So what’s the difference between a W-2 and a W-4 tax form? They sound similar but there are some important differences to make note of. Our research below spells out the primary distinctions between the two.
W-2: Employers fill out a W-2 tax form for each employee and must submit them to the IRS before January 31st.
W-4: Employees fill out a W-4 tax form as part of their new hire paperwork. A W-4 should be completed by the employee and submitted to the employer before their first paycheck is processed.
W-2: A W-2 tax form reports an employee’s gross earnings, including bonuses and tips if applicable. A W-2 also includes how much was withheld for Income, Medicare, and Social Security tax.
W-4: A W-4 tax form is used to calculate the tax amount withheld from an employee’s paycheck. The amount withheld is determined by a number of factors, including but not limited to, the number of dependents the employee has, their marital status, etc.
W-2: A W-2 tax form must be submitted to the IRS before January 31st by the employer. A copy of the W-2 must also be given to the employee before January 31st. The employee will need a copy of the W-2 when filling out their annual tax return.
W-4: Employees must fill out a W-4 tax form as part of their new hire paperwork to be completed and submitted to their employer before their first paycheck is processed. It is preferable that this form be completed and submitted on the first day of employment. An employee’s W-4 should be updated if there are any changes to their tax status (example: got married, had a child, etc). The W-4 does not need to be submitted to the IRS unless requested.
Managing payroll taxes can be done yourself using accounting software, or you can hire an accountant or tax professional to handle your payroll for you. Whichever you choose, any money spent for these services will be considered a tax deductible business expense.