What Is The Difference Between W2 and W4?

Need To Know About Form W2 and Form W4

Your tax refunds and balance due payment of your tax return is entirely interdependent on your form W2 and form W4. This blog article will surely equip you with the better understanding about your federal and state Wage and tax withholding.

Why W2 Is Issued To Employees, And W4 Submitted With The Employer? 

Technical name of wage and tax statement is W-2 and it is issued to the employee by the employer, it consists of the employee’s annual income and withheld taxes for federal, state, city or county, W-2 even consists of social security and Medicare taxes, etc.

In case of multiple jobs, you are entitled to receive separate W2’s from each employer. Out of 51 states of the U.S. there are nine tax free states, three taxable county’s and five taxable city’s. If you are living in any of the tax free states you need not pay individual income tax, but if you lived or worked in any taxable state, county or city you need to pay taxes.

How To Understand The Information On W-2 Boxes?

Your form W-2 consists of 20 boxes, some boxes are about your annual wage and rest are for withheld tax information about federal, states, counties or cities, and the description about your W-2 boxes are below.

Box no 1: Wage of your total Annual Income

Box no 2: Amount withheld for Federal income tax 

Box no 3: Wages considered for Social Security

Box no 4: Withheld taxes for social Security wages

Box no 5: Wages considered for Medicare Taxes

Box no 6: Amount withheld for Medicare Taxes

Box no 7: Tips paid by your employer

Box no 8: Income Considered towards Tips

Box no 10: Daycare Expenses provided by your Employer

Box no 11: Any distribution amount from non-qualified deferred compensation plan by employer

Box 13: Contribution towards retirement plans like: IRA

Box 14: Employer provided benefits such as, Union dues, uniform payments, Health insurance premiums, nontaxable income, education payments, state disability insurance withheld taxes, etc.

Box no 15 to 20: Employer’s EIN, State withheld taxes for city or county.

The descriptions of Box no 12 Codes.

A- Non-deducted RRTA, social security tax.

B- Non-deducted Medicare Tax.

C- Group-term insurance for taxing over $50,000

D- Deferred 401(K) cash arrangement

E- Deferral for 403(b) salary deduction agreement

G- Deferral for 408(K)(6) SEP salary deduction

H- Deferral employer contributions to 457(b) compensation plans

J- Untaxable sick pay

K- Excise tax on excess golden parachute payment @20%

L- Reimbursements for employee business expenses

M- Non-deducted RRTA or social security tax on group term insurance over $50,000

N- Non-deducted Medicare tax on group term life insurance over $50,000

P- Moving expenses excluded for a member of the U.S. Armed forces   

Q- Deferred Combat pay

R- Archer medical saving accounts (MSA) and long-term care insurance contract, contributed by employer

S- Salary reduction contribution to employee

T- Benefits of adoption

V- Income from stock options (exercise)

W- Heath savings account (HSA) contributions by your employer

Y- Non-qualified differed 409A compensation plan

Z- Income subject to non-qualified deferred compensation plan 

AA- 401(K) plan Contributions 

BB- 403(b) plan Contributions

DD- Cost of health insurance contributed by employer

EE- 457(b) plan contributions

FF- Benefits covered by qualified small employer reimbursement

GG- Income by qualified equity grants

HH- Aggregate deferrals under section 83(i)

Why Should I Pay Social Security And Medicare Taxes?

If you are an employee on H1B visa, L1 Visa and qualified by Green card test/Substantial present test need to pay personal income taxes as well as social security and Medicare taxes. As per the U.S. tax law your employer should deduct taxes from wage and pay to the IRS.

I Am On H1B/L1 What Type Of Tax Form Should I File?

If you are a resident alien being on H1B Visa, L1 Visa, GC, Citizen should qualify by Substantial Present Test (SPT) or Green Card Test should file form 1040 to claim resident tax benefits.

I Am An International Student, What Type Of Tax Return Should I File? 

If you are a non-resident (International Student) on F1 Visa or J1 Visa, unless you qualify by Substantial Present Test (SPT) or Green Card Test you are considered as a non-resident alien, and your tax return form is 1040NR. Filing incorrect tax form will lead to penalties and interest.

How Many W-2’s Your Employer Can Issue?

Your employer would issue 6 copies of each W2, and a number of copies may change due to state or local income tax filing, if there is no state or local income tax liability the employer would issue 4 W-2 copies.

  1. Copy A will be submitted to the social security administration
  2. Copy B will be submitted with the IRS along with the tax returns
  3. Copy C should be retained with the employee
  4. Copy D should be retained with the employer for records purposes.
  5. Copy 1 will be submitted by your Employer with the state or Local income tax return.
  6. Copy 2 will be submitted by an employee with the state or local tax returns

Does The IRS, State and Local Income Tax Department Will Have Any Idea About My Income?

Yes! The IRS, State and Local income tax department would have an idea about your income and tax withholding. The movement taxes are deducted from your paycheck a copy will be submitted with the tax authorities, and non- filing of your tax return on or before the due date will attract late payment or late filing penalties and interest.

What If My Wages Do Not Match With My W-2 Figures?

Mostly mismatch of your income and tax withholding could happen, if you have received bonus and was not mentioned on your paycheck or tax withholding did not happen for bonus payout. The best way to deal with mismatch by paying self-taxes through form 1040ES.

Why Did My Employer Not Withhold Taxes For The State I lived In?

You could come across this sort of situation, if you have not informed your employer about your residency details. Your employer should be informed whenever you move to a new place. Remember your employer should report your income to the state where you are residing and your employer’s office located state.

My Employer Reluctant To Provide Form W-2?

As per the IRS guidelines an employer should issue form W-2 before February though an employee is not working with him/her. If the employer is reluctant to issue the Form W2 before march 31st, you can call IRS helpline and seek help, if there is no hope of getting your W2 you can provide us your Paystubs so that we can issue substitute W2 with the tax returns and your tax return filing will be in a paper form, it means you need to mail the tax returns to the IRS.

As much as possible an employee should maintain a good relationship with the employer to avoid issues. 

I Am An International Student; Do I Have To Pay FICA Taxes?

You being an international student you are exempted from paying FICA taxes (social security and Medicare taxes) unless you failed in substantial present test (SPT) or green card test, since you are considered as a non-resident alien. You can choose a standard deduction if there is a tax treaty between the U.S. and your country.

I Work As An Independent Contractor And Expected To Get 1099 MISC, How Would I Pay My Taxes?

When you have worked as an independent contractor you would get 1099MISC, and you should pay your taxes with form 1040ES, since your income tax, social security & Medicare taxes were not withheld.

It is a painful situation when you pay taxes with an underpayment penalty while filing your tax returns, so it is better to pay taxes as soon as you are paid.

I Need Assistance With Payroll Services Since I Am Working On My Own?

An employee taxes are entirely taken care by employer, in your case as you are a self-employed or individual contractor, we can surely help you pay your income taxes, social security and Medicare taxes.

Can Crescent Tax Filing Help Me In Keeping An Eye On My Income And Tax Withholding?

Yes, with fully rest assure about checking your month on month paycheck by us, we ensure you that your required taxes are deducted by your employer through checking your periodic paystubs often without collecting any fees.

If you are ambitious to set up a business, we can help you in incorporating your business and assisting you with our in-payroll services with nominal fees.

All About Form W4

Form W-4 is an employee withholding certificate, filled out and submitted with the respective employer for required tax withholding for federal, state and local taxes.

Why Should I Submit New Form W-4 Every Year?

Yes! You need to submit form W-4 with your employer in the beginning of the tax year, if you are newly married or remarried, blessed with kids, parents and relatives stayed with you for more than 183 days, changed employer or moved to a new state or place.

Why Am I Paying Taxes With The Tax Returns, Though Taxes Were Deducted Before?

You are still paying taxes with your tax returns, because your tax withholding didn’t happen as per your eligibility, mentioned incorrect stay, marital status, incorrect dependents information with your employer on form W4, and taxes were not deducted on your bonus payout.

Being married and choosing filing status as married filing jointly (MFJ) with claiming kids and other dependents on both spouses form W4 will let your employer withhold less taxes, in turn when your tax returns are done you could be paying balance due tax rather than getting tax refund amount.

Why The New Form W4 Is Entirely Different From The Previous Years?

In order to ensure that the taxpayers understand the form W4, IRS has simplified the form W4. It takes your marital status, kid’s details, other dependent details, residency details and your tax information to see your tax withholding for the federal and state accurately.

Is It Mandatory To Submit Form W4 With New Employer?

You need to submit a new form W4 with a new employer, if there is a change in your marital status, having a new dependent, blessed with a kid, found a new job, residing in a new state.

Soon after submitting your form W4 with your employer You should ensure that your tax withholding on your paystubs are complied with the absolute tax withholding, as per your marital status, claimed dependents etc. 

What If I Work Individually Apart From My Regular Job?

By choosing step 4 option (c) on your form W4 you can mention any amount for additional tax withholding, though there is no tax withholding from your part time job income the additional tax withholding by your employer will be sufficient for the part time income earned. This wise step will get you appropriate tax refunds rather than any balance due payment to the tax authorities.

I Am a Busy Person, As I Work And Spend My Leisure Time In Upskilling?

We do understand you are like any other brilliant hard worker, who always strives hard to see ends meet for upskilling yourself as well as saving for a rainy day.

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