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  • Stubbuilder
  • May 10, 2024

W-4 Vs W-2 Forms: A Definitive Guide For Employers

The difference between W4 vs W2 forms is that a W4 tells the employer how much tax you can withhold from an employee’s paycheck, whereas the W2 reports how much an employer has paid to an employee and how much tax it has withheld during a particular year. Both of them are required for the IRS tax forms.

In this blog, we will compare W2 and W4 forms, explaining the difference between them and how you can fill each one correctly for your business. Let’s get started.

W4 Vs W2: The Basics

W2 and W4 forms both can be found online. The W2 and W4 should be filed by each employee, as they are a part of the firm’s HR, accounting and payroll process.

What is W4 Used For?

W4 commonly known as the employee’s withholding allowance certificate, lets the employer know how much income tax they can withhold from the employee’s pay.

When starting a job employees are required to complete a W4 form as part of their onboarding paperwork. It is important to update this form if there are any changes, in their circumstances. Once the employee has filled out the W4 you can utilize the provided information to determine the amount of taxes to deduct during each payroll cycle.

What is W2 Used For?

Employers create the W2 form every year for each employee summarizing their earnings, tax deductions contributions, child care accounts, Social Security and income taxes well and payments, into designated retirement funds.

Workers require their W2 documents to submit their tax returns. You have the option to electronically submit W2 forms or fill them out by hand and send them via mail to the Social Security Administration (SSA) as local and state authorities and your staff members.

W2 V/S W4 Form Differences 

W2 and W4 forms are related but serve different purposes. Below mentioned are some of the differences:

W4 W2
Employees fill out this form. Employers fill this form on behalf of their staff.
The purpose of this form is to inform employers of how much income tax to withhold from employees. The purpose of this form is to report how much an employer paid each employee and the amount of income tax withheld during the tax year.
W 4 forms shall be submitted to the employers within the first month of starting a new job. Employers must finish and distribute a copy of the W2 form to their staff by 31st January each calendar year.
Employers are the recipients of W4 forms.  W2 forms are deliberate for employees and the IRS and SSA.
Form W4 is submitted every time an employee starts a new job. The W2 form is submitted only once at the end of the tax year.

 

What Happens After W4 and W2 Forms Are Filed Out?

Let us look in-depth at the options for w4 and w2 and their pros and cons.

  • E-filing: This process involves filing online tax returns through the Electronic Federal Tax Payment System. One key benefit of e-filing is that it processes returns much faster than mail submissions. Not only are the returns processed within a day or two, but the IRS also sends people direct confirmation when their forms have been received.

With e-filing, there are fewer chances of human mistakes. The IRS cannot manually enter your return into the system. The tax software the IRS uses completes the calculations, flags errors, and lets the taxpayers know if they have any important updates.

Though e-filing is efficient, there are a few limitations. Individuals cannot use the e-filing system if: 

  • Additional statements are attached to the return.
  • Return is for someone who has passed away.
  • The IRS has not opened the filing system for the year.
  • Paper Filing: For those who prefer not to use the digital filing system, paper filing works just as well as their method. This method allows taxpayers to be much more thorough when finishing their tax returns. The paper filing allows the individual to review all the details of their tax return and see the calculations first-hand.

Most taxpayers also find paper filing more secure because they do not have to upload any of their personal information on the Internet. Though the IRS has some security measures to prevent data breaches, paper filing has less chance of ending up in the wrong hands.

  • Filing Extensions: No matter how you decide to submit your documents make sure you ask for an extension if you can’t meet the deadline to prevent any fees. To get an extension individuals should fill out Form 4868. This extra time gives you the opportunity to complete your tax filing. Keep in mind that the tax payment is still required by April 18th.

Conclusion

Employees use the W-4 form to specify their tax withholding preferences, including allowances and extra withholding amounts. Employers must correctly implement the details, from the W 4 form to deduct the income tax from employees’ salaries. If you need a tool to check stub maker consider using Stubbuilder for a solution.