Difference between w2 and w4
W-2 and W-4 are both tax-related forms used in the United States, but they serve different purposes and are associated with different stages of the employment and tax process.
W-2 Form (Wage and Tax Statement):
- Issued by Employers: Employers are responsible for providing W-2 forms to their employees. They must send a W-2 to each employee by January 31 of the following year.
- Contents: The W-2 form reports an employee’s annual wages and the amount of taxes withheld from their paychecks during the previous tax year. It includes information such as total earnings, federal and state income tax withheld, Social Security and Medicare taxes paid, and other deductions.
- Used for Tax Filing: Employees use the information on their W-2 forms to prepare and file their federal and state income tax returns. It helps determine if they owe additional taxes or are eligible for a refund.
- Employer Responsibility: Employers are responsible for accurately reporting the income and taxes withheld for each employee on the W-2 form. Errors or discrepancies can result in penalties.
W-4 Form (Employee’s Withholding Certificate):
- Submitted by Employees: Employees are required to fill out a W-4 form when they start a new job or when their personal or financial situation changes (e.g., getting married, having a child, or changing jobs).
- Contents: The W-4 form provides information to employers about how much federal income tax should be withheld from an employee’s paychecks. It includes details such as filing status, the number of allowances claimed, and additional withholding amounts.
- Used for Tax Withholding: Employers use the information provided on the W-4 form to calculate the appropriate amount of federal income tax to withhold from each paycheck. Accurate withholding helps employees meet their tax obligations without having too much or too little tax withheld.
- Employee Responsibility: It’s the responsibility of employees to complete the W-4 accurately to reflect their financial and tax situation. If personal or financial circumstances change, employees should update their W-4 with their employer.
In summary, the W-2 form is provided by employers to employees and reports annual income and tax withholding for the previous tax year. The W-4 form is submitted by employees to their employers and guides the employer on how much federal income tax to withhold from each paycheck based on the employee’s tax situation. Both forms are important for tax compliance and ensuring that employees have the correct amount of taxes withheld to meet their tax obligations.