W-4 vs W-2 - Understand the Difference

The W-2 and W-4 forms are two of the most important tax documents that workers and their employers must work with. But, they can be confusing. So, you may be wondering, “what is a W-4 form vs a W-2?”

W-4 vs W-2

Though these forms are extremely distinct in purpose and function, they are often confused. This should help to clear up any confusion you may have about how to use and file them.

When it comes to the W-4 form vs W-2 both are the two primary tax forms that an employer must complete for each employee. It must be completed for both part and full-time employees. Here is a closer look at these forms and their differences.

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Key differences between the W-2 and W-4

There are several key differences between the W-2 vs W-4, including:

• Who fills them out: The W-4 is completed by the employee, whereas the employer fills out the W-2.
• Their use: The W-4 is used to determine the amount of taxes the employer withholds. In contrast,  the W-2 is used to record the amount of compensation an employer provides and the associated taxes withheld.
• When they are completed: The W-4 is completed when an employee is first hired before their first payday. Alternatively, the W-2 is completed annually at the end of each tax year no later than January 31st.

Form W-4

The W-4 is the Employee Withholding Certificate, and this form must be filled out by each new employee in order to determine how much tax must be withheld from their paychecks.

The employee will include their tax filing status, i.e., single, married, filing jointly or separately, or head of household. They will also include other pertinent information, including whether they have additional employment, dependents, a working spouse, or need additional withholding. Depending upon state tax regulations, employees may be required to complete a version of the W-4 for their state income taxes as well.

Form W-2

The Form W-2 is a Wage and Tax Statement that the employer will need to fill out for each and every employee who was paid at least $600 in the tax year. On this form, they record how much compensation an employee was provided in the tax year. This must include wages, tips, and all other taxable compensation.

The completed form is then filed with the Social Security Administration and provided to each employee regardless of whether they still are employed with the company. This serves as a record of the amount of compensation provided to each employee and allows these workers to file their own tax returns.

Filling out W-4 and W-2

It is not difficult to complete a W-4 or W-2, but it is important to do so correctly. 

W-4

The W-4 is an Employee Withholding Certificate that employees need to complete. It has five parts that need to be completed, including:

1. Personal Information: This includes the employee’s name, address, and filing status.
2. Multiple Jobs or Spouse Works: Employees will only complete this section if they have more than one job or if the employee’s filing status is married filing jointly, and their spouse works.
3. Claim Dependents and Other Credits: In this section, employees will claim any dependents or credits for which they are eligible.
4. Other Adjustments: This section can be used to withhold taxes from other income for which taxes will not be withheld. Employees can also reduce their withholding if they expect to have other deductions or have additional taxes withheld if they want.
5. Signature: Employees will sign the form in this section, and you will need to sign it as well.

W-2

Employers complete the W-2

• If they have a business or trade and pay an employee $600 or more, including non-cash payments
• If they withheld any income, Medicare, or Social Security taxes, even if they paid an employee less than $600

The W-2 will show an employee’s income for the previous year and the federal, state, and local income taxes that were deducted. It will also show the amounts deducted for Medicare and Social Security.

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Keeping records

It is a legal requirement to complete these forms in most cases, and you should consider having them completed by a professional to ensure they are correct. Additionally, these documents should be kept for the required period of time. Employers should keep employment tax records for a minimum of four years. In contrast, employees should keep their W-2 for three years after filing their return or two years after paying the taxes, whichever date is later.

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