Fundamental Payroll Certification (FPC) Practice Exam

What information is provided by a W-2 form?

1. A summary of an employee's work performance

2. A record of wages and tax statements for employees

3. Details about employee benefits selections

4. A document for reporting payroll taxes only

The correct answer is: A record of wages and tax statements for employees

The W-2 form serves as a critical document in the payroll process as it summarizes an employee's earnings and the taxes withheld throughout the year. It is issued by employers to report the annual wages paid to employees and the taxes withheld from those wages, such as federal income tax, Social Security tax, and Medicare tax. This information is crucial for employees when they are preparing their income tax returns since it provides a comprehensive breakdown of all income earned and taxes paid. The details included in a W-2 include not only the total wages but also additional information such as benefits and retirement contributions that might have been deducted from an employee's pay. Thus, the W-2 forms the foundation upon which employees can assess their total compensation and tax obligations for the year. Other options, while relevant to employee records or payroll processes, do not directly reflect the primary purpose of the W-2 form. For example, employee work performance is assessed through performance reviews, not through tax documents. Similarly, employee benefits selections are typically documented through separate forms or systems used for benefits administration, not a W-2. While payroll tax reporting is indeed a component of the information, the W-2 encapsulates much more than merely reporting payroll taxes, making it a more holistic