Form W-2 vs Form W-4: Key Differences
Understand the purpose, deadlines, and key differences between W-2 and W-4—file with confidence!
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Form W-2 and Form W-4 are both essential IRS tax forms used in the employee payroll process, but they serve very different purposes. Employees often confuse these two forms because they both relate to income and taxes. However, knowing how each form works is critical for accurate tax withholding and correct tax filing.
Form W-4 is used to set up tax withholding, while Form W-2 is used to report wages and taxes withheld at the end of the year. Understanding the difference helps both employers and employees avoid tax errors and penalties.
Table of Contents
What is the purpose of these forms?
- Form W-2: Used by employers to report an employee’s total wages and taxes withheld for the year.
- Form W-4: Used by employees to tell their employer how much federal income tax should be withheld from their paycheck.
Form W2 vs W4: Key Difference
| Aspect | Form W2 | Form W4 |
|---|---|---|
| Purpose | Reports the employee’s actual annual wages and taxes withheld for the year. Used to file federal and state tax returns. | Tells the employer how much federal income tax to withhold from each paycheck throughout the year |
| Completed by | Employer | Employee |
| When it is completed | At the end of every tax year; must be issued by January 31. | When starting a new job or when updating withholding (after life changes such as marriage, dependents, or a second job). |
| Who receives it | Employee, Social Security Administration (SSA) and IRS. |
|
| How does it Affect taxes? | Shows final income and withholding amounts used to prepare the annual tax return | Determines how much federal income tax is taken out of each paycheck. The withholding affects whether you owe taxes or receive a refund when you file your return. |
| Frequency | Issued once a year for every employee | Completed as needed, such as when your personal or financial situation changes. |
| Impact on Paycheck | Does not affect current or future paychecks; it summarizes the past year. | Directly impacts each paycheck by either increasing or decreasing federal withholding |
| Role in Payroll | It serves as an employer's annual record of wages and taxes withheld. | Guides payroll throughout the year to withhold the correct amount of federal income tax |
| Used When Filing Taxes? | Yes, employees must use the W-2 to prepare & file their tax returns | Directly impacts each paycheck by either increasing or decreasing federal withholding |
| Includes Employee Preferences? | No, it only reports what happened during the year. | Yes, it includes withholding selections like dependents, filing status, and extra withholding. |
Can an Employee Have Both W-2 and W-4?
Yes, an employee can have both Form W-2 and Form W-4 because the two forms serve different purposes.
- Form W-4 is completed by the employee when they start a job or updating tax withholding. It tells the employer how much federal income tax to withhold from each paycheck.
- Form W-2 is prepared by the employer at the end of the year to report the employee’s total wages and the taxes that were withheld based on the W-4 information.
Understanding Form W-4 and W-2 for New Employees
When starting a new job, employees are required to complete Form W-4, so their employer can correctly withhold federal income tax from each paycheck. The Form W-2 does not get filled out by the employee. Instead, it is provided by the employer at the close of the year and represents a summary of total wages earned and taxes withheld for tax filing purposes.
What are the deadlines for filing W-2 and W-4 forms?
- Form W-2 Deadline: Employers must file W-2 forms with the Social Security Administration and provide copies to employees no later than January 31 every year.
- Form W-4 Filing Deadline: Employers must apply W-4 changes by the first payroll after 30 days. The employees shall fill out or change this form when starting employment and when any changes to their tax situation take place.
Penalties for Late or Incorrect W-2 Filing
Failure to file or distribute Form W2 in a timely manner may result in penalties assessed by the IRS. The penalty amount will vary, depending upon the lateness of the filing and whether this is willful.
- $60 per form if filed within 30 days after the due date
- $130 per form if filed after 30 days but before August 1
- $340 per form if filed after August 1 or not filed at all
- $680 or more per form for intentional disregard
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