The W-2 form is very important when preparing your tax returns. 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. You simply need to apply basic math using figures in your paystub to calculate W2 wages. Find out how below
Whenever you receive your wages you are also given a paystub which indicates how much money you earned for that period and your total income from the start of the year to date. Included in the paystub are the deductions taken out from your wages and what is left from the paycheck.
At the end of the year, you get your final paystub. This shows your gross and net incomes for the entire year.
The firs thing you need to know is how much gross income you’ve earned. You final paystub shows your gross income and this includes your monthly salary plus the extra overtime hours, bonuses, or commissions.
Then when your gross income is determined, you need to subtract the wages that are non-taxable. The items included in non-taxable wages are disability wages, partnership income, employer insurance or gifts. Add all these up and subtract it from your gross income.
Next, you need to check out other deductions that can be made on your income. These pretax deductions can help lower your taxable income amount and there are people who are eligible for this. If you are eligible for pretax deductions, then you should determine this to help lower your taxable income. Some kinds of pretax deductions include employer benefits, retirement accounts, health insurance, life insurance, transportation programs, and more. Your paystub will indicate the total of these deductions. In the previous step we ended up with a figure and deductions should be taken out from this figure. This figure that you get after deduction is your total taxable income for the year.
Then find out the total taxes withheld from your income the whole 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. A workers who receives wages every 15 days receives his salary 24 time a year. 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. The total tax withheld should then be subtracted from your total taxable income calculated in the third step. The amount that you get is your net income for the entire year.