Which statement best describes the W-2 form?

• A. It reports wages and tax withholdings for employees.
• B. It reports self-employment income.
• C. It reports investment income.
• D. It reports business expenses.

Answer: (A)

The main idea here is understanding what information the W-2 provides. The W-2 is the form employers issue to employees to show how much they were paid in wages or tips during the year and how much tax was withheld from those wages. It presents wages, tips, and other compensation, along with the amounts withheld for federal income tax, Social Security, and Medicare. This form is specifically for employees, not for self-employed individuals or investment earners. Self-employment income is reported on other forms such as Schedule C and 1099-NEC, investment income is reported on 1099-INT/DIV and similar forms, and business expenses are shown on schedules like Schedule C. The W-2 is used to prepare the individual’s tax return (Form 1040) by detailing what was earned and what taxes were already paid through withholding.