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There is a lot of confusion when it comes to forming W-4 and W-2. The IRS (Internal Revenue Service) W-2 form and W-4 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 W-2 and W-4 forms.
W-2 forms:
Form W-2 records all wages earned by an employee and includes the tax amount to be withheld from their paychecks throughout the year. An employer completes the form, and both employees and the IRS will have a copy 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.
W-4 forms:
An employee completes the W-4 form. It determines how much tax employees should withhold from their paychecks. When starting a new job, employees complete Form W-4 to determine the withholding tax factor. This amount is determined by a number of factors, such as total income, number of dependents, custom adjustments, and so on.
A quick overview of the forms W-2 and W-4
Form W-2
- 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 W-4: The W-4 form indicates how much should be withheld from each employee’s paycheck and submitted to the IRS. The amount depends on various factors, such as the employee’s marital status, the number of dependents, and personal withholding preference.
Form W-2: This is a year-end form that reports an individual employee’s earnings, including gross pay, tips, and bonuses. 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 W-2 form.
When is it submitted?
Form W-4: Form W-4 is typically filled out by employees once they begin a new job. However, employees need to fill out the form again anytime their financial situation changes. Also, they need to be more or less withheld from a paycheck.
Form W-2: As said earlier, employers fill out the W-2 form each year. Employers must submit a copy to their employees and the IRS by January 31 to report holdings for the previous year. If they miss the deadline, they face steep fines. As for the W2 form 2021, employers must fill it out before the deadline.
W4 VS W2: Wrapping up!
The difference between W-2 and W-4 forms is now completely clear. To make it easy, remember that the W-4 is your game plan for how points (income and withholding taxes) will be scored, whereas the W-2 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.
