W-2 vs. W-4: What's the Difference?

ByG. Dautovic
January 25, 2022

Filing your tax returns can be complicated, especially if you are doing it for the first time. There are so many different forms, and it can be confusing simply to know which ones apply to you. There’s no need to panic, though, as we are here to help.

Below, we will take you through everything you need to know about W-2 vs. W-4 so that you can get a better understanding. 

The Purpose of W-2 and W-4 Tax Forms

So, let’s begin by taking a look at both tax forms and understanding what they have been designed for. A W-2 form is a year-end form that reports an individual employee’s earnings, including bonuses, tips, gross pay, and contributions to federal taxes, including Medicare and social security taxes.

Any extra withholdings, for example, contributions to retirement plans, would also feature on the W-2 form. 

On the other hand, the W-4 form is used so that an employee can indicate the amount of money they want to be withheld from their paycheck every month and sent to the IRS.

here are a number of different factors that will determine how much money should be held back, including personal withholding preference, number of dependents, and marital status. 

Who Completes W-2 and W-4 Forms?

So, do you fill out both forms? Or, does your employer do so? Well, it’s quite simple: the W-4 is filled in by the employee, while the employer fills in the W-2. Whenever someone starts a new job, this form should be filled out within their first month.

In terms of the W-2 form, the employer needs to submit this to the IRS at the end of each year, and this is something that they need to do for every employee on their team. Employers will also need to provide their workers with a copy of this form by the end of January.

So long as you paid the employee $600 or more for the year, you are going to need to fill in this form for them - this also means employees who have been paid less than $600 but have had social security or Medicare tax withheld.

When Should the W-4 and W-2 reports Be Filed?

It is vital to set aside time for your tax commitments every year to not end up falling behind. If you do, you could be subject to a significant fine. 

So, let’s start with the W-2 form. This is something that all employers will need to fill out every year. Both the IRS and the worker in question should receive a copy of this form by the 31st of January.

The W-4 form works a little bit differently. You are not going to need to fill this out every year. Instead, you will typically need to submit this form once you start a new job.

Nevertheless, if your financial situation changes, for example, you get a pay rise or reduce your hours and earn less, you need to fill out the form again. After all, it could be that you need to have more or less money withheld from your paycheck, so do keep this in mind. 

W-4 and W-2 Filings

When filing both of these forms, you need to make sure you meet the requirements in place. So, let’s take a look at each one in greater detail:

W-4 form filing requirements

As mentioned, you will typically need to fill out the W-4 form on your first day of employment. This most definitely needs to be done before receiving your first paycheck. Here are a few things that you need to keep in mind when it comes to W-4 forms:

  • Depending on where you are located, you may also need to file state withholding tax forms. This form will specify the income tax withholding in your state, and it also follows the same procedure as the W-4 form. You can head to the official website of the revenue and taxation department in the state you live in to determine state tax withholding form requirements.
  • You can amend your W-4 form at any time. Simply update the filling system with the new data and change your payroll information as needed.
  • Once you have completed your W4 form, you will have to give it to your employer, who should ensure that this file is kept for reference. It is advisable for employers to put the data into their payroll system to make sure they withhold the correct amount of tax from each paycheck.
  • An employer cannot tell an employee what they should put on their W-4 form. However, they can provide them with resources to help them figure out the correct amount for withholding. Some payroll and HR solutions enable employees to complete their W-4 forms electronically.

W-2 form filing requirements

Next, let’s look at some of the specifics regarding filing out the W2-form. When it comes to W-2 vs. W-4 form differences, the key one is that the former is the employer’s sole responsibility, while the employee fills in the latter. The SSA advises that these forms are filed electronically, but you do have the option of completing them physically if you so prefer.

To fill out the W-2 form for every one of your workers, you will need some specific information. This includes the following:

  • The tax withholdings and wages for the employee
  • The name, address, and ZIP code of the employee
  • Your name, ZIP code, and address
  • Your employer identification number, otherwise known as EIN
  • The social security number of your employee

You need to make sure that the W-2 form for the prior year is completed, distributed, and filed no later than the 31st of January of the current year. You can use the IRS website to get the blank W-2 forms that you need.

In many cases, businesses will rely on their payroll administrator or accountant (if they have one) to help them fill in their W-2 form. Furthermore, a lot of the tax software solutions available today give you the ability to file your W-2 forms in this manner.

Final Words on W-2 vs. W-4

So there you have it: everything you need to know about the differences between W-4 and W-2 tax forms. We hope that this has given you a better understanding of how these tax forms work and what needs to be considered when filing them out.

It is essential to make sure that you always report your information accurately when dealing with these documents.

FAQ

What is a W-4 used for?

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The W-4 is a type of IRS tax form that users fill in to inform their employer of how much money they should withhold from their paycheck and keep back for federal taxes. It is important to complete your W-4 form accurately so that you do not end up owing a large amount of money once tax time arrives.

Is W-2 and T4 the same?

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Many people get W-2 and T4 forms confused with one another.  A T4 slip will report the amount of income you have earned in Canada, as well as the amount of taxes that have been taken away from your paycheck. It’s the Canadian equivalent of the W-2 used in the US and can be filed in the United States, too, if you’re earning income in Canada.

What is W-2 used for?

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A W-2 tax form shows vital information about the income you have earned from your employer, the benefits provided, and the amount of taxes that have been withheld from your paycheck, as well as some other crucial pieces of information from that financial year. You will use this form when filing for your state and federal taxes.

Do I need to fill out a W-4?

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Not everyone is going to have to fill out the W-4 form. It has been designed for employees who wish to tell their employer how much tax they should keep from every paycheck. Therefore, if we compare W-2 vs. the W-4, for example, the latter needs to be filled in every year by the employer, while employees only need to deal with W-2’s when first getting hired or when their contract terms and salary change.

About author

I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.

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