A Business Owner’s Guide to Differentiating Between Forms W-2 and W-4

Forms W-2 and W-4 are crucial for any business that has employees. Learn more about IRS filing obligations for employers.

Stephanie Glanville | November 24, 2023 | Read time: 8 minute(s) | Small Business, W-2 Forms | No Comments

Whether you are the owner or the manager of a business, there are seemingly limitless tasks to track. If your business operates with the help of employees, one of these tasks will include collecting important tax information from new employees during their onboarding process. Without this information, you won’t be able to withhold payroll taxes from their wages properly and report this information when year-end tax filing comes around.

An understanding of Forms W2 and W-4 is crucial for completing this process successfully. Both your business and your employees depend on the withholding information reported on both of these forms to maintain IRS compliance.

While these forms are both key components of hiring employees and paying them wages, they are very different in terms of purpose and IRS reporting requirements. Let’s get into the intricacies of these forms.

What is Form W-4?

Form W-4 is an IRS document that is the Employee’s Withholding Certificate. It’s used to request information from new employees. While it is not required to be filed by employers, it should be collected from each new hire to collect the following information:

Personal information such as the employee’s legal name, address, and Social Security Number (SSN).
Any applicable job information. For example, if the employee has another job, or if they are married they should include their spouse’s job information.
Deductions and withholding information.
Their signature – this certifies that all of the information they’ve provided is true to the best of their knowledge.

The employee should complete and submit a new Form W-4 anytime they undergo major life changes, like a marriage, divorce, or having a child.

What is Form W-2?

Now that we’ve covered the initial step of collecting a W-4 (Withholding Certificate) from new employees, let’s talk about the IRS reporting requirements for employers. This is where Form W-2 enters the process.

Form W-2 is a Wage and Tax Statement that is filed annually with the Social Security Administration. This employment tax form is used to report the wages paid to an employee over the course of the year. In addition to filing a W-2 for each of their employees, employers must furnish the employee with a copy. Without a W-2 copy, the employee is unable to properly report their wages and taxes withheld on their own personal income tax return, making it crucial for them.

Timeline for Collecting and Filing W-4 and W-2

Now that we’ve explored the differences in the purpose of these forms, let’s look at when they are required and the filing deadlines.

Form W-4: This form has no set deadline because it is not actually filed with the IRS or SSA. However, it is best practice to collect this form from every new employee during their onboarding process. Then, it is the employee’s responsibility to update this information as needed when significant life changes occur and affect their tax classification.

Form W-2: This Wage and Tax Statement is a major annual filing requirement for employers. This means that there are defined deadlines for filing and distributing employee copies.

Deadline to file with the SSA: January 31st
Deadline to Distribute Copies: January 31st.

Failing to file on time, or failing to file at all can result in unwanted penalties for businesses.

Is There an Extension Available for Filing Form W-2?

There is technically an extension available for W-2 forms, however, the likelihood of being granted an extension by the SSA is highly unlikely.

When it comes to filing an extension of time to file W-2s, the form used to do this is Form 8809, Application for Extension of TimeTo File Information Returns.

However, there is a different procedure when requesting an extension for Forms W-2 and 1099-NEC. While this is typically an automatic extension that allows filers an additional 30 days to file, that is not the case with these forms. When filing Form 8809 for W-2s and 1099-NEC (Nonemployee Compensation) a paper copy must be filed, there is no e-filing option.

The extension will only be granted under dire circumstances, like impacts of a major natural disaster, a fire, or other destructive event, and an unexpected death or serious illness of the individual responsible for filing.

TaxBandits Tips for Maintaining W-2 Compliance

As a business owner, once you’ve collected a W-4 from your employees and withheld payroll taxes as required from their wages, the next step is filing W-2s with the SSA and distributing copies to your employees.

Start the process early, the 2023 Form W-2 is already available from TaxBandits!
Take advantage of the Bulk Upload feature from TaxBandits, this allows you to import all the information needed to file W-2s. This is a great option if you are filing more than just a few forms.
The TaxBandits application has built-in error checks using the IRS Business Rules. This catches the common errors that can often result in a rejected form.
Check out your state’s filing requirements for W-2s, as this can vary greatly. Each state has its own requirements ranging from no filing requirements to filing a reconciliation form with the state. TaxBandits supports both federal and state filing of W-2.
Distribute employee copies in plenty of time. Missing this deadline not only jeopardizes your business’s tax compliance, but it places unneeded stress on their own tax filing process. TaxBandits offers Postal Mailing and Online Access options for distributing copies, so you don’t have to!

Ready to get ahead of your year-end W-2 filing? Get started with TaxBandits today!