What is the purpose of Form W-2 for employees?

What is the purpose of Form W-2 for employees?

• A. To report an employee's hourly pay rate
• B. To document an employee's tip income
• C. To provide a summary of wages and tax withholding for the year
• D. To collect information for employer tax returns

Answer: (C)

The purpose of Form W-2 for employees is to provide a summary of wages and tax withholding for the year. This form is essential for both employees and the IRS as it consolidates the total earnings that an employee received throughout the year, along with the federal, state, and local taxes that have been withheld from those earnings. Employees use the information on the W-2 to accurately file their annual tax returns and determine whether they owe additional taxes or are entitled to a refund. The IRS also uses the data reported on the W-2 to verify income and taxes withheld, ensuring that tax filings are accurate and compliant with tax laws. In contrast, reporting an employee's hourly pay rate, documenting tip income, and collecting information for employer tax returns are not the primary functions of Form W-2. While some of that information might be relevant in broader payroll and tax discussions, it is not captured in the way and for the purpose that a W-2 serves.

The purpose of Form W-2 for employees is to provide a summary of wages and tax withholding for the year. This form is essential for both employees and the IRS as it consolidates the total earnings that an employee received throughout the year, along with the federal, state, and local taxes that have been withheld from those earnings.

Employees use the information on the W-2 to accurately file their annual tax returns and determine whether they owe additional taxes or are entitled to a refund. The IRS also uses the data reported on the W-2 to verify income and taxes withheld, ensuring that tax filings are accurate and compliant with tax laws.

In contrast, reporting an employee's hourly pay rate, documenting tip income, and collecting information for employer tax returns are not the primary functions of Form W-2. While some of that information might be relevant in broader payroll and tax discussions, it is not captured in the way and for the purpose that a W-2 serves.