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W2 vs W4: Differences Explained - 2023 Updates

Every tax season, employers and employees must gather all of the required tax forms to file their income tax returns to the IRS. There are many types of tax forms that certain taxpayers must submit with their tax return, so it is important they understand the difference in requirements of each of these tax forms. Two of the tax forms employers and employees will commonly be required to fill out for tax purposes include W-2s and W-4s.


Key Takeaways:

  • The IRS Form W-2 is a Wage and Tax Statement that employers must issue to their employees who earned more than $600 annually so they can file their income tax returns.
  • The IRS Form W-4, also known as the Employee Withholding Allowance Certificate, is an IRS form that employees fill out when they start a new job or undergo a change in financial status so their employer knows how much tax to withhold from their paycheck.
  • The main differences between W-2s and W-4s are the main purpose of the form, who needs to fill out the form, when the form is due, and where to submit the form.

What Is IRS Form W-2?

The IRS Form W-2 is a Wage and Tax Statement that employers issue to their employees annually so they can file their tax returns. 

Within the W-2 form, employees will be able to access all relevant tax information from their employer that is necessary for them to file their tax returns, including their gross earnings, including wages, tips, bonuses, and compensation, tax deductions for income, FICA taxes (Social Security and Medicare Taxes), and retirement account contributions.

Do Employers Need To Fill Out A W-2 Form For Every Employee?

Employers are responsible for filling out a W-2 form for every employee who earned more than $600 during the current tax year. This form can be completed electronically and submitted online or manually and sent to the Social Security Administration through the mail.

Are Independent Contractors Considered W-2 Employees?

No, independent contractors, freelancers, and other types of self-employed vendors are not considered employees, and therefore employers will not need to provide them with a W-2 tax form. If a small business hires a contractor to complete some work for the company, the 1099 tax form will be used instead of a W-2 form to provide details about their earnings for when they file their taxes. 

How Can Employees Access Their W2?

Employers usually provide the annual W2 form to their employees by mailing the form to their last known address. For this reason, it is imperative that employers have the most updated address on file for each of their staff members, otherwise, they may miss out on receiving important tax documents.

The due date for employers to fill out W-2 forms for their employees is January 31, so workers should receive their W-2 close to that deadline.

What Is IRS Form W-4?

The IRS W-4 form, also known as the Employee’s Withholding Certificate, is a tax form that employees fill out when they start a new job to inform their employer how much tax they should withhold from their paycheck. The tax withholding allowances are configured based on your marital status, the number of dependents or children you have, and the payroll credits and deductions you are eligible for.

When Must Employees Fill Out Tax Form W-4?

Employees must fill out tax form W-4 any time they undergo changes in their employment, filing status, or financial situation. Form W-4 must be accurately completed before the employee receives their first paycheck, as employers must use this information to determine how much federal income tax to withhold from their wages.

What information is required on IRS Form W-4?

  • To ensure accurate reporting to the IRS, employees must include their full legal name on their W-4 forms.
  • Employees should verify their addresses to ensure they receive important communication from the IRS about taxes.
  • A valid Social Security Number is required on the W-4 form to verify the employee’s identity for tax and payment purposes.
  • The filing status selected on the W-4 form can significantly affect the employee’s tax situation, so it’s important to indicate whether they are single or married and, if married, whether they will be filing separately or jointly.
  • Employees must also provide information about other jobs, including their spouse’s employment.
  • The number of dependents the employee is financially responsible for can affect their tax relief options and should be listed on the W-4 form.
  • Lastly, the W-4 form includes a section where employees can list any adjustments, such as deductions, withholdings, and non-job-related income.

W-2 Vs. W-4: Key Differences

Main Purpose

W-2: The main purpose of form W-2 is for employers to state the total compensation paid and taxes withheld from an employee’s earnings for the past tax year.

W-4: The main purpose of form W-4 is for employees to tell their employer how much tax to withhold from their paychecks.

Person Who Fills Out Form

W-2: The employer is responsible for filling out the W-2 tax form for each of their employees.

W-4: The employee fills out the tax form W-4.

When To Complete

W-2: Employers responsible for accounting and their payroll system must fill out a new W2 tax form for everyone on their staff for each tax year and distribute the forms by January 31.

W-4: The employee fills out the tax form W-4 when there is a change in their employment status or their withholding status. Employees should also complete a new W4 form if, upon filing their taxes, they realize too little was withheld from their paychecks and they owed significant tax payment or too much was withheld and they received a tax refund.

Where To File

W-2: Employers must file W-2s with the Social Security Administration (SSA) and distribute a copy to each employee by Jan. 31. Once W2s are issued to the employees, they can use the tax form while filing their tax returns.

W-4: W-4s do not need to be directly filed with the IRS or a tax agency, and are instead utilized for accounting and bookkeeping purposes. The people in charge of payroll responsibilities must keep all tax records organized for workers within the companies or businesses. 

Small Business Tax Tips

If you are responsible for managing payroll taxes for your employees, here are some tips to make tax season seamless:

  • Forms W-2 and W-4 can be accessed on the IRS website.
  • Requiring newly hired employees to fill out form W-4 and identify the amount of their pay they would like to be withheld from their wages for tax purposes will ensure all of your accounting is up to date. 
  • Providing your employees with resources, such as directing them to the IRS website, can help them fill out Form W-4 correctly to ensure there are no problems when they eventually file their taxes. 
  • Begin organizing W-2 documents as soon as the new year rolls around to ensure you meet the January 31 deadline and give your employees enough time to file their tax returns and not receive a late-to-file penalty from the IRS.
  • Seek help early if you have any misunderstanding about the meaning of these tax forms. An experienced HR professional, Certified Public Accountant (CPA), or tax consultant will be able to answer your questions and provide advice to ensure you manage the payroll tax responsibilities of your employees correctly. 
  • Utilize payroll software for small business owners to guide you through the tax form process. This tax software is designed to make the experience of filling out tax forms like W-2s and W-4s easy, streamlining the steps so that you can easily submit the forms electronically. 
  • The IRS has sample tax forms on its websites for taxpayers to refer to when filling out their information to ensure everything is completed correctly. 

Filling out your tax forms correctly and efficiently is an essential part of the tax filing process, so if you need any guidance, consult with a tax professional at Ideal Tax for all the answers you need. We also offer free tax consultation.

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