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.
Every time you get your salary, there is a paystub that accompanies it which shows how much you earned for that period and the year-to-date payroll. This paystub also contains all the deductions and taxes that have been taken out of your salary. You net earnings is also indicated after all the deductions have been taken out and what is left is the amount of money you get from the paycheck.
The final paystub is the last paystub you get for the year. In this final paystub, you will find your gross and net incomes for the entire year.
Your gross income is the first thing you need to determine. In your final paystub you will find the gross income you made the entire year and this will include your 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. After adding up all your non-taxable income, it should be taken out of your gross income.
You also need to determine your other deductions. 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. Check your paystub and find out how much deductions you can make. Then subtract this amount from the result of the previous step. The difference is 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. A workers who receives wages every 15 days receives his salary 24 time a year. The total tax withheld from your income the whole year is the tax withheld per payroll times 24. Then you need to subtract the total tax withheld from your total taxable income. The results would be your net income for the year.