If you are looking to know the differences between the W2 vs W4 then you are at the place as we are going to explore these two terms with you in detail! If you are a business owner, then your employees needed to fill out the IRS to tell how much tax will be deducted from your all income. This is called W4. And in the W2, your employees needed to fill out the document which is a tax report of your all income and deductions to the Internal Revenue Service.
We recommend you to hire a financial advisor as he can guide you in a legal easy way so that you do not need to pay extra. So, let’s dive into the details!
What Is a W-2?
We are going to discuss both the w-2 vs w-4 one by one. W-2 is a short form of the IRS form and it is filed by company employees. If you are a business owner, then all your employees needed to file a w-2 document only if $600 is paid per year tax. And after that w-2 copy will be sent to your employees so that they can make records. Your employes have to file it by 31 Jan of the year following the below-listed taxation details!
The major aspects of Form W-2 are as:
- Employer ID details
- Employers’ tips, wages, and any other compensation
- Employers Medicare payroll taxes and social security if provided
- Federal income tax paid
- State income tax paid
- Local income tax paid
- Retirement contributions paid
What Is a W-4?
W4 is a short form of IRS. It is a withholding allowance certificate that your employees need to fill out when you hire an employee. W4 is not applicable if you are an independent contractor. In short, W4 is a payroll record that will guide your employees on how much tax will be deducted from their income.
The following are the functions of the W-4 to tell an employer:
- How many hold-back allowances and employees hold
- How many withholding allowances does an employee profess
- How much an employee can charge extra or claim an extra amount
W-2 VS W-4 Key Differences:
- The first difference between the W-2 and W-4 forms is related to the aspect that who and when is filling out the document. Such as w-4 is filled out by the employees when the employees join a new job place or when he or she wants to change the withholding allowances.
- A W-2 is filled by the employer after the tax paid per year and it is a statement of income and hold back for that tax year.
- The W-4 identifies the employee’s all information such as marital status and withholding alimony whereas the w-2 is a reporting document at the end of the year such as the employee’s wages, tips, or any compensations if given.
- The W-2 is a Social Security Administration and its copy is given to the employee. The W-4 does not need to fill out with any taxation details of a company.
- W-4 is an input document whereas w2 is an output document.
- W-2 and w-4 are both tac documents but have different functions.
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It was a brief discussion on the key difference between w-2 vs w-4. We hope now you are more familiar with these terms. Are you running a business? Or are you a w-2 filer or w-4 share with us your experience in the comment box below?