ensure that the information received by the employer is the information sent by the employee and that the person accessing the system and furnishing the Form W-4 is the employee identified in the form. If a social security number or other personal information is separately used by the electronic Form W-4 system to verify the identity of the employee, the employee will need to resubmit the information for that purpose. Step 3 of 2022 Form W-4 To allow an employee access to and use of all parts of the calculation shown on the paper Form W-4, an electronic Form W-4 system cannot restrict Step 3 to dollar increments based on the number of qualifying children or dependents the employee may claim for purposes of the child tax credit or credit for other dependents. The 2022 Instructions for Form W-4 indicate that an employee can include other tax credits for which they are eligible in Step 3 by adding an estimate of the credit amount for the year to the credits for dependents and entering the total amount. An employee should be allowed to include an estimate of tax credits other than the child tax credit or credit for other dependents when entering an amount in an electronic Form W-4 system for Step 3. Paper Substitute to Form W-4 While the 2022 Publications 15-A and 15-T provide guidance concerning electronic substitutes to paper Form W-4, they do not address a substitute paper form. Some employers have inquired about guidelines for paper substitutes to the form. In lieu of the prescribed form, an employer may prepare and provide to employees a substitute paper form the provisions of which are identical to those of the prescribed form, including the exact same wording from Steps 1c-4c (inclusive), but only if the employer also: Provides employees with all the tables, instructions, and worksheets set forth in the Form W-4 in effect at that time, and Complies with all revenue procedures and other guidance prescribed by the Commissioner relating to substitute forms in effect at that time. Guidelines that apply for electronic substitutes for Form W-4 do not necessarily apply to a paper substitute Form W-4. For example, a paper substitute Form W-4 must include the form's instructions and worksheets rather than providing a web address where the payee can find them on IRS.gov. Employers are prohibited from accepting a substitute form developed by an employee, and an employee furnishing such form must be treated as failing to furnish a withholding allowance certificate.
