Employers and employees may not always have a lot in common. When it comes to a general dislike for and confusion about tax forms, though, they’re usually on the same page. There are over 800 forms used for federal taxes and related items, and unless you work for the Internal Revenue Service (IRS), or even if you do, you’ll never remember all of them.
However, there are a few forms you definitely need to know as an employer and may also want to familiarize yourself with as an employee. In this short article, we’ll look at two of these important forms – W-2 vs W-4 – and help you learn their different features and uses.
What is a W-2 Form?
Form W-2 is actually just this form’s IRS code. Its full name is the Wage and Tax Statement and is a document that gives a summary of a worker’s earnings and taxes withheld during the tax year. This form can be filled out on paper, in which case the employer is required to produce six specific copies or digitally, and the copies will be made automatically.
The W-2 form includes general information about the employer and the employee as well as information about the employee’s taxable income for the year, the taxes their employer has withheld, and other possibly non-taxable income.
What is Form W-2 used for?
The Wage and Tax Statement of W-2 form has multiple uses that range from record keeping to supporting tax returns. These uses relate directly to the six mandatory copies of the form, which are:
- Copy 1: For state, city, or local tax department
- Copy 2: To be filed with the employee’s state, city, or local income tax return
- Copy A: For Social Security Administration
- Copy B: To be filed with the employee’s federal tax return
- Copy C: For employee’s records
- Copy D: For employer
These different copies are in a strange order, but their purposes are listed clearly on the copy types and help you know what to do with them. Both the employer and employee have responsibilities toward these copies of Form W-2 as follows:
Employer’s responsibilities:
- Fill out form W-2 correctly
- Send Copy 1 to the state or local tax authority
- Send Copy A to the Social Security Authority
- Keep Copy D for internal records
- Provide Copies 2, B, and C to the employee by the 31st of January
Employee’s responsibilities:
- File Copy ,2 along with state or local tax return
- File Copy B along with federal tax return to the IRS
- Keep Copy C for internal records
Employers must fill out Form W-2 for each employee they pay wages or salary to and deduct taxes (income, Social Security, Medicare) from. Failure to do so and provide these copies of the W-2 form can result in fines.
What is a W-4 Form?
Form W-4 from the IRS is named the Employee’s Withholding Certificate. While this is also an IRS form, it’s not one that the employer or the employee needs to submit to the IRS.
Instead, this form is filled out by the employee and given to the employer to let them know how much tax to withhold from their paychecks. This is normally an important part of the employee’s onboarding paperwork.
However, employees should also fill out new W-4 forms when life events change their tax withholding status.
What is Form W-4 used for?
The purpose of Form W-2 is for the employee to give their tax withholding information to their employer. This allows the employer to accurately calculate how much tax to withhold from the employee’s paycheck for each pay period.
Since employees fill out Form W-4 themselves, they can ensure that their deductions are correct. They also have the opportunity to ask their employer to deduct taxes on income they may receive from elsewhere so that they don’t have to pay these taxes later.
Summary of W-2 vs W-4 Forms
| W-2 | W-4 | |
| Full Name | Wage and Tax Statement | Employee’s Withholding Certificate |
| Used For | Reporting the employee’s taxable income and taxes withheld by the employer during the year | Calculating the amount of federal income tax that the employer should withhold from the employee’s paychecks |
| Information Included | Employer and employee names and addresses; wages or salary, income, Social Security, and Medicare taxes withheld; state and local taxes withheld; and non-taxable income | Employee’s name, address, Social Security Number, dependents, marital status, and other withholding information |
| Who fills out this form? | The employer fills out Form W-2 | The employee must fill out Form W-4 |
| Who files this form? | The employer files with the state or local tax authority and Social Security. The employee files along with their federal and state tax returns. | The employee returns this form to the employer, usually through their HR department |
| When does this form need to be filed? | The W-2 must be provided to employees by the 31st of January. Employees must file these forms with their tax returns by the 15th of April. | There is no specific date for this form to be filed. It must be collected from new employees or those who need to change their tax withholding details |
| Impact on employee pay | No effect | Defines federal income tax withheld every pay period |
How to Read Form W-2
Form W-2 is sometimes also called “the box form” since it has 26 boxes used to display different types of information. Here’s a breakdown of what you’ll see in each box:
Boxes a-f
Details of the employer’s and employee’s information are given in Boxes a-f:
- Box a – Employee’s Social Security Number (SSN)
- Box b – Employer Identification Number (EIN)
- Box c – Employer’s name, address, and ZIP code
- Box d – Control number (optional internal number to help employers keep track of their W-2 forms)
- Box e – Employee’s first name, initial, last name, and suffix (PhD, Sr., Jr., etc.)
- Box f – Employee’s address and ZIP code
Boxes 1-20
- Box 1: Employee’s total wages, tips, and other compensation earned over the course of the year subject to federal income tax
- Box 2: Total federal income tax withheld from employee’s paychecks over the year
- Boxes 3-6: Employee’s total income subject to Social Security and Medicare taxes
- Box 7: Employee’s tips subject to Social Security tax
- Box 8: Tips allocated to the employee
- Box 9: normally left blank
- Box 10-14*: various other earnings that may be taxable and special employee types and conditions
- Box 15-18: Employer’s state tax information and employee’s state taxable income and taxes withheld
- Box 19-20: Local tax information and taxes withheld
*Box 12 actually consists of four boxes, 12a, 12b, 12c, and 12d, which may contain one- or two-letter codes and dollar amounts. These codes represent different types of income that may or may not be taxable but still need to be reported on the W-2 form. The meanings of these codes can be found here.
How to Read Form W-4
Employers typically download and print Form W-4 when new employees are hired or when established employees need to update their tax withholding information. The newly updated form is now divided into four pages:
Page 1: Employee’s Withholding Certificate, main reporting page
Page 2: General and specific instructions for filling out the form
Page 3: Multiple jobs worksheet for Step 2(b) of the main form
Page 4: Reference tables (married and filing jointly or qualified surviving spouse, single or married filing separately, and head of household), also for Steb 2(b) calculations on Page 3
Pages 2, 3, and 4 don’t need to be returned to the employer. The employee should keep Page 3 for their own records.
Page 1, the main reporting page, is the part of the W-4 that the employee has to return to the employer. This page is divided into five steps as follows:
Step 1: This step is where the employee fills out their personal information including name, Social Security Number (SSN), and full address and also indicates their marital status and type of filing.
Step 2: If the employee holds multiple jobs or has a spouse who works, they can tick the box in this step. If not, the employee uses the calculators on Page 3 to decide on the totals for lines 4(b) and 4(c) in Step 4.
Step 3: The employee claims dependent and other credits in this step.
Step 4: The employee claims other income, deductions, and extra withholdings in this step.
Step 5: The employee signs and dates the form in this step and then returns the form to the employer who adds their EIN, name, and address and the first date of the worker’s employment.
All employees must fill out Step 1 and Step 5. Steps 2-4 are only necessary if they apply to the employee’s specific situation.
Summary of Forms W-2 vs W-4
If you’re an employer, you’ll fill out Form W-2 for each employee and provide them with this form at the end of the year. You’ll also ask new hires to fill out Form W-2 and return it to you.
If you’re an employee, your employer will ask you to fill out Form W-4 when you start working and return it to them. You’ll also get your W-2 from your employer at the end of the year, which you’ll need to file along with your federal and state tax returns.
