Explain the purpose of Form W-2.
Explanation of Solution
Form W-2: Form W-2, also known as Wage and Tax Statement, is provided by employers to every employee regarding their earning of previous calendar year. This statement is provided till January 31 and contains information about the earning and tax deduction at source of every employee.
Purpose of Form W-2 is that it contains the information of earning and tax deduction at source of every employee which helps the employees in completing their federal income tax return. Form W-2 is the standard form provided by Internal Revenue Service (IRS). It is mandatory to prepare at least four copies of Form W-2. The four copies which are prepared and used are given below:
- First copy is sent to social security administration by the employer.
- Second copy is attached by the employee in federal income tax return.
- Third copy is kept in employer’s record.
- Fourth copy is kept in employee’s record.
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