What is the purpose of a withholding tax statement?

A withholding tax statement serves a specific purpose in the tax system by detailing the amounts of money that have been withheld from an individual's wages or salary for federal income tax purposes. This statement is typically provided by employers and is essential for employees to understand how much has been set aside to pay their federal income taxes throughout the year.

By accurately reporting the amounts withheld, the statement helps taxpayers determine their potential tax liability when they file their annual tax returns. It provides transparency about how much tax has already been paid, which can affect the amount owed or the refund received at tax time.

The other options do not align with the primary function of a withholding tax statement. For instance, while total income can be impacted by the amount withheld, the statement does not provide a comprehensive calculation of total income for the year. Similarly, it does not summarize cash transactions or declare personal tax exemptions, as these are handled through different forms and filings within the tax system.