05. August 2019 · Comments Off on Getting Down To Basics with Documents · Categories: Software

Computation For Your W-2 Wages Using a Paystub

Usually, people cannot commence with their tax process without their W2. After all, the W2 form contains the information that you will need in preparing your tax return. How about if you do not have a W2 yet? You do not have to wait for it. You can actually get the same information in your W2 from your paystubs. We will teach you now how to calculate W2 wages using a paystub.

What is a Paystub?

Paystub is the check that you receive once your employer pays you your salary. It includes information about your pay, as well as the total amount you’ve earned as of the current pay period, and the total amount you’ve earned for the year-to-date payroll. Also, it portrays the taxes and other deductions that will be taken from your current earnings. Considering this, the paystub lists the net earnings of employees or the amount they will actually receive.

What is a W-2?

W-2 is a tax form containing what taxes are withheld from your paycheck for the year. This is important in relation to filling out your tax return.

How Do you Calculate W-2 Wages Out of a Paystub?

Waiting for your W-2 forms that contain the taxes withheld from your salary and you annual net income is not necessary considering that you can calculate for your W2 wages through your paystubs. The paystub may not contain all information present in a W2 form but, it contains all sufficient information necessary for calculating your overall net income. Here are the steps to do it.

1. Find your Gross Income.

The initial step is computing for your gross income which is the total amount of money you have earned before any deductions or tax withholdings. For most, this is equal to your hourly rate times the number of hours you’ve worked in a week. The paystub has this details too as well as details regarding your overtime hours, bonuses, and commissions.

Subtract Wages That Are Non-Taxable.

Once you have computed for your gross income, the next step is to subtract from it your non-taxable wages. Non-taxable wages are the wages you received without any federal taxes, income taxes, or state taxes. Wages like these are disability wages, partnership income, employer insurance, or gifts.

3. Calculate For Other Deductions.

Mostly, there are people who can avail of pretax deductions so as to decrease their taxable income. Common examples of pretax deductions are health benefits, employer benefits, retirements accounts, transportation programs, life insurance, and more. The total amount of these deductions can be found on your paystub.

You subtract the total amount of pretax deductions from the total amount you have derived in step 2. This amount should be comparable to the amount in Box 1 of your W2 form.

4. Compute Your Annual Taxes.

Look for the amount of taxes–local, state, and income taxes–from your paystub that are withheld and multiply this amount by the number of times you are paid in a year. For example, if by chance you are paid twice in a month, then you multiply the total amount of withheld taxes by 24. The product is the total amount of taxes that will be withheld at the end of the year.

5. Compute Your W-2 Earnings.

Compute for your net income by deducting from the amount in step three the withholding taxes.

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