What critical financial document summarizes an individual’s tax information for the previous year?

The W-2 form is a critical financial document that summarizes an individual's earnings and tax information for the previous year. Employers are required to issue a W-2 to each employee, which details the total wages earned and the amount of federal, state, and other taxes withheld from those earnings throughout the year. This information is essential for employees when preparing their annual tax returns, as it provides a clear account of what they earned and how much tax has been paid.

The W-2 form is specifically designed to enable individuals to report their income accurately to the IRS and to understand their tax obligations. It serves as an official record of employment income that is reported to the government, reflecting the taxpayer's earnings and any contributed FICA taxes (Social Security and Medicare) for that year.

In contrast, a pay stub provides information on an employee's earnings for a specific pay period but does not summarize the entire year's earnings or tax withheld. A tax return is the document filed with the IRS to report income for the year, but it relies on the information provided on the W-2 and other forms. Similarly, a financial statement typically reflects an individual's overall financial position and activities rather than specifically summarizing tax-related details.