Form W-2 and Form W-4 sound pretty similar right? Let’s face it, they’re only two digits away from being the same word. If you’re new to tax world, you may be wondering, “What’s the difference?” and “How does this impact me?” If you’re an employer or employee, here’s what you should know.
Start With Form W-4
When you start a new job, your employer is required to give you a Form W-4 to fill out. This form is used to calculate the federal income tax withheld from your paychecks. To determine your withholding, information needed on your W-4 IRS form includes marital status, allowances and exemptions.
- If too much tax is withheld, you’ll lose that money on your paychecks and have to wait until tax time for a refund.
- If not enough tax is withheld, you’ll keep more in your paychecks but may owe at tax time.
- If your withholding is in line with your actual tax liability, you’re on the right track.
Not sure how much to withhold on your Form W-4? Use our W-4 Withholding Calculator. Remember, you can update your W-4 at any time year-round, especially if you have financial changes or life events that may impact your income tax liability.
End With Form W-2
Your job starts with a Form W-4 and ends each year with a Form W-2. Your employer has until February 1 to send your W-2 summarizing the prior year, and you’ll reference this to file your taxes. The W-2 tax form shows your wages earned, Social Security contribution, federal income tax withheld, Medicare tax withheld and more.
If you have any questions about either form, contact your nearest Liberty Tax® and we’re happy to break things down for you.
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