How to Use Your Paystub to Calculate W-2 Wages
You can easily calculate your net income with the use of the W2 form. 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. 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. 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.
At the end of the year, you get your final paystub. Your gross and net incomes are shown on this final paystub.
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. Disability wages, partnership income, employer insurance or gifts are non-taxable income. Add all these up and subtract it from 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. Employer benefits, retirement accounts, health insurance, life insurance, transportation programs, etc. are some of the other deductions that can be applied to your gross income. Check your paystub and find out how much deductions you can make. In the previous step we ended up with a figure and deductions should be taken out from this figure. This amount reflects your total taxable income for the year.
Then find out the total taxes withheld from your income the whole year. Every paystub gives you a figure of total taxes withheld. How many times are you paid the whole year? Multiply that number with the tax withheld indicated in your pay stub. If you receive your salary twice a month, then the whole year you get paid 24 times. The total tax withheld from your income the whole year is the tax withheld per payroll times 24. Finally, you need to subtract this total taxes withheld from your total taxable income which we found in step 3. The amount that you get is your net income for the entire year.