What is the purpose of Form W-2?

Form W-2 serves the essential purpose of reporting wages paid to employees and the taxes withheld from their paychecks over the course of the tax year. Employers are required to complete this form for each employee and submit copies to both the employee and the Social Security Administration. The details included on Form W-2 allow employees to accurately file their income tax returns, ensuring they declare the correct income and taxes already paid through withholding.

This form is crucial for tax reporting because it provides necessary information such as total earnings, Social Security wages, Medicare wages, and various types of withholding taxes, including federal, state, and local taxes. The W-2 is a key document for employees when preparing their tax returns since it summarizes their earnings and taxes for the year, making it easier for them to comply with tax laws and obligations.