W-2 Vs. W-4: What's The Difference? (2024)

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The IRS Form W-4 is the Employee’s Withholding Certificate. An employee fills it out upon hiring (and any time their withholding or filing status should change) to let you know how much tax to withhold from their paychecks.

On this form, an employee lets you know their tax filing status: single, married filing jointly, married filing separately or head of household. They’ll include whether they work additional jobs, have a working spouse or claim dependents and they’ll indicate any additional withholding. Depending on your state, your employees may also need to fill out a state version of the W-4 form so state income taxes can be withheld from their pay.

Your human resources (HR) or payroll department collects these forms for their records to determine how much tax to withhold and pay from an employee’s paycheck.

The IRS Form W-2 is an employee’s Wage and Tax Statement. You fill this out for each employee who was paid at least $600 for the tax year and file it with the Social Security Administration (SSA).

A W-2 form records how much an employee was paid in wages, tips, other compensation and benefits from your business as well as the amount of federal, state and local income tax and Social Security and Medicare tax withheld. You file it with the government as a record of compensation and taxes and you distribute it to employees to help them fill out their tax returns.

You have to fill out, file and distribute a W-2 form for every employee you paid at least $600 in a given tax year, even if they no longer work for your business at the time you’re filing.

You can file and distribute forms electronically or mail paper forms. Many payroll services, such as Gusto and Justworks generate, file and distribute W-2 forms automatically.

W-2 and W-4 forms are related but serve distinct purposes. Here are the key differences:

• Who fills it out: An employee fills out a W-4 while the employer fills out the W-2.
• What it’s for: A W-4 lets an employer know how much to withhold from an employee’s paycheck while a W-2 is a statement of compensation paid and taxes withheld.
• When it’s used: Employees fill out a W-4 upon hiring and anytime their withholding changes. You fill out a W-2 for each tax year and file and distribute it by Jan. 31 of the following year.
• Where to file: You hold onto a W-4 but don’t typically have to file it with a tax agency while you file a W-2 with the SSA and distribute a copy to employees.

Here are a few tips to keep in mind to use W-2 and W-4 forms properly in your business:

• You can find both forms on the IRS website: Form W-2/Form W-4.
• Make filling out a Form W-4 part of the employee onboarding process. Ideally, they should fill this out and get it to you on their first day, but it should happen no later than processing their first paycheck.
• You can’t tell your employees what to put on their W-4s, but you can direct them to resources, such as the IRS site or the instructions pages included with the form.
• Use a payroll service to make it easy for employees to fill out the W-4 electronically and keep records in order. Many services also file new hire reports and W-2s for you.
• Consult an accountant or HR professional if you have any questions about these tax forms. The IRS website includes helpful information and instructions, but don’t try to guess if you’re unsure about anything. Getting the info wrong on either form could have tax consequences for both you and your employees.
• Start processing W-2s at the start of the new year to make them easy to file and distribute by Jan. 31. This ensures you meet the government’s deadline and it helps your employees file their taxes in a timely manner.

Bottom Line

W-2 and W-4 forms are both for employees of your business. They’re both forms created by the IRS and relate to taxes but each serves its own purpose.

A W-4 lets you know how much tax to withhold from an employee’s paycheck while a W-2 lets the SSA, tax agencies and the employee know how much you paid an employee and how much you’ve paid in taxes on their behalf.

Both forms are relatively simple in most cases, but some circ*mstances, such as employee benefits or tips, might add complexity. Consult a professional for guidance if you come across any questions not answered on the IRS website.