What is the purpose of Form W-2?

Form W-2 serves as a Wage and Tax Statement, which is crucial for both employees and the IRS. This form is issued by employers to report the annual wages paid to an employee and the taxes withheld from those wages. The information included on Form W-2, such as the employee's total earnings, Social Security and Medicare taxes withheld, and federal and state income taxes withheld, is essential for accurately filing income tax returns.

When an employee receives their Form W-2, they use the details on it to complete their individual income tax return, ensuring that they report their income accurately and are able to claim any potential refunds based on the taxes already withheld by their employer. Furthermore, the employer submits this information to the IRS, which helps the government ensure that taxpayers are reporting their income accurately.

This form plays a critical role in tax compliance and reporting, making it an essential tool for both tax preparation and government oversight.