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What is the difference between W2 and W4 in simple terms?
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In this article, I will break down the main differences between W2 vs W4 so you know all there is to know about it!
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W2 vs W4 Overview
You are about to start a new job and you are told that you need to fill out a W4 but you thought that you were getting into a W2 contract?
What is a W2 or W4 form?
Well, you are at the perfect place.
In this post, I will tell you exactly what is a W2 and W4 and break down their differences.
Let’s get right to it.
W2 vs W4 Difference
Let’s look at the main differences between a W2 and a W4.
Purpose of Form
A W2 is a document that provides a report of how much you earned as an employee whereas a W4 indicates how much taxes you wish to have deducted from each of your paychecks.
A W2 is a form that your employer must fill out at the end of the year to report your total employee earnings such as gross pay, commissions, bonuses, tips, and so on.
In addition, you will also have the amounts that were deducted from your pay for things like federal tax contributions, Social Security, and Medicare taxes.
If you had additional sums of money withheld from your pay to contribute to a retirement plan or other, it will also be indicated there.
A W4 form is a document that establishes how much taxes should be withheld from each of your paychecks to be remitted to the IRS.
The amounts that will be withheld may vary depending on your situation.
Who Fills It Out
A W2 is a document that is filled out and prepared by your employer whereas a W4 is a document that is filled out by you as the employee.
At the end of every tax year, your employer must prepare a W2 for all its employees where one copy of this document goes to the employee and one to the IRS.
On the W2, the employer will have to indicate how much the employee has earned in taxable income during the year.
On the other hand, a W4 is a document that is filled out by new employees within the first month of new employment where they set the amount of taxes that the employer will withhold from their paycheck.
When It Is Submitted
A W2 must be submitted by the employer every year to the employee and the IRS by no later than January 31st of the year whereas a W4 must be submitted by the employee to the employer within a month when starting a new job.
With regard to a W2, every year, before January 31st, all employers must remit a W2 to their employees so the employees can prepare their income tax reports.
With regard to a W4, this is a document that a new employee must complete and remit to his or her employer shortly after starting a new job so the employer knows how much to withhold in taxes from each paycheck.
What Employers Do With Them
Employers must file the W4 form either electronically or physically but are not required to send it to the IRS or the Social Security Administration.
On the other hand, a W2 form must be submitted by the employer to the Social Security Administration either by mail or electronically, to all employees, and to the tax authorities like the IRS or potentially your state or local tax department.
Filling Out W2 vs W4
Let’s look at each of the W2 and W4 forms to see how they must be filled out so you have an overall understanding.
W2 Form: Wages And Tax Statement
The W2 form is called the IRS Wage and Tax Statement where your employer will have to specify how much the employee has earned and how much money was deducted from the employee’s earnings.
The W2 form has different fields as follows:
On the form, you have the following fields:
- Box A: Employee’s Social Security Number
- Box B: Employer Identification Number (EIN)
- Box C: Employer’s Name, Address, and ZIP Code
- Box D: Control Number
- Box E: Employee’s First Name, Initial, and Last Name
- Box F: Employee’s Address and ZIP code
- Box 1: Wages, Tips, and Other Compensation
- Box 2: Federal Income Tax Withheld
- Box 3: Social Security Wages
- Box 4: Social Security Tax Withheld
- Box 5: Medicare Wages and Tips
- Box 6: Medicare Tax Withheld
- Box 7: Social Security Tips
- Box 8: Allocated Tips
- Box 9 used to reflect tax perks but now it no longer applies, so it’s empty.
- Box 10 provides the information on how much you received in dependent care benefits, and if you have any dependents.
- Box 11 provides the confirmation of how much deferred compensation you have received from a nonqualified plan.
- Box 13 is used to report amounts that you received that is not subject to federal income tax withholding and it includes pay as statutory employee, employer-sponsored retirement plan, or third-party sick pay.
- Box 14 is an additional box allowing employers to report any other tax information that could not specifically fit into another box on the tax form W2.
- Box 15: Employer State ID Number
- Box 16: State Wages, Tips, etc.
- Box 17: State Income Tax
- Box 18: Local Wages, Tips, etc.
- Box 19: Local Income Tax
- Box 20: Locality Name
W4 Form: Employee’s Withholding Certificate
The W4 form is called the Employee’s Withholding Certificate.
On the W4 form, the employee must provide relevant information about his or her personal situation so the employer knows how much to withhold in taxes to remit to the tax authorities.
This document is usually filled out right after you start a new job in time before you get your first paycheck.
Here is what the W4 form looks like:
On the W4, you have the following sections:
- Step 1: Enter Personal Information
- Step 2: Multiple Jobs or Spouse Works
- Step 3: Claim Dependents
- Step 4: Other Adjustments (Optional)
- Step 5: Sign Here
On the W4, you are essentially indicating if you’re single or married, have dependents, or have other allowances that you can claim.
W2 vs W4 FAQs
What is the difference between W2 and W4?
The main difference between a W2 form and a W4 form is that a W2 is used to report the total compensation you earned during the year and how much money was withheld from your pay whereas a W4 form is a document used to establish how much money should be withheld from your pay to be submitted to the IRS.
Who must fill out a W2 vs W4?
A W2 form is a document that is prepared and completed by employers whereas a W4 form is a document that is prepared and completed by the employees.
Why do I need a W2 or W4?
You need a W2 form to be able to fill out your income tax report at the end of the year so you can establish if you will get a tax refund or have a tax liability.
A W4 form is a document that you need to fill out to let your employer know how much tax to withhold from your pay and remit to the IRS.
So there you have it folks!
The main difference between a W2 vs W4 is that the W4 is used by employees to inform their employers how much tax to withhold on their income whereas a W2 is used by employers to report the employee’s total earnings and income deductions.
Another key difference between W2s and W4s is that the W4 is completed by employees whereas W2 is completed by employers.
The third main difference is that once employees complete their W4, employers must file it but do not have to submit it to the IRS or the SSA whereas the W2 must but submitted by employers to the SSA and provide employees a copy by no later than January 31st of every year.
Now that you know the key differences between W2 versus W4, good luck with your research!
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