Employees fill out W-4 and W-9 forms, while employers provide W2s. The W-4 form shows how many withholding allowances you claim, plus your tax information. W-9 forms give employers information about workers who are independent contractors. At the end of the year, W-4 employees receive a W-2 form from employers showing how many dollars in taxes were withheld.
You don’t have to be an IRS employee to care about the tax forms employers, employees, and independent contractors have to fill out. Three of the most common tax forms that you may deal with are the W2, W4, and W9 forms. If you’re like most people, you probably wonder what the differences are.
Believe it or not, these three forms have fairly simple purposes. What you should know about your filing status can be a little trickier. Let’s talk about the differences between the three forms and what to expect when you fill out or receive them.
W2 vs. W4 vs. W9: the basics
All three forms have their own characteristics and connotations that are worth looking into. Here’s a simplified breakdown of what you need to know:
|For regular employees.||For regular employees.||For independent contractors only.|
|For showing how much tax was withheld during the year.||For announcing your tax info and withholding allowances.||For showing your taxpayer identification number, or that of your business. Confirms contractor status.|
|Given by employer.||Filled in by the employee.||Filled in by the employee.|
|Given at end of the year.||Given at start of work.||Given at start of work.|
What is a W-4 form?
A Form W-4 is one of the many IRS tax forms that define a worker’s role as a full employee of a company. When you first start to work for an employer, you are expected to fill out and hand in this paper. It’s often called an Employee’s Withholding Allowance Certificate.
Your Form W-4 tells your employer your name, taxpayer identification number, marital status, and allowances claimed. It’s used by both the IRS and the company’s payroll department. The payroll department uses it to process payroll and ensure that they withhold the right amount of money.
What is a W-2 form?
W-2 forms are handed to you by your payroll administrator at the end of the year. This year-end tax document shows an employee’s gross earnings, state and local taxes withheld, federal income taxes withheld, and any additional Social Security taxes you had withheld. If you have employer benefits, then your W-2 may also show how much you paid toward them.
You or your tax preparer will need the information on your W-2 forms to prepare your federal and state income tax returns.
What is a W-9 form?
You fill out Form W-9 and provide it to your employer (client) when you are an independent contractor. Unlike a Form W-4 or a Form W-2, these do not show any type of tax withholding information. An employer cannot withhold income tax for an independent contractor.
This means that you are going to have to figure out how much tax you owe at the end of the year. You also can deduct business expenses and figure out everything from your federal income tax to your Medicare taxes. At the end of the year, you may get a 1099 that shows your gross pay.
Even if your employer or client fails to send you a 1099 (specifically, 1099-MISC), you still have to report your earnings to tax authorities. If you earn enough each year, you will need to estimate your taxes and make a payment each quarter to avoid penalties when you file your tax return for the year.
A little more about Form W-9 and paying taxes as an independent contractor
Form W-9 bears the official title Request for Taxpayer Identification Number and Certification. Basically, it provides the information your employer needs to report its payments to you to tax officials. If you do business as yourself, your taxpayer identification number (TIN) will likely be your Social Security number. If you contract under a business name, whether as yourself under a DBA (“doing business as”) or as a corporation or LLC, your TIN will be your business’s employer identification number (EID).
In light the of the ever-growing complexity of the U.S. federal tax code, the IRS has organized links to its various resources and reference materials for every sort of business in an A–Z Index for Business. Many independent contractors will find the agency’s Self-Employed Individuals Tax Center especially relevant.
What happens if you don’t fill out a Form W-4 or a W-9?
Well, if you fail to complete your W-4, you probably won’t be able to keep your job. If you got hired as a W-4 employee, you have to complete that form within 30 days of getting hired. This is a major problem for payroll and your employer’s business. Employers can get fined or end up in trouble with the IRS if they don’t give you tax forms.
Moreover, you’re not going to be too happy once tax time comes up, either. You need your employer’s Employer Identification Number and end-of-year tax statement to do your taxes. If you don’t have either, you will have a very hard time filing a tax return.
As for failing to complete a W-9, if employers you do contract work for ask for this form, this means they’re required to file an “information return” with the IRS and report their payments to you. Since this is a legal obligation tax authorities may impose on your clients (depending on how much work you do for them), refusing to complete the form won’t help you build a client base.
Should you agree to work “off the books”?
Sometimes, it’s called “working off the books.” At other times, it’s working for “cash under the table.” As an employee or contractor, you may think it a great way to evade taxes. But if an employer or client suggests that you work “off the books,” be careful. For one thing, your job may not be legitimate and you could end up being bilked out of a paycheck. For another, evading taxes this way is illegal and carries stiff penalties.
How often do you have to fill out a W-4 or a W-9?
In the United States, taxes are done on an annual basis. This means that you should fill out a Form W-4 or a Form W-9 once a year if your tax situation has changed. Usually, this is done the moment that you get hired or at the end of the year near December 1st.
Your employer’s accounting department or payroll service provider will generally encourage you to meet earlier deadlines, particularly in the case of W-4s. The earlier they get the information from you, the more accurately they can estimate your annual income and the right amount to withhold from your paychecks.
Though employers do not withhold taxes from payments to W-9 contractors, they, too, will appreciate getting updated forms as soon as possible. Simply put, making tax compliance more difficult for your clients is not a winning business strategy. Enough said.
What happens if you do not get a Form W-2 at the end of the year?
While employers are supposed to send you your W-2s at the end of the year, this doesn’t always happen. To acquire your W-2s, you can follow the instructions in our article on how to get your W-2 from your employer. Alternatively, you may file your taxes without a W-2.
In some cases, you may have forgotten that you were a W-9 employee. If you expected a W-2 but received a 1099, it may be a good idea to touch base with your employer to figure out what’s going on.
What should you do if you aren’t sure which form you need or what allowances you should get?
Generally speaking, there are two groups of people you should approach for help. The first is your employer’s HR representative. This person may be able to help you understand the forms you need to complete and how to fill them out correctly. (Make sure to ask if you’re a W-2 employee or an independent contractor.)
Tax professionals are the second group to approach. The advice of a qualified tax professional can help you out. If your personal or financial situation is unique or complex, a qualified person who provides tax advice and assistance professionally can help you figure out what your tax liability should be.
Tax professionals can also be a great help if you’ve already gotten yourself into a bad tax situation. In such cases, finding the right tax relief help can make a world of difference.
How do employers use your W-4 to calculate tax withholdings?
W-4 employees complete their forms for a reason, and it’s not just for the IRS’s benefit. It’s for their employers’ benefit, too. Most companies use a payroll system or a specialized payroll service provider to calculate what amount of taxes needs to be withheld from an employee’s wages.
If you are having a hard time navigating the IRS website or just want to see what you should do with a specific form, don’t panic. In many cases, a search for the topic you’re interested in here on SuperMoney will reveal multiple articles and resources that simplify and clarify things in a way that government resources don’t.
Why are all these tax forms necessary?
While some dream of a greatly simplified tax system with few forms and rules that even math-challenged poor record keepers could understand, that’s not the tax system of today. At present, we have a tax system that keeps growing in complexity.
This complex system requires lots of detailed information. The purpose of the IRS is to ensure that all Americans pay the taxes that they owe according to the complex laws currently in effect. This includes ensuring that employees pay what they owe, either through tax withholding arrangements with their boss, or through their own record keeping and completion of IRS forms. The IRS is also there to ensure that you get back money if you overpay, of course. That’s why you get a tax refund.
To administer a complex system of taxes based on income, the IRS needs detailed information about you, the businesses you work for, and how much money those businesses pay you. Having everyone file the same forms is how the IRS collects and keeps this information current. For now, at least, there really is no alternative.
You may not have to handle all the complexity yourself
Even some of us who enjoy doing calculations may have little tolerance for the tedium of IRS forms and obsessive-compulsive record keeping. Though you probably can’t escape tedious record keeping and form filing entirely in a bureaucratic state, you can avoid a lot of the most tiresome aspects of tax preparation by using the right software or service.
What’s the difference between Forms W-2 and 1099?
W-2s are for regular employees who have taxes withheld from their paychecks, while 1099s are for people who are independent contractors.
Both forms provide you with information you need when you prepare your taxes — gross pay, taxes withheld (if applicable), your employer’s Employer Identification Number, and so on.
How many allowances should I claim on my W-4?
How many allowances you should claim can vary based on your situation. Unless you want to loan the IRS your money at 0% interest until you put in for your tax refund each year, make sure that you claim every allowance that you’re eligible to claim. If you worry that this might mean you’ll owe taxes at the end of the year, set some money aside some money from each paycheck to make sure you can afford to make the payment.
While you can ask your HR rep about which allowances you might be able to claim, a chat with a tax advisor may be the best choice here if you have questions.
What is a W-2 form used for?
A W-2 form is used to give you the full details on your earned income, taxes withheld, any allowances you may have claimed, and the amount of tax you paid into things like Social Security. If you have state taxes, then your W-2 will show state tax withholdings, too.
Since your employer also has a copy, your W-2 may serve as a useful backup record in some cases, though the same payroll software that likely generated the form will also serve as the primary records repository.
When are W-4 forms due?
If you have been working for the same employer year after year, then you should be getting your W-4 forms by December 1st. You only need to fill out your W-4 if your tax filing status changed from the year before. If it has changed, you have until February 15th, at the latest, to turn it in. You can still turn it in if you miss the deadline, but that may result in some of your withholdings not matching your changed status.
- W-4 and W-9 forms are submitted by employees to employers at the start of a new job or at the start of a change in their tax status.
- W-2 and 1099 forms both are issued by employers and show how much you earned during the tax year.
- Employers will take out taxes from every W-4 employee’s paycheck.
- People who have W-9 forms to their name do not have any taxes taken from their paycheck.
- How much tax you will have removed from your paycheck depends on calculations done, in most cases, by accounting software. Employers, or accountants in their employ, could also do the calculations manually by referring to IRS tax tables.
- If you don’t know which allowances to claim or have more than one job, you may want to consult with an accountant.
Tax confusion is no cause for shame
The intricacies of tax compliance require an attention to detail and sustained focus that many people find unnatural and unpleasant. If you find yourself confused about any of this, don’t feel bad — unless you’re trying to earn your living as a tax preparer, of course.
Unnatural and unpleasant though you might find it, it is important to understand which tax forms you’re supposed to get. Are you a W-4 employee? A W-9 contractor? Are you getting a 1099 at the end of the year, or a W-2?
Dealing with tax forms can be pretty confusing, and sometimes, the stuff you need can go beyond what they have on the IRS website. Thankfully, Super Money has you covered with all the resources you need to put your finances in order.
View Article Sources
- A–Z Index for Business — IRS
- About Form W-9, Request for Taxpayer Identification Number and Certification — IRS
- Form 1099-MISC (Rev. January 2022) — IRS
- About Form W-2, Wage and Tax Statement — IRS
- About Form W-4, Employee’s Withholding Certificate — IRS
- Instructions for the Requester of Form W-9 — IRS
- Self-Employed Individuals Tax Center — IRS
- Best Tax Preparation Firms — SuperMoney
- How to File Taxes Without a W-2 — SuperMoney
- How to Get Your W-2 from a Previous Employer — SuperMoney
- Tax Evasion vs. Tax Avoidance — Difference & Examples
- What is a 1099 Employee? The Definitive Guide to 1099 Status — SuperMoney