Which form is essential for reporting an employee's tax withholdings?

The W-2 form is essential for reporting an employee's tax withholdings because it is specifically designed to provide both the employee and the IRS with a summary of the employee's earnings and the taxes that have been withheld from their paycheck throughout the year. Employers are required to issue W-2 forms to their employees by the end of January each year, detailing the total wages paid and the amounts withheld for federal income tax, Social Security, and Medicare taxes. This information is crucial for employees when they prepare their annual tax returns, as it affects their total tax liability and eligibility for refunds.

In contrast, Form 1065 is used for reporting income, gains, losses, deductions, and credits for partnerships, and it does not pertain to individual employees’ tax withholdings. Form 1040 is the individual income tax return that taxpayers file, but it does not itself report withholdings; instead, it utilizes the information provided on forms like the W-2. The K-1 form is issued to partners and shareholders in S corporations to report income, deductions, and credits, but it is not relevant to an individual employee's tax withholding situation.