W-2 vs. W-4 Form: Key Differences, Filing Rules, & Purpose

The main difference between a W-2 vs. a W-4 form is that a W-2is filled out by employers to report all wages paid to employees as well as the taxes withheld from their employees’ earnings.

Meanwhile, a W-4 form is filled out by employees to help employers determine the correct amount of tax to withhold from employee salaries or wages.

Knowing how to distinguish a W-2 from a W-4 form is a must if you want to avoid incurring penalties or facing additional paperwork.

Key Takeaways

• Differentiating a W-2 vs. a W-4 form is a must for businesses to ensure they withhold the correct taxes from their employees’ wages and salaries.
• One of the main distinctions between a W-2 and a W-4 form is that W-2 forms are furnished by employers to report paid annual wages and withheld taxes, while W-4 forms are filled out by employees to provide personal identification and tax information.
• Unlike employees, independent contractors and non-employees receive a 1099 form to report their income and use a W-9 form to provide their personally identifiable information.

What’s a W-2 Form, and What’s Its Purpose?

A W-2 form, or Wage and Tax Statement, is a tax document that enumerates all the wages or salaries, tips, bonuses, benefits, and all other types of compensation paid to employees.

The said form also outlines all federal, state, and local income taxes as well as deductions for retirement, healthcare, or savings benefits withheld from employee earnings.

Employers are obligated to distribute copies of their employees’ W-2 forms. Otherwise, it can be difficult for employees to file their returns without a copy of their Wage and Tax Statement.

It is possible for an employee to have multiple W-2 forms, particularly if they have more than one job or have worked at different companies throughout the year.

Another instance where receiving more than one Form W-2 is possible is when a company changes its ownershipor payroll provider.

Such changes entail business owners providing their employees with updated versions of their Wage and Tax Statements.

What’s a W-4 Form, and What’s Its Purpose?

A W-4 Form, or Employee’s Withholding Certificate, is an IRS form that full-time employees fill out to help employers determine the amount of tax to withhold from their earnings.

The information provided on an employee’s W-4 form, such as their filing status and Social Security Number, also ensures that any applicable tax deductions are reflected on their federal, state, and local tax withholding.

For instance, there are specific tax rates and tax credits that apply depending on whether a worker indicates that they are married filing jointly or separately on their W-4.

An employee typically has to fill out a new W-4 form whenever they start a new job. In the same manner, they must update their Form W-4 information whenever they change their filing status following a marriage, legal separation, or a significant change in their financial situation.

The failure to fulfill or secure a duly updated W-4 form can leave employees overpaying or underpaying their taxes. For instance, they may be eligible to claim a Child Tax Credit but have failed to take advantage of the said tax break simply because their W-4 form does not declare their dependents.

W-2 vs. W-4: Key Differences

The key differences between a W-2 vs. a W-4 form can be identified by defining who is responsible for filling out which form.

That said, the table below outlines the important details that will help you decide when to use a W-2 or a W-4 form:

Filing a W-2 Form in 3 Easy Steps

Employers play a significant and chief role in filing a W-2 form.

Whether you’re preparing W-2 form copies for a handful of employees or a larger workforce, keeping the following steps below in filing a Wage and Tax Statement helps you avoid incurring mistakes or missing the IRS deadline:

#1. Fill out the W-2 Form

Employers must fill out the W-2 form with all the essential wage details, withholding tax information, and contributions for each of their employees.

Business owners can use their payroll records as a basis for inputting the correct details for each employee.

Checking with their employees to verify that the information on their W-4 forms remains correct and up-to-date will also help save time and effort when filling out the W-2 forms.

#2. Determine Whether to File Electronically

Electronic filing or e-filing is a must for at least ten information returns. The Internal Revenue Service recommends that employers file their W-2 forms and other information returns electronically to save time and effort.

To file Wage and Tax Statements electronically, employers can find an IRS Free File partner, use tax preparation software, or get assistance from a tax preparer who is authorized to e-file returns.

#3. Send the Correct W-2 Copies to the Appropriate Recipients

The recipients of a W-2 and a W-4 form differ as well because employees aren’t the only recipients of W-2 forms.

Every business or employer that needs to furnish a Form W-2 must distribute six copies of the said tax document and distribute them to the following recipients:

• Copy A. It is sent to the Social Security Administration (SSA).

• Copy 1. This copy is to be distributed to either the local, city, or state tax department for state and local income tax reporting purposes.

• Copy B. Copy B is reserved for employees to use when filing their federal tax returns.

• Copy C. Employers send this copy to employees for them to file in their personal records.

• Copy 2. Employees need Copy 2 of their Wage and Tax Statement to file their returns in their locale, city, or state.

• Copy D. This copy is for employers' record-keeping purposes and must be kept in a company’s file for a minimum of four years.

Filing a W-4 Form in 4 Easy Steps

Filing a W-4 form is the employee’s responsibility. Between a W-2 and a W-4 form, filing the latter has special and additional instructions depending on whether an employee has multiple jobs or is filing jointly.

That said, here are the steps on how to fill out a W-4:

#1. Input the Necessary Information

If there are key differences that help identify a W-2 from a W-4 form, there are also similarities, such as the need for taxpayers or employees to provide personal details.

Some of the basic information that employees must provide on their W-4 form includes their name, SSN, address, and filing status.

#2. Consider Whether You Have Multiple Jobs

Employees with multiple jobs must take into account the following options and rules:

• Check the box that lets employers withhold default tax rates if they belong to a high-income household or if all other jobs generate roughly the same amount of earnings.

• Employees with high-paying jobs should also fill out the fields from Step 2 through Step 4 (until 4(b)) of their Form W-4.

• For taxpayers filing jointly, they can check Box 2(c) on each of their W-4 forms if they, along with their spouse, each have jobs that generate almost the same income.

It is important to note that employees with more than one job are only allowed to claim a tax exemption or deduction on one W-4 form.

If an employee does not want their employer to know about their other jobs, they can use Line 4(c) to inform employers that they can withhold an additional amount from their earnings to pay for their taxes.

Employees can also choose to send estimated payments to the IRS.

#3. Claim Children and Other Dependents

When claiming children and other dependents, employees or taxpayers must include qualifying children or dependents aged 17 and below. They must also specify the number of dependents they have.

For married partners, it is best to claim their dependents on the W-4 of the spouse with the higher salary. In this manner, both spouses can be assured that they will withhold enough to pay their taxes.

#4. Sign the W-4 Form

Upon completing all the necessary fields, employees must sign their W-4 form and indicate the date when they fulfilled their Withholding Certificate. Employees have the option to fill out a paper form or complete their Form W-4 online.

3 Helpful Tips for Small Businesses on W-2 and W-4 Forms

Aside from knowing how to identify a W-2 vs. a W-4 form in terms of their purpose and filing regulations, here are additional tips that small business owners must keep in mind to regulate their tax filing and payroll management processes:

#1. Learn About Other IRS Forms

W-2 forms and W-4 forms aren’t the only forms that business owners should become familiar with. Some examples of IRS documents that are essential in managing business and employee taxes and income include 1099 forms and W-9 forms.

There is a stark difference between a W-2 vs. a W-9 form and a W-4 vs. a 1099 form. Form W-9, Request for a Taxpayer’s Identification and Certification, is used to gather personally identifiable information from independent contractors.

Meanwhile, 1099 forms have different variations but are ultimately used to report non-employee compensation paid to individuals, entities, or freelancers.

By knowing the purpose of each IRS form, business owners can avoid mistakes in preparing the documents needed by their employees or hired contractors to file their returns.

#2. Use Online Tools

Using online tools such as Paystub.org’s W-2 form generator and the 1099 form generator effectively saves time and effort during tax season.

This is especially true for employers who must prepare several W-2 forms or 1099 forms while being mindful of all the different IRS deadlines.

Paystub.org’s W-2 form and 1099 form generator have ready-made templates that enable employers to fill in all essential details about their employees or contractors, as well as their earnings and tax situation, in minutes.

Aside from the templates, the generators also come with a built-in calculator that lets employers calculate taxes, deductions, and gross and net wages correctly and avoid the need to make W-2 form corrections later on in case of an error on their employee’s information.

#3. Keep Payroll Records Updated

Updating payroll records is not just about having employees verify their W-4 form information periodically.

It also entails securely disposing of the records of former employees and ensuring newly hired employees have complete documents at the beginning of their employment.

Final Thoughts

It is crucial to know when to use a W-2 vs. a W-4 form because both IRS documents are essential in a company’s payroll administration process.

After all, paying taxes, compensating employees correctly, and keeping their payroll organized are all key ingredients in ensuring full compliance with federal, state, and local regulations.

More importantly, having all the basic knowledge needed to file taxes also helps employees monitor their tax dues and figure out how to reduce their taxes by exploring their eligibility for certain tax deductions and credits.

W-2 vs. W-4 FAQ

#1. What’s the difference between a W-2, W-4, and 1099 form?

The difference between a W-2, W-4 and 1099 form is that W-2 and W-4 forms are both used by employers and employees. 1099 forms are used by freelancers to report their annual income and file their taxes.

A W-2 form summarizes an employee’s earnings and withheld taxes, while a W-4 form informs employers of the amount to be withheld from employee earnings to pay their taxes.

#2. Can I file my taxes without a W-2 form?

Yes, you can file your taxes without a W-2 form by using Form 4852, Substitute for Form W-2, Wage and Tax Statement. If you haven’t received a copy of your Wage and Tax Statement, contact your employer and cooperate with them to get your W-2 form.

#3. Is 1040 the same as W-2?

No, the Form 1040 is not the same as the Form W-2, because the 1040 form is used by taxpayers to calculate the taxes they owe and report their annual income. On the other hand, the W-2 form provides a summary of an employee’s withheld taxes and annual wages.

#4. How to know if I need to update my W-4?

The key to knowing whether you need to update your W-4 is to check whether there have been any significant changes in your life that led to an update in your filing status, tax bracket, or eligibility for certain tax breaks.

For instance, if you change your marital status, claim additional dependents, or get a salary increase, then you need to update your W-4 details.

#5. Do I need to fill out a new W-4 every year?

No, you don’t. Between a W-2 vs. a W-4 form, the only time you need to fill out a new W-4 is if you start a new job or work at a different company so that your new employer will know your tax situation. In contrast, new W-2 forms must be completed by employers each year.