W-2 vs W-4: What’s the Difference?

If you’re starting a new job, it’s easy to be confused by Human Resources and tax papers. What is a 401k? How do I figure out a W-2 vs W-4 and why are these forms so confusing?

Relax—the HR team in your company will walk you through everything you need to know when it comes to taxes and paperwork.

However, one of the key parts of employment payroll relates to both the W-4 and W-2 forms, which are both used to ensure you pay the correct amount of time. The forms are similar, but also very different!

To learn more, keep reading to find out what each form is used for, who should use it, and why it’s important.

When Is a W-4 Tax Form Used?

A W-4 is a form that is completed by employees. It is used to let employers know how much federal tax they should withhold when paying the new staff member.

Ideally, the employee should complete it within the first few days of employment, to ensure they’re paid correctly. It is only filled out once, although if you have multiple jobs, you’ll need to complete one form for each employer.

When completing the W-4 form, you’ll go through a series of questions to work out which amount of tax should be withheld from your pay. This is based on your marital status, the number of dependents (usually this refers to children), and other preferences.

Once complete, the form is given back to the employer for use in payroll. If you have any questions while completing your W-4 tax form, it’s best to ask your accountant, rather than your employer, as everyone’s circumstances are unique.

For most people, the form is quick and easy and shouldn’t take more than a few minutes to complete.

How About a W-2 Form?

In contrast, what is the W-2 form about? The W-2 tax form is sort of the opposite—it is completed by the employer to report to the IRS how much they were paid and how much was withheld in taxes.

A form will need to be completed annually, for each employee. This includes details on total pay, any overtime or bonuses, and amounts withheld for federal tax, Medicare, and Social Security.

After completion, employees will then receive a W-2 form in the mail, which they will use to file their own taxes. However, they should already have a good idea of how much tax they’ve paid throughout the year, based on their weekly pay stubs—you can find more info about payslips and tax. 

Within a company, the W-2 form is most likely to be completed by someone with the Human Resources or Finance department.

W-2 vs W-4: Which Is Right for Your Needs?

As you can see, understanding W-2 vs W-4 is simpler than you might have thought, After reading the above, an easy way to remember is that W-4 is always completed by new employees, but the W-2 is always completed by the company.

However, both are essential forms for the IRS, as they are used to ensure companies and employees pay accurate amounts of tax. When tax time comes around, employees will need copies of their W-2 to file tax, as it can help you receive a much-anticipated refund!

Use these forms to make sure you’re paying the correct amount of tax, an important part of any job.

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