The Major difference between IRS Form W-2 and W-4 is that when an employee starts a new job, they are eligible to file the Form W-4 to decide how much tax to withhold from an employee’s paycheck. On the other hand, an employee can file the Form W-2 every end of the year that indicates how much an employer paid and how much tax is withheld during the year.

When setting up a business, some factors should be considered to nail the industry, be it service-based or product-based. Out of which, tax liabilities remain the point of focus. Studies show that systematic analysis of the total tax liabilities helps organizations make better business decisions. It is possible through various courses of action, such as payroll tax forms.

Internal Revenue Service (IRS) requires every employer and employee to fill out payroll tax forms known as Form W2 and Form W4, respectively. Users have noticed a major difference between w-2 and w-4 tax forms. These forms are positioned significantly in the business hierarchy and categorized as payroll tax forms. However, there are a few differences between them. This blog aims to inform you about payroll tax forms W-2 vs. W-4 and their multiple uses. Let us have a concentrated look at the following sections!

What is a W-2 Form

Form W-2, also known as IRS Form W-2 Wage and Tax Statement, is a year-end tax document for which employers are held responsible. In simpler terms, Form W-2 is a tax form that employers or business owners must provide to the Internal Revenue Service (IRS) and each employee at the end of the tax year. Form W-2 expresses the annual wages of employees, which helps in sorting out the monetary calculations. It points out the exact amount of gross earnings of the employees, total tax proportion out of their income, deductions, savings, medical care earnings, etc.

W-2 Form

Form W-2 displays the earned wages of employees to the IRS. Employers are supposed to provide it by the end of January or early February for employees to fill it out. Likewise, after filling in their details, they become W-2 Employees. It means that employers give them their income after deducting the tax amount. Employers keep an informational record of the payroll forms. Later, they even share it with the government as well. Pieces of information available in the W-2 are useful during income tax filing when the employees retire.

Generally, employers make numerous copies of W-2, but they should necessarily make six copies for the following use:  

  • Copy A- This copy is for the Social Security Administration (SSA).
  • Copy B- This copy is for those employees who have their federal tax returns
  • Copy C- This copy of the W-2 takes care of the employee’s records.
  • Copy D- This copy of the W-2 takes care of the employer’s records.
  • Copy 1- This copy of the W-2 is for states, cities, or local tax departments.
  • Copy 2- This copy of the W-2 needs to be filled by employees. It should include their state, city, or local tax returns.

What is a W-4 Form

Form W-4 or Employee’s Withholding Certificate, is an Internal Revenue Service (IRS) form. Employees who work in an organization fill out the W-4 to let their employers know how much tax to withhold from their income or paycheck. Employees should fill it out correctly because incorrections lead to unnecessary taxes during the return file.

Form W-4

Every new employee joining a particular organization must fill out the W-4.  The entire system got revised in 2020, which simplified W-4. Filling out the Withholding Form does not necessarily restrict an employee’s tax to the filled amount. The information is subject to change and employees can change it whenever they want. However, IRS subjects W-4 form as a necessary document. Moreover, employees fill W-4 , whether new or old. 

The structure of the W-4 follows five sections in total. However, section numbers One and Five implies on employees. Moreover, filling out the remaining part helps the employer determine the exact amount to be withheld from the employee’s yearly income.

Some mandatory details includes:

  • Name 
  • Address
  • Social Security Number
  • Work Information
  • The Status Of Filing
  • Total Number Of Dependents 
  • Signature 

W-2 vs W-4: What’s the Difference

The features of both forms, W-2 and W-4, are not entirely homogeneous. Both are for business purposes, but the person filling them out marks a difference. Understanding the differences may be difficult because of the apparent similarities.

The W-2 represents the employers of organizations. Furthermore, employees fill the form every year. Through W-2, employers track their employees’ income, including everything from their total income to savings. W-4, on the other hand, is an area of focus for the employees. It records an amount (variable as it is subject to change) that must be withheld as taxes. 

One question that comes to all of our curious minds is “is w4 the same as w2″ ? If put compactly, W-2 determines how much employees should be taxed on their yearly paycheck or income, and W-4 marks the total amount of money employees make every year by working in an organization.

How Do The Forms W-2 And W-4 Work

Form W-2

The Internal Revenue Service requires eligible employers to send W-2 forms to their employees before Jan 31st, following the close of the tax year.  Employers must submit these forms with the SSA (Social Security Administration) and the IRS by the end of January, however, may file for a 30-day extension by filing Form 8809.

Also, even if the employer requests and gets an extension to submit the W-2 form with the SSA and IRS, they still need to submit the employee’s copies of their W-2 forms by the 31st of January unless they also drop a request for an extension post the due date.

The W-2 consists of several compartments or boxes on the page’s left and right sides These sections represent various things such as the total amount of taxes, total income, medical aid taxes, tips, and more.

Let us look at the sections that are available in the W-2:

  • Box 1: represents the total wages or income, medical aid, tips, and other compensation expenses of an employee.
  • Box 2: represents the total federal tax withheld from an employee’s income.
  • Box 3: represents the Social Security Tax withheld from an employee’s income.
  • Box 4: represents the total amount withheld for Social Security Tax from an employee’s income.
  • Box 5: represents income that is subject to medical taxes
  • Box 6: represents the total amount withheld as Medical Care Taxes from an employee’s income.   
  • Box 7: represents the amount of Social Security Tip given to the employers by employees.
  • Box 8: represents the amount of tips distributed by the employers to the employees (this does not include in the W-2 Box 1, 3, 5, or 7).
  • Box 9: as this represents a defunct-tax perk, it is left unfilled.
  • Box 10: reports the total amount of care benefits for dependents provided by the employers to their employees.
  • Box 11: reports the deferred compensation received by employees from their employer’s non-qualified plan (non-taxable).
  • Box 12: represents a wide section with various benefits and deductions from an employee’s income. It has code boxes ranging from A to HH.
  • Box 13: represents three sub-boxes that report income that is not subject to the income tax if an employee has participated in the “Employer-Sponsored Retirement Plan.
  • Box 14: reports additional taxes other than employees’ income that is not shown in the W-2.
  • Box 15-20: remaining few sections from 15 to 20 represent state and local taxes that include the total amount subject to the taxes and the amount withheld from an employee’s income.

W-2 Form

Form W-4

Employees fill the W-4 form and submit it to their employers. It provides information like how much tax to be withheld from their income. It makes the entire process systematic, simplifying it for the IRS to collect federal income tax.  

Filling out the W-4 helps complete the process on time. Employees who fill out the W-4 give their employers a clear picture of everything. Later, the information of form becomes useful in calculating annual taxes.  

Form W-4

How To Fill W-2 And W-4 Online

  • W-2 Form: Wage And Tax Statement 

Employer fills the W-2 Form so submitting it to the IRS becomes their responsibility. To help ease the process, the IRS invented ways. Employers can file W-2 electronically or online after successfully registering on Business Services Online (BSO)

The W-2 is readily available on the official webpage of SSA. After completion, employers should provide a copy to the IRS and their employees by the 31st of January. The forms are available on SSA’s Employer W-2 Filing Instruction and Information Web Page. Furthermore, website is highly secure, and you don’t need to pay a single penny for the completion.

  • W-4 Form: Employee’s Withholding Certificate

The good part about the W-4 is that employees who fill out the W-4 form do not need to submit it to the IRS themselves. However, they need to fill it out and send it to their respective employers. 

The employers then settle things on their own by re-checking the forms of each employee and submitting them to the IRS altogether. 

Conclusion

To conclude, within the first month of work, every employee contributing to the company’s payroll needs to fill out a W-4 form. Companies must give the Internal Revenue Service a W-2 form for each employee every year.

Employees use the W-4 form to inform their employers of the amount of tax that should be withheld from their paychecks. In contrast, Employers use the W-2 form to record how much money employees were paid.  Correspondingly, to record the amount of tax taken from their wages throughout the year. 

FAQs

1. Who is Eligible for Filling out the W-2 and W-4 Form

The employers and employees fulfill the eligibility. All the people working in an organization fill W-2 and W-4 content. Likewise, organization can be product based as well as service based.

2. What is the Completion Date for the W-2 and W-4

The completed W-2 and W-4 forms must be submitted to the Internal Revenue Service (IRS) by late January i.e., not later than the 31st of January for the following tax year. 

3. Are W-2 and W-4 the Same

No, W-2 and W-4 are not the same forms. Although they are categorized as Payroll Tax Forms, who fills them out brings a difference. The W-2 is filled out by the employers whereas the W-4 by the employees. 

4. How many Allowances Should I Claim on my W-4

An employee can claim anywhere between 0 to 3 allowances. The more allowances, the lesser the tax. These fewer allowances result in a more withholding income, and such cases support employees asking for a refund. 

5. When are W-2 and W-4 considered Completed

Employees should fill out the W-4 within a month of their placement, and employers should also send out W-2 forms to the IRS. It is considered complete when employers submit both forms to the IRS and simultaneously, provides the copy of the W-2 to the employees.

6. What is Tax Liabilities on W-4

In financial terms, your tax liability is the whole amount of tax you owe before any withholdings or payments have been made. The word “liability” comes from the same source as “responsibility”, so think of your tax liability as the amount you owe the government. You can claim exemption from income tax withholding by filling out the “Tax liabilities” section of a W-4. Employers can use a W-4 to learn how much money an employee would like withheld from their paychecks to pay federal income taxes.

7. Does QuickBooks Send Out W-2

If you choose to automate your taxes and forms turned on (we pay and file for you), Intuit will mail W-2s to your employees from January 20 to January 31. If you need to start on January 13, you can print them again on plain paper. You can print W-2s if you start using QuickBooks Online Payroll or any year before. QuickBooks and w-2 forms can be automated together for better tax-based visibility and clarity. 

Moreover, if you use Core, Premium, Elite, Full Service, or Assisted QuickBooks Payroll versions, Intuit will automatically print and mail your employees’ W-2s.