The simplest explanation for the differences is this:
- A W-4 is completed by the employee at the start of employment (or when tax preferences change). The W-4 determines how much tax is withheld from each paycheck.
- A W-2 is completed by the employer at the end of the year, reporting actual wages and withholdings. The W-2 shows what was actually withheld during the year.
Below are the basics of each form.
W-2 Form Basics
A W-2 is an annual tax document prepared by the employer. It shows how much an employee earned and how much in taxes were taken out of an employee’s total pay throughout the year. Employees use this form when filing their federal and state tax returns.
The information required to complete a W-2 includes:
- Employee’s legal name
- Employee’s Social Security number
- Employer name, address, and EIN
- Total wages, tips, and compensation
- Federal income tax withheld
- Social Security wages and tax
- Medicare wages and tax
- State/local wages and tax (if applicable)
W-4 Form Basics
A W-4 is completed by the employee, so employers know how much federal income tax to withhold from each paycheck. Employees submit a W-4 when they start a job or when their financial situation changes.
The information needed to complete a W-4 includes:
- Employee filing status
- Number of dependents
- Additional withholding requests
- Multiple jobs or spouse income adjustments
- Tax credits or deductions
Purpose of W-2 and W-4
The W-2’s purpose is to report wages and withholdings to the IRS so employees can file their taxes. The W-4’s purpose is to give employers the correct withholding instructions for each employee’s paycheck.
Completion of W-2 vs W-4
Employers complete and issue the W-2 to employees by January 31. Employees complete the W-4 with no specific date requirement.
Use of W-2 and W-4 Forms
W-2s are used after the year ends for tax filing. W-4s are used before and during employment to guide payroll withholding.
W-2 and W-4 Form Filing Process
Employers are required to file W-2s with the SSA and give copies to employees and state departments (if necessary). W-4s are not filed with the IRS, but employers keep them on file for the business’s internal use.
How W-2 and W-4 Forms Affect Employee Paychecks
W-4s determine how much tax is withheld each pay period, which affects an employee’s net pay. W-2s do not affect paychecks; they only summarize annual earnings.
Taxes and W-2 vs W-4
The W-4 gives withholding instructions. The W-2 reports total annual tax withheld.
How to Determine If You Need a W-2 or W-4 Form
Determining whether you need a W-2 vs a W-4 depends on your role within the business. For instance:
- If you are an employee starting a job, you need a W-4.
- If you are an employer processing payroll, you need a W-4.
- If you an employee filing taxes, you need a W-2.
- If you an employer reporting wages, you must file a W-2.
- If you’re an employer onboarding a new hire, you need a W-4.
- If you’re an employee preparing for year-end taxes, you need a W-2.