Future Business Leaders of America (FBLA) Accounting Practice Test

Which form is required to report comprehensive payroll information about employees at the end of the year?

1. Form W-3

2. Form W-2

3. Form 940

4. Form 941

The correct answer is: Form W-2

The appropriate form for reporting comprehensive payroll information about employees at the end of the year is Form W-2. This form is essential for summarizing an employee's earnings and the taxes withheld from those earnings throughout the year. Each employer must provide a W-2 to every employee who has received wages, tips, or other compensation, ensuring that employees have the necessary information to accurately file their income tax returns. Form W-2 contains critical information such as the employee's total annual earnings, Social Security wages, Medicare wages, and the amount of federal, state, and other taxes withheld. This makes it a crucial document for both employees and the IRS, as it helps maintain transparency and accuracy in reporting income and tax obligations. In contrast, other forms listed serve different purposes: Form W-3 is a summary of the W-2 forms submitted, Form 940 is used for reporting annual Federal Unemployment Tax Act (FUTA) tax, and Form 941 is a quarterly report for payroll taxes, which includes information on Social Security, Medicare, and income taxes withheld from employee paychecks. Each of these forms plays a distinct role in payroll reporting but does not provide the comprehensive year-end payroll details required for individual employees like Form W-2 does.