What does W-2 form report?

The W-2 form serves as a comprehensive report of an employee’s annual income and the taxes that have been withheld from that income throughout the year. It is an essential tax document that employers provide to their employees each January, summarizing key information required for tax filing. This includes total wages earned, Social Security income, Medicare wages, and federal and state taxes withheld, among other things.

The importance of this information lies in its role in helping individuals accurately report their income and calculate their tax obligations for the year. Employees use the data from their W-2 forms when they prepare their tax returns, ensuring they pay the correct amounts due to the state and federal governments. The details included allow for proper tax deductions, credits, and overall compliance with tax laws.

Other options, such as reporting only gross pay or monthly earnings, do not capture the full breadth of the information provided in the W-2. Similarly, eligibility for employment is not relevant to the W-2 form, as it is not a statement of individual employment status. Rather, the W-2 is focused specifically on financial earnings and tax information, making annual income and taxes withheld the accurate and comprehensive answer.