How to Use Your Paystub to Calculate W-2 Wages
When preparing tax returns, the W2 form gives us the important figures that are needed in out calculations. But sometimes there is a delay in receiving your W-2 and when this happens, you wait anxiously for it hoping that it arrives in time before the tax deadline arrives. You don’t have to wait for the W2 form to calculate your net income; a simple paystub can help you with the figures. With just a paystub in hand, you will be able to calculate W2 wages using just your basic math. The procedure is given below.
You get a paystub every time you receive you wages and this shows you how much you earned for that payroll period and the total you have earned so far. You can only find here how much was deducted from your salary and the net salary you get for that paycheck.
At the end of the year, you get your final paystub. Your gross and net incomes are shown on this final paystub.
IT is important to first determine your gross income. Your final paystub will show your gross income which is the sum of all your regular wages including your extra overtime hours, bonuses, or commissions.
Then when your gross income is determined, you need to subtract the wages that are non-taxable. Disability wages, partnership income, employer insurance or gifts are non-taxable income. After adding up all your non-taxable income, it should be taken out of your gross income.
Next, you need to check out other deductions that can be made on your income. There are many people wo are eligible for pretax deductions that can lower their taxable income amount. Some kinds of pretax deductions include employer benefits, retirement accounts, health insurance, life insurance, transportation programs, and more. Check your paystub and find out how much deductions you can make. This total should be deducted from the amount you got in the previous step. This amount reflects your total taxable income for the year.
You next need to determine how much taxes were withheld from your earnings throughout the year. The taxes withheld for a certain period is indicated in your paystub. You need to multiply this amount with the number of times your are paid each year. If you receive your salary twice a month, then the whole year you get paid 24 times. So, multiply the tax withheld you find in your pay stub by 24 and you get the total tax withheld from your income the whole year. Finally, you need to subtract this total taxes withheld from your total taxable income which we found in step 3. The results would be your net income for the year.