Mostly, people cannot start computing for their tax until they got their W2. After all, the information you need for your tax return is on the W2 form. What if your W2 is not yet with you? It is not necessary for you to wait for your W2. Your paystubs actually contains information that are in your W2. We will teach you how to calculate W2 wages using your paystubs in this page at https://www.paystubcreator.net/blog/how-to/how-to-calculate-w-2-wages-from-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. It also shows the deductions and taxes that will be reduced from your earnings. Given this, the paystub indicates your net earnings or the amount that you will actually receive. Visit this website at https://www.encyclopedia.com/articles/can-you-file-your-taxes-online-using-your-last-pay-stub-from-december/ and know paystubs.
What is a W-2?
A W-2 is a tax form from this site that contains details about the taxes withheld from your paycheck for the year. This is also an integral part of filling out the tax return.
Computation of W-2 Wages From A Paystub.
Although the W2 form is very much helpful in computing for your W2 wages because it already contains the taxes withheld thus, your net income for the year, waiting for it is not the only option because you can actually compute for your W-2 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’s how you do it.
Calculate for 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. Commonly, gross income is the hourly rate times the number of hours worked per week. The paystub has this also including your overtime hours, bonuses, and commissions.
Subtract Wages That Are Non-Taxable.
After you got your gross income. You should deduct from it the wages you received that are non-taxable. These non-taxable wages are the wages you’ve earned that do not have income taxes, federal taxes, or state taxes due. Gifts, employer insurance, disability wages, and partnership income are common examples of nontaxable wages.
3. Calculate For Other Deductions.
There are people who are eligible for pretax deductions that lessens their taxable income. Life insurance, retirement accounts, transportation programs, employer benefits, and health benefits are examples of pretax deductions. The total amount of these deductions can be found on your paystub.
Once you have this amount, you deduct it from the total amount you derived at step 2. This amount should be comparable to the amount in Box 1 of your W2 form.
4. Determine Your Annual Taxes.
Find the total amount of state, local, and income taxes withheld and multiply it by the number of times you are paid every year. For example, if you are paid twice in a month, then you will multiply 24 by the total amount of taxes withheld. The total amount of withholding taxes at the end of the year is the product.
Calculate Your W-2 Earnings.
Lastly, subtract the total amount of taxes withheld from the amount you got in step three to get the net income.