Form W-4 is used only in an employment relationship where an individual is treated as an employee for federal tax purposes. Independent contractors are subject to different tax rules and do not use Form W-4.
Employee Classification
An employee is an individual whose work is subject to the control and direction of an employer under federal tax rules. Employees receive wages that are subject to federal income tax withholding, which is established through Form W-4.
Independent Contractor Classification
An independent contractor is not treated as an employee for federal payroll tax purposes. Compensation paid to independent contractors is generally not subject to payroll withholding and is reported using different forms.
Different Tax Documentation
Because employees and independent contractors are taxed under different systems, they use different tax forms. Form W-4 applies to employees, while independent contractors provide taxpayer information through other documentation.
Importance of Correct Classification
Worker classification determines which federal tax rules apply to income and withholding. Form W-4 reflects the employee classification and is not used when compensation is paid outside of an employment relationship.