Many people get overwhelmed when they are required to pay taxes. Since the required information is in the W2, most of the people delay their taxing processes until the W2 is released. In this article, you will get steps that will guide you through calculating W2 wages from a pay stub so that you do not delay your taxpaying process.
Pay Stub Definition
The paycheck you receive from your employer each time you are paid is called a pay stub. Apart from pay stubs informing you on the much you have earned, they also tell you of all the deductions and taxes that have been deducted from your earnings. Pay Stubs will also include your net earnings.
Meaning of Final Pay Stub
The last pay stub you will be given at the end of the year is called a final pay stub. It gives information on how much total and net income you were able to raise throughout the year.
Definition of a W-2
A W-2 is a tax form which indicates the entire amount of taxes that have been deducted from your paycheck for the whole year. When filling out your tax return, this information is essential.
Calculating W-2 Wages From A Pay stub
Through a W2, you will get details on the tax deductions made on your paycheck and the net revenue raised in the year. Even though a pay stub will not give you similar information, it will provide you with the relevant information that will help you know your overall net income. Use the following steps.
Get to Know Your Gross Income
Before anything else, you have to know what you are supposed to earn when no deductions have been made. Mostly, it indicates the hourly rate multiplied by a specified number of hours per week.
Minus Non-Taxable Wages
Your wages cannot be imposed if you do not have any federal, state or income taxes. At times, it is inclusive of partnership income, disability wages and employer insurances. Sum up the non-taxable payments and subtract from the gross income.
Find out What The Other Deductions are
Employer benefits, and life and health insurances can make up the list of other deductions. From the amount in the above step, subtract all these deductions.
Find out The Yearly Taxes
Determine the amount of local, state and income taxes that are to be withheld from your full salary. By increasing the number of fees to be paid by the number of times you get you to pay per year, you will know the total amount of taxes that withheld at the end of the year.
Calculate W-2 Earnings
The final step would be to subtract all the taxes withheld from your salary from the amount calculated in the third step. The answer you will get will be your annual net income.
In case the figures differ from the ones on your W-2 form, repeat the process to check if there are any math errors.