Which of the following forms is essential for employees' records and for IRS reporting?

The W-2 form is crucial for maintaining employees' records and for IRS reporting purposes because it summarizes an employee's annual wages and the amount of taxes withheld from their paycheck throughout the year. Employers are required to issue a W-2 to each employee by January 31 of the following year, and this form must be submitted to the IRS as part of the employer’s reporting requirements.

The importance of the W-2 lies in its role in providing employees with the necessary information to file their personal income taxes accurately. It reflects earnings, social security contributions, and federal, state, and local taxes withheld. Because both employers and employees rely on this form for tax reporting, it is a critical component of payroll management.

In contrast, while the 941 and 940 forms are related to reporting payroll taxes, they serve different purposes; the 941 is submitted quarterly and reports income taxes, social security, and Medicare taxes withheld, while the 940 is an annual report of federal unemployment tax. The 1040, on the other hand, is the individual income tax return that employees file with the IRS, and not a form that employers are responsible for providing. Thus, in the context of employee records and IRS reporting, the W-2 is