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What is the difference between a W-2 and a W-4 form?

There is a lot of confusion when it comes to forming W4 and W2. The IRS (Internal Revenue Service) W2 form and W4 both have to do with employers paying their employees, but they’re different in function.

The significant difference between these two forms lies in who fills out the documents. This blog will brief you on everything you need to know about W2 and W4 forms.

W2 forms:

Form W2 is used to record all wages earned by an employee. It also includes the tax amount to be withheld from their paychecks throughout the year. The form is completed by an employer, and both employees and IRS will have a copy of the W2 form at the end of the year. This gives them the information they need to file and process tax returns at the end of the year.

W4 forms:

The form W4 is completed by an employee. It determines how much tax employees should withhold from their paychecks. When starting a new job, employees complete Form W4 to determine the withholding tax factor. This amount is determined by your number of factors such as total income, number of dependents, custom adjustments, and so on.

A quick overview of the form W2 and W4

Form W2

  • Record of all wages and taxes withheld
  • Filled by an employer
  • Used by the employee/IRS when filing/processing tax returns

Essentially the W2 is a record of an employee’s income.

What’s the purpose?

Form W4: The W4 form indicates how much should be withheld from each employee’s paycheck and submitted to the IRS. The amount would depend on various factors such as the employee’s marital status, the number of dependents, and personal withholding preference.

Form W2: This is a year-end form that reports an individual employee’s earnings, including gross pay, tips, and bonus. It also includes employees’ federal tax contributions, encompassing social security and Medicare taxes. Any additional withholdings such as contributions to retirement plans would also appear on the W2 form.

When it is submitted?

Form W4: Form W4 is typically filled by employees once they begin a new job. However, employees need to fill out the form again anytime if their financial situation changes. Also, they need to be more or less withheld from a paycheck.

Form W2: As said earlier, the W2 form is filled out each year by employers. Employers would need to submit a copy of the W2 form to their employees and the IRS by January 31 to report holdings for the previous year. If the employers missed the deadline, they have to face steep fines. As for the W2 form 2021, employers must fill-up the form before the deadline.

W4 VS W2: Wrapping up!

The difference between W2 and W4 forms is now completely clear. To make it easy, remember, the W4 is your game plan for how points (income and withholding taxes) will be scored, whereas, the W2 form is the scoreboard as points (earnings and actual withholdings) are scored. Once you fill out these forms, you can leverage a free paystub generator to make your employees happy and improve the efficiency of your organization.

Related Article: What is Pay Cycle and What Pay Cycle is Best for your Organization?

FAQ's

What is the W4 form?

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The W4 form is an IRS tax form that employees complete when starting a new job or when they want to update their tax withholding information. The form informs employers about the amount of federal income tax to withhold from an employee's paycheck.

What is the W2 form?

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The W2 form is an IRS tax form that employers use to report an employee's wages and tax withholding for the year. Employers are required to provide a W2 form to each employee by January 31st of the following year.

How are the W4 and W2 forms related?

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The W4 form is used to determine how much federal income tax to withhold from an employee's paycheck, while the W2 form reports how much federal income tax was withheld and paid to the IRS.

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