diff --git a/compiler/src/dotty/tools/dotc/Compiler.scala b/compiler/src/dotty/tools/dotc/Compiler.scala
index fe1ce0f02742..16fcaf694b98 100644
--- a/compiler/src/dotty/tools/dotc/Compiler.scala
+++ b/compiler/src/dotty/tools/dotc/Compiler.scala
@@ -67,6 +67,7 @@ class Compiler {
          new NormalizeFlags,         // Rewrite some definition flags
          new ExtensionMethods,       // Expand methods of value classes with extension methods
          new ExpandSAMs,             // Expand single abstract method closures to anonymous classes
+         new ShortcutImplicits,      // Allow implicit functions without creating closures
          new TailRec,                // Rewrite tail recursion to loops
          new ByNameClosures,         // Expand arguments to by-name parameters to closures
          new LiftTry,                // Put try expressions that might execute on non-empty stacks into their own methods
@@ -77,7 +78,6 @@ class Compiler {
          new PatternMatcher,         // Compile pattern matches
          new ExplicitOuter,          // Add accessors to outer classes from nested ones.
          new ExplicitSelf,           // Make references to non-trivial self types explicit as casts
-         new ShortcutImplicits,      // Allow implicit functions without creating closures
          new CrossCastAnd,           // Normalize selections involving intersection types.
          new Splitter) ::            // Expand selections involving union types into conditionals
     List(new ErasedDecls,            // Removes all erased defs and vals decls (except for parameters)
diff --git a/compiler/src/dotty/tools/dotc/transform/MegaPhase.scala b/compiler/src/dotty/tools/dotc/transform/MegaPhase.scala
index 2d2cbf4de3aa..868c48b0c0ae 100644
--- a/compiler/src/dotty/tools/dotc/transform/MegaPhase.scala
+++ b/compiler/src/dotty/tools/dotc/transform/MegaPhase.scala
@@ -156,7 +156,7 @@ class MegaPhase(val miniPhases: Array[MiniPhase]) extends Phase {
   private val cpy: TypedTreeCopier = cpyBetweenPhases
 
   /** Transform node using all phases in this group that have idxInGroup >= start */
-  def transformNode(tree: Tree, start: Int)(implicit ctx: Context) = {
+  def transformNode(tree: Tree, start: Int)(implicit ctx: Context): Tree = {
     def goNamed(tree: Tree, start: Int) = tree match {
       case tree: Ident => goIdent(tree, start)
       case tree: Select => goSelect(tree, start)
@@ -169,6 +169,8 @@ class MegaPhase(val miniPhases: Array[MiniPhase]) extends Phase {
     def goUnnamed(tree: Tree, start: Int) = tree match {
       case tree: Apply => goApply(tree, start)
       case tree: TypeTree => goTypeTree(tree, start)
+      case tree: Thicket =>
+        cpy.Thicket(tree)(tree.trees.mapConserve(transformNode(_, start)))
       case tree: This => goThis(tree, start)
       case tree: Literal => goLiteral(tree, start)
       case tree: Block => goBlock(tree, start)
diff --git a/compiler/src/dotty/tools/dotc/transform/ShortcutImplicits.scala b/compiler/src/dotty/tools/dotc/transform/ShortcutImplicits.scala
index 77e735bdfe0a..3cc8b68233d0 100644
--- a/compiler/src/dotty/tools/dotc/transform/ShortcutImplicits.scala
+++ b/compiler/src/dotty/tools/dotc/transform/ShortcutImplicits.scala
@@ -48,7 +48,7 @@ import collection.mutable
 class ShortcutImplicits extends MiniPhase with IdentityDenotTransformer { thisPhase =>
   import tpd._
 
-  override def phaseName: String = "shortcutImplicits"
+  override def phaseName: String = ShortcutImplicits.name
 
   override def changesMembers = true  // the phase adds "direct" methods
 
@@ -138,6 +138,14 @@ class ShortcutImplicits extends MiniPhase with IdentityDenotTransformer { thisPh
     if (shouldBeSpecialized(original)) {
       val direct = directMethod(original)
 
+      // Move @tailrec to the direct method
+      original.getAnnotation(defn.TailrecAnnot) match {
+        case Some(annot) =>
+          direct.addAnnotation(annot)
+          original.removeAnnotation(defn.TailrecAnnot)
+        case _ =>
+      }
+
       def splitClosure(tree: Tree): (List[Type] => List[List[Tree]] => Tree, Tree) = tree match {
         case Block(Nil, expr) => splitClosure(expr)
         case Block((meth @ DefDef(nme.ANON_FUN, Nil, clparams :: Nil, _, _)) :: Nil, cl: Closure) =>
@@ -167,3 +175,7 @@ class ShortcutImplicits extends MiniPhase with IdentityDenotTransformer { thisPh
     else mdef
   }
 }
+
+object ShortcutImplicits {
+  val name = "shortcutImplicits"
+}
diff --git a/compiler/src/dotty/tools/dotc/transform/TailRec.scala b/compiler/src/dotty/tools/dotc/transform/TailRec.scala
index 61d4b232ba3b..6ef41144204b 100644
--- a/compiler/src/dotty/tools/dotc/transform/TailRec.scala
+++ b/compiler/src/dotty/tools/dotc/transform/TailRec.scala
@@ -70,6 +70,8 @@ class TailRec extends MiniPhase with FullParameterization {
 
   override def phaseName: String = TailRec.name
 
+  override def runsAfter = Set(ShortcutImplicits.name) // Replaces non-tail calls by tail calls
+
   final val labelFlags = Flags.Synthetic | Flags.Label
 
   /** Symbols of methods that have @tailrec annotatios inside */
diff --git a/tests/neg/i4196.scala b/tests/neg/i4196.scala
new file mode 100644
index 000000000000..ba197eaa2c5d
--- /dev/null
+++ b/tests/neg/i4196.scala
@@ -0,0 +1,8 @@
+object Test {
+  @annotation.tailrec
+  def foo(i: implicit Unit => Int): implicit Unit => Int =  // error: method not tail recursive
+    if (i == 0)
+      0
+    else
+      foo(i - 1)*2 // error: Cannot rewrite recursive call not in tail position
+}
diff --git a/tests/pos/i4196.scala b/tests/pos/i4196.scala
new file mode 100644
index 000000000000..24662df97962
--- /dev/null
+++ b/tests/pos/i4196.scala
@@ -0,0 +1,8 @@
+object Test {
+  @annotation.tailrec
+  def foo(i: implicit Unit => Int): implicit Unit => Int =
+    if (i == 0)
+      0
+    else
+      foo(i - 1)
+}