W4 vs W9: Differences Explained
W4 vs W9: Differences Explained
There are many different types of tax forms that you may come across during the tax season when it is time to file your tax return, so it is essential that you understand the differences between them and identify which forms you must submit to accurately complete your tax filing.
TABLE OF CONTENTS
What Is IRS Form W-4?
What Are Withholding Taxes
What Type Of Information Must Be Included On IRS Form W-4?
What Is IRS Form W-9?
Types Of W-9 Employees
What Is An Independent Contractor?
What Type Of Information Must Be Included On IRS Form W-9?
What Is The Difference Between W-4s and W-9s?
What Is IRS Form W-2?
Key Takeaways:
- The IRS Form W-4, or the Employee’s Withholding Allowance Certificate, is a tax article that allows employees to determine how much of their income they would like to be withheld for federal income tax purposes.
- The IRS Form W-9 or the Request for Taxpayer Identification Number (TIN) and Certification, is a tax form that allows employers to gather the tax identification number for each of their independent contractors and self-employed workers so that they can complete their own tax records.
- While W-4 employees are wage-earning or salary employees, W-9 workers are individuals who receive non-employee compensation from a company, including freelancers, vendors, and independent contractors.
- The IRS Form W-2 is a tax form that the employer provides to their employees at the end of the tax year to summarize their earnings for the year. The W-2 form will also contain information about how much of the employee’s pay was withheld during the year for tax payments and applicable deductions.
What Is IRS Form W-4?
The IRS Form W-4 is also known as Employee’s Withholding Allowance Certificate. This form allows employees to determine how much of their income they would like to be withheld for federal income tax purposes. After the employee has filled out the required elements of Form W-4, the employer knows how much of their employee’s paycheck they need to withhold.
The amount from their paychecks that employees are able to withhold is determined by their hourly wage or salary and by their withholding allowances. Withholding allowances are dependent on the taxpayer’s filing status, how many dependents they have, and which tax credits and deductions they qualify for.
What Are Withholding Taxes?
As an employee, withholding taxes represent the amount of federal income tax withheld from each of your paychecks. The benefit of having taxes withheld from your paychecks throughout the year is that when it comes time to file your tax return during the tax season, you will have already largely contributed to your tax liability.
If during the tax season, you realize the amount you asked your employer to withhold from your paycheck was less than what you owe in total, you may be required to submit additional tax payments. On the other hand, if you learn that the amount you documented on your W-4 form resulted in the tax withheld from your paycheck being a larger sum than what you owe in tax payments for that year, you will be returned that money in the form of a tax refund.
What Type Of Information Must Be Included On IRS Form W-4?
Full Name
Employees must list their full legal name on their W-4 tax forms to ensure all tax data is correctly reported to the IRS.
Address
It is important that employees verify their address on their W-4 forms to ensure they receive all essential communication from the IRS regarding taxes.
Social Security Number
The employee’s valid Social Security Number is required to verify their identity for payment and tax purposes.
Filing Status
The filing status you select when you file your taxes can significantly impact your tax situation, so it is important to identify if you are single or married. If you are in a marriage, you must list if you will be filing singly or jointly.
Additional Jobs or Spouse Employment Information
Employees must list all other information related to other jobs, including their spouses.
Number of Dependents
The number of dependents the employee is financially responsible for can impact their tax relief options.
Adjustments
There is also a section on form W-4 where employees must list all adjustments, including deductions, withholdings, and non-job related income.
What Is IRS Form W-9?
The IRS Form W-9 is also known as the form to Request for Taxpayer Identification Number (TIN) and Certification. The purpose of form W-9 is to allow employers to gather the tax identification number for each of their independent contractors and self-employed workers so that they can complete their own tax records.
Types Of W-9 Employees
There are several titles that employees who use IRS form W-9 can hold, such as:
- Independent Contractor
- Self-Employed
- Freelancer
- Vendor
What Is An Independent Contractor?
An independent contractor is different than a regular wage employee in that they are responsible for paying their own taxes, do not receive any employment benefits from an employer, such as retirement investment matching or health insurance, and may have more control over their work hours and task regulations.
What Type Of Information Must Be Included On IRS Form W-9?
Full Name
Taxpayers must list their full legal name on their W-9 forms to ensure all of their tax information is accurately recorded. It is especially important that freelancers and other types of W-9 employees complete these tax documents accurately because they do not work under an employer that withholds taxes for them and are responsible for paying all of their taxes.
Tax Identification Number (TIN)
Your TIN may be your Social Security Number (SSN) or your Employer Identification Number (EIN), depending on whether you file as an individual or if your contract work operates under a business.
Business Name
If you operate as a business and utilize an EIN to complete your taxes, you must include the full legal name of the companies or businesses.
Business Entity
Taxpayers who report their taxes as a business on Form W-9 must include the type of business entity, such as limited liability company (LLC), C-Corporation, or partnership.
Exemptions
Certain entities that qualify for a type of exemption, like an exempt payee code, must disclose this information within the appropriate section of Form W-9.
Address
W-9 employees must fill in their addresses as an additional form of identity verification.
Signature
Signing at the bottom of Form W-9 to complete the process and ensure the accuracy of all details listed in the tax form.
What Is The Difference Between W-4s and W-9s?
The major difference between tax forms W4 and W9 is the type of worker who is required to use the form when filing their taxes. W-4 tax forms are utilized by employees who earn hourly wages or a salary from an employer. W-9 tax forms are used by individuals who receive non-employee compensation from a company, including freelancers, vendors, and independent contractors.
Additionally, the main purpose of filling out a W-4 form is to inform the person with the responsibility of managing payroll to withhold the correct amount of payroll taxes from each paycheck. In contrast, W-9 forms are largely utilized for documentation purposes due to the fact that the W-9 employee is solely responsible for paying their tax liability owed to the IRS.
What Is IRS Form W-2?
The form W-2 is a tax form that the employer provides to their employees at the end of the tax year to summarize their earnings for the year. The W2 form will also contain information about how much of the employee’s pay was withheld during the year for tax payments and applicable deductions.
This form contains all of the details regarding an employee’s income, federal taxes, state taxes, and FICA taxes (including Social Security and Medicare taxes) that were withheld from their paycheck. This form also contains identification details about the taxpayer, including their social security number, address, and employer ID number.
If you want help determining which tax forms you need for your information return, how much you need to pay in income taxes, or if you want to utilize professional tax preparation services this tax season, Ideal Tax can help you navigate the steps of resolving your tax situation.
