What is the purpose of a Form W-2?

The purpose of a Form W-2 is to provide a detailed summary of an employee's income and the taxes that have been withheld from that income during the tax year. It specifically shows how much money was earned from working, which is essential for filing income tax returns. The W-2 form includes information on wages, tips, and any other compensation received from the employer, as well as federal, state, and other taxes withheld.

Providing a comprehensive overview of earnings and withholdings ensures that employees can accurately report their income when preparing their tax returns, determine their tax obligation, and check for any discrepancies. This form is critical for individual taxpayers in understanding their financial standing and for ensuring compliance with tax regulations.

While the W-2 does contain the employee’s Social Security Number and is used to report income data to the IRS, its primary function is centered around summarizing earnings and tax withholdings for the purpose of income reporting. Summarizing annual expenses, on the other hand, is not the role of the W-2 form.