Home Blog W2 Vs W4 – Key Differences & Tips For Small Businesses to fill W-4 and W-2 Forms

W2 Vs W4 – Key Differences & Tips For Small Businesses to fill W-4 and W-2 Forms


Tax forms are the main part of your job regardless of whatever business you are in. Beginners to the tax forms are usually confused with tax Forms W-2 and W-4. This is because these two tax forms are related to each other and the names of these two forms are similar. The Internal Revenue Service (IRS) requires knowing what income individuals earn during the tax year. It requires every employer to withhold money from the paychecks of employees to cover the end-of-the-year tax bill of employees except independent contractors.

This article briefs the differences between W-2 and W-4 forms in detail. If you want to keep yourself away from the confusion, then simply go for the paystubs generator free to make an informed decision.  

What is the W-4 Form? 

It is the tax form employers ask their staff members to fill out upon hire. An employee has to fill out this form unless he or she makes less than $800 per year. Business people use this form to calculate the amount of federal income tax deducted from the earnings of employees. Employees have to fill in the form as per their household earnings. Employees of the company can update the W-4 form at any time there is a change to their financial or personal status.

What is the W-2 Form? 

The W-2 Form is a tax form that employers issue their employees at the end of the year. This tax form includes the total wages the employee earned. It lists the total amount of federal and state taxes the government withheld. It lists the contributions made to Social Security for the specified tax year..  

The employees have to submit this information in April while paying taxes after receiving the W-2 Form from the employer. Employers have to provide employees 3 copies of W-2 by January 31 of each year along with keeping a copy on record for the next 4 years.

Understanding Differences between W2 and W4 Forms 

W-2 and W-4 Forms are associated and designed for distinct purposes. You can focus on the following details and get an overview of how to successfully use these forms and the difference between w2 and w4

1. Who fills it out?

An employee fills out the W-4 tax form on the other hand the employer fills out the W-2 form. 

2. What is it for?

The W-4 form lets employers know how much to withhold from the paycheck of employees while the W-2 form is a statement of compensation paid and the overall taxes withheld. 

3. When is it used? 

Employees of the organization have to fill out the W-4 upon hiring and anytime their withholding alters. You can fill out the W2 for each tax year and file and distribute this tax form by January 31 of the following year.  

4. Where to file?

You must hold onto the W-4 form but do not usually have to file it with the tax agency while you file the W-2 form with the SSA and distribute a copy of this tax form to employees. 

Instructions For Small Businesses to fill the Form W-4 and Form W-2

Once you are clear on what is the difference between w2 and w4 you can start focusing on other vital things to fill these two forms easily and accurately. This section gives you expert tips on filing W-2 and W-4 forms accurately.

  • Small businesses can make use of the IRS official website for filling up both W-2 and W-4 forms.
  • Make sure you are filling those forms in well-advanced and accurately to avoid penalties imposed by the IRS.
  • As an employer, you must make sure your employee fills their W-4 forms with the appropriate information before their first day of employment. So that you can handle the deadline of filing the W2 form by 31st of January.
  • Preferring the electronic mode of filing W-2 and W-4 forms is highly suggested to avoid paperwork and also it will be more convenient to stay organized.
  • Be cautious while filing W2 forms and making your employees fill out their W-4 forms. So that you can avoid mistakes and other consequences your company may face because of that.
  • It’s better to invest in reliable payroll or HR software with W-2 & W-4 features, this allows you and your employee to fill those forms on your platform easily and quickly.   
  • Apart from those detailed instructions provided on IRS websites, hiring a professional accountant to handle all these issues is recommended to complete the process time-efficiently and without errors.

Bottom Line

Understanding the W4 vs W2 forms is necessary to make an informed decision while paying taxes on time. Both forms are relatively much simpler and easy to fill. However, in some circumstances, you may find it difficult to enter the benefits or tips offered by employers. In such a situation it’s better to consult with professionals and utilize online paystubs generator free to avoid hassles.   

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