Employees use the W-4 form to inform their employer about their tax withholding preferences. In contrast, the employer provides the W-2 form to the employee, summarizing their annual wages and taxes withheld.
Read more to know more about these three differences.
What is the W-4 Form?
The W-4 form is a tax document every employee fills out when starting a new job.
The main goal of the form is to let your employer know how much federal income tax to withhold from your paycheck. In simple terms, it helps you pay the right amount of taxes during the year so you don’t owe a lot or get a huge refund when tax season comes.
Here’s how it works:
When filling out the W-4, you’ll choose your filing status (e.g., single, married). You’ll also include other details, like dependents or extra income. These factors will affect how much tax is withheld from your paycheck.
Let’s say you’re single and working one job.
You might choose to withhold less from your paycheck to have a bit more take-home pay each period. On the other hand, if you prefer a bigger refund, you might withhold extra.
How to Fill Out a W-4 Form Correctly
Start by entering your basic information, like your name and Social Security number, and select your filing status. If you have more than one job or dependents, use the worksheet on the form to adjust your withholdings.
Not sure how much to withhold?
The IRS Tax Withholding Estimator is a great tool. Once you’ve filled it out, sign it and give it to your employer.
What is the W-2 Form?
While the W-4 helps set the stage for your tax withholdings, the W-2 form comes into play at the end of the year. Officially called the Wage and Tax Statement, the W-2 is a document your employer provides.
It summarizes your total earnings and the taxes withheld from your paycheck during the year.
Here’s what it includes:
➡ The total wages you earned,
➡ The amount of federal, state, and local taxes withheld,
➡ And other deductions.
If you’ve contributed to a retirement plan or received certain benefits, those will also be noted.
For example, if you earned $50,000 in a year, your W-2 will show that figure along with the taxes your employer withheld from your paycheck. It’s this information that you’ll use to file your tax return, ensuring everything matches up with what the IRS has on record.
Employers are required to send W-2 forms to their employees by January 31 each year, giving you plenty of time to file your taxes. Whether you’re filing alone or using a tax professional, the W-2 is essential for getting everything right.
Unlike the W-4, which you fill out, the W-2 is prepared entirely by your employer.
How to Read a W-2 Form
At the top, you’ll find your name, address, Social Security number, and your employer’s information.
➡ Box 1: Shows your total wages, tips, and other compensation.
➡ Box 2: Lists the federal income tax withheld from your pay.
➡ Boxes 3 and 4: Show your Social Security wages and tax withheld.
➡ Boxes 5 and 6: Show your Medicare wages and tax withheld.
➡ Boxes 16 and 17: (If applicable) Show your state wages and state income tax withheld.
Carefully review your W-2 to ensure accurate tax filing.
Three Key Differences Between the W-4 and W-2 Forms
The three main differences between the two forms can be categorized into:
1. Purpose and Function
The most obvious difference lies in what each form is designed to do.
As we have seen above, employees complete the W-4 form at the start of a job or when their tax situation changes. Its main goal is to let employers know how much tax to withhold from paychecks based on the employee’s circumstances.
This form helps avoid situations where too little tax is withheld, leading to a large tax bill or too much, resulting in an overpayment.
On the other hand, the W-2 form summarizes everything that happened financially during the year. It reports earnings, deductions, and taxes already withheld. Essentially, the final document helps you file your tax return.
If the W-4 is the plan, the W-2 is the result.
For instance, if you worked multiple jobs in a year, each employer would use your W-4 details for tax withholdings and then issue a W-2 reflecting your annual earnings and deductions.
2. Timing of Use
Another major difference is when and how often these forms are used.
A W-4 is typically filled out when you start a new job. However, it’s not a one-and-done document. You can update it anytime life changes, like getting married, having children, or picking up a second job.
Adjusting it ensures your paycheck reflects the right tax withholdings for your current situation.
The W-2, the other hand, is only issued once a year, usually in January. Employers are responsible for preparing and sending it to you. You don’t fill it out or update it—your role is simply to use it when filing your taxes.
This timing difference highlights how the W-4 is an ongoing tool for managing taxes, while the W-2 is more of a once-a-year summary of your earnings and deductions.
3. Responsibility for Completing the Form
The last difference is about who is responsible for each form.
The W-4 is entirely in your hands as an employee. You fill it out and submit it to your employer, ensuring it reflects your personal tax situation. This gives you control over how much tax is withheld from your paycheck, which can impact your finances throughout the year.
The W-2, however, is the employer’s responsibility.
They compile all the data from your paychecks—like gross earnings, taxes withheld, and other deductions—and provide it to you and the IRS. This means you don’t have to do anything to create a W-2.
Your role is to simply review it for accuracy and use it during tax season.
For example, if your W-2 shows incorrect wages or missing tax information, you would contact your employer to get it corrected. This highlights the collaborative nature of these forms. While you manage the W-4, the employer ensures the W-2 accurately reflects your year’s work.
Why These Differences Matter
Knowing the distinctions between the W-4 and W-2 forms can make the tax process less stressful. Each serves a unique purpose: one helps shape your paycheck throughout the year, and the other ensures your annual taxes are filed correctly.
Let’s say you update your W-4 to reflect a new job or a growing family. Those changes will directly affect your paychecks and tax withholdings.
Then, at the end of the year, your W-2 will show whether everything added up as planned.
How to Obtain These Documents
As an employee, your W-4 and W-2 forms are provided by your employer. The W-4 is usually given when you start a new job or when you need to make changes to your withholding preferences.
W-2s, on the other hand, are provided by your employer at the end of each year to show your earnings and the taxes that were withheld.
If you’re an employer looking to generate W-2s quickly, PaystubHero makes the process easy and instant. We provide a simple and reliable way to create W-2s, helping you get them to your employees without hassle.
FAQs
The most common questions people have about the differences between the W-4 and W-2 forms are:
