W-2 Vs. W-4 Tax Forms: What’s The Difference?

Both W-2 and W-4 are income tax-related forms that the IRS requires to be filled out. As with most things related to taxes and the IRS, exactly what each form does and why it needs to be completed and sent in aren’t always clear. Therefore, you may wonder: what exactly is the difference between a W-2 and a W-4? And why are they necessary?

The forms both relate to income tax, but they serve different purposes. W-2s are a yearly record of the compensation that an employee receives from their employer, allowing the IRS to see how much money you made and, therefore, what tax bracket you fit into.

A W-4, on the other hand, is about withholding. A certain amount of money is withheld from every paycheck for tax purposes (unless you’re a contractor, but they have a whole different set of forms), and the W-4 keeps track of that.

Key Takeaways:

What Is a W-2?

IRS form W-2, wage and tax statement, is what it sounds like. The W-2 is filled out by an employer at the end of the year and sent to the employee as a record of how much compensation they received for their work.

Employers fill out W-2s every year. They are then sent to employees for tax purposes. Many employers mail them, but there are also ways to send them digitally.

W-2s are also the forms that are submitted to the IRS when filing taxes. Oftentimes, it’s only required to fill out certain information from them on the tax form itself – the form contains a fair amount of additional information that only relates to what the IRS requires from employers.

A W-2 form is broken down into boxes. Some are demarcated by letters, others by numbers.

• Boxes B, C, D, and F. These contain information about your employers, such as the company’s name, address, and EIN (employer identification number).

• Boxes A and E. These sections are filled out with information about the employee: their name, address, and social security number.

• Boxes 1 and 2. The first box is for your taxable income, which is your wages, any tips or bonuses you may have received, or your salary. Box 2 shows the amount that was withheld.

• Boxes 3 and 4. These relate specifically to the social security tax. Box 3 shows how much of your earnings were subject to the tax, while box 4 is how much was withheld.

• Boxes 5 and 6. Wages are also subject to a Medicare tax. As with boxes 3 and 4, box 5 is how much of your earnings is subject to the tax, and box 6 is how much was withheld.

• Boxes 7 and 8. These are only relevant if part of your pay is based on tips. Box 7 is how much was reported in tips, and box 8 is how much your employer reported in tips paid out to you.

• Box 9. This box used to be reserved for a tax perk, but as it’s defunct, it’s no longer relevant.

• Box 10. If you have dependents and your employer has benefits to that end, then that amount will be filled out here.

• Box 12. This is the amount of deferred compensation your employer has set out for you. Deferred compensation is any sort of compensation that isn’t paid out right away, such as retirement benefits and pension plans.

  However, this box only applies to nonqualified plans, which are those that fall outside the Employer Retirement Income Security Act guidelines. Most of these are specialized plans, often for executives or highly in-demand employees.

• Box 13. If you received any pay that wasn’t subject to federal income tax withholding, then that amount will be placed here. This would be for something like an employer-sponsored retirement plan or sick pay paid out by an insurance company.

• Box 14. This is a sort of catch-all box. Any other tax information that doesn’t fit into the other categories will go here, such as union dues.

• Boxes 15-20. These remaining boxes are for state taxes. It contains most of the information as in the first part of the federal part of the form, such as how much money you made, how much of it was in tips, and then the tax income withholding of your state and locality.

What Is a W-4?

IRS Form W-4, employee’s withholding certificate, is a form that the employee fills out, usually during onboarding. Once filled out, the W-4 is submitted to the employer, who then sends it to the IRS. The IRS uses the information on it to determine the correct amount of withholding in every paycheck.

The IRS recommends refiling them yearly or every time you have a change in personal circumstance – be it a promotion, marriage, birth of a child, or divorce. Most employers, however, won’t request it, except perhaps if they greatly alter your pay.

W-4 forms are broken down into steps, making it easier for people who often don’t fill out tax forms to work through them.

If you’re unmarried and have no children or other dependents, then you only need to fill out steps one and five.

• Step 1. Provide your personal information, such as your name, address, social security number, and filing status. Your filing status has to do with whether or not you’re married (and filing jointly), single, or the head of household – which means you don’t live alone, but you aren’t married, and you pay more than half the cost of keeping up the home yourself.

• Step 2. If you work more than one job, or you and your spouse both work and file jointly, then you need to fill out this section. The IRS recommends using their estimator to figure out how much of your salary or wages should be withheld, but you can also request that your employer do additional withholdings if you believe your tax rate will be higher.

• Step 3. This is for if you have a dependent. Children are the most common, but there are other situations where someone can be considered your dependent for tax purposes.

• Step 4. Fill this part out if you believe you’ll have other tax adjustments you want to get ahead of. For instance, if you have other income that isn’t related to your job or jobs, such as winnings, inheritance, or dividends, then you can include that. Also, if you expect to get other tax deductions, you can make alterations here for that.

• Step 5. Lastly, you sign the document. This step makes it a valid legal document and pledges that you filled out everything above truthfully to the best of your ability and knowledge.

W-2 vs. W-4 FAQ

1. Is a W-4 a state or federal form?

   W-4s are federal forms, though the majority of states accept them. That means that in most states, just filling out the W-4 will be sufficient for your withholding, though a few will require you to fill out a specific state tax form.

2. How do you get a W-2 from the IRS?

   It’s possible to request previously filed tax returns from the IRS, though it’s usually easier to request it from your employer.

   If you wish to request it directly from the IRS, then you need to go to their website. Requesting your tax transcript from the IRS will allow you to get all the information. You can go to their get your tax record page by clicking here.

3. How do you file a W-2?

   Filing a W-2 with the IRS is typically done through tax filing software. Sites such as TurboTax and H&R Block will have all the information and forms needed to file your taxes, including your W-2. If you wish to, you can also go through an accounting firm or even submit it by mail.

4. What’s the difference between a W-2 and 1099?

   A W-2 form is used for standard employment, while 1099 is a form that is used for contractors. Ostensibly, 1099 is for reporting miscellaneous income. It’s most often used for contractors. However, it’s also the form for landlords, as well as those who received royalties, prizes, or other forms of income.

   Paying a contractor doesn’t require you to withhold pay for taxes, so that’s something that the contractor must correct at the end of the year. Contractors usually don’t have additional benefits or deferred payments, either.

Author

Di Doherty

Di has been a writer for more than half her life. Most of her writing so far has been fiction, and she’s gotten short stories published in online magazines Kzine and Silver Blade, as well as a flash fiction piece in the Bookends review. Di graduated from Mary Baldwin College (now University) with a degree in Psychology and Sociology.