It can be easy to get tied down in tax jargon.
When learning how to file taxes, t’d be great if each tax form was able to be named in accordance with the information that it actually contains. However, this is sadly not the case. In your times of tax need, look to this guide to determine just what a W2 form is, what a W4 form is, and what makes them different.
What’s the difference between a W2 and a W4?
A W4 shows how much you should be taxed by noting your income level, marital status, and the number of financial dependents you have. A W2 reports the wages earned, taxes, and deductions that were withheld in a given fiscal year.
Let’s take a deeper dive into what distinguishes these two essential tax forms.
We’ll go through a W4 form and then a W2 to show you what each form contains and why it is relevant to you.
W4
A W4 form is a legal certificate that informs your employer how much federal income tax to withhold from your paycheck. This amount is based on your income level, marital status, the number of people who depend on you financially, and your income from a second job or a spouse.
When you accept a new job, your employer will typically ask you to fill out a W4 form. The form is less than a page, and there are only seven lines that you need to fill out. The IRS also suggests filling out a new W4 form each year to make sure everything in your life is taken into account and you are paying the right amount in taxes.
When you fill out a W4, you’ll need to enter your name and address, social security number, filing status (single, married, or filing separately), the number of allowances you claim, and any additional money you want your employer to withhold.
W2
A W2 document reports the wages earned, taxes, and deductions that were withheld in a given fiscal year. An employer will file this form for an employee to report salary information. Employees are the only people that W2s are used for, as workers such as independent contractors will receive a different form.
Employers are required to send one copy of a W2 to their employee and one to the IRS. The employer is also required to have the W2 ready for the employee by January 31st for tax filing purposes.
The main components of a W2 come in the first two boxes of the form. The first box shows how much money an employee earned over the course of the year. The second box shows the amount that was taken out as tax during the year.
Overall, a W2 is pretty straightforward. It exists to show how much money an employee has earned and how much they have been taxed over the course of a year.
Telling the difference
Breaking down a W4 and W2 into their essential parts shows that these forms are pretty simple in nature. A W4 exists to show how much you should be taxed, while a W2 shows how much you earned and were taxed. A W4 is filled out when you begin a new job or have a major change in the finances of your life, while a W2 is received on a yearly basis.
Need any further help with sorting through the complexities of tax season? Check out G2’s guide to the best tax services providers.