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. Below is a guide that will assist you in calculating your W2 wages from a pay stub and therefore speed up your tax process.
Definition of Pay Stub
Pay stubs are the paychecks that an employer provides the employees after paying them. It indicates the information about your salary and the deductions and taxes that have been deducted from your salary. It will also inform you on the amount you will get from the paycheck.
Definition of Final Pay Stub
A final pay stub is a pay stub that is provided when the year comes to an end. 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.
How to Calculate 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. The following steps will guide you.
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.
Subtract Wages That cannot be Taxed
Wages cannot be taxed if they do not include federal, income or state taxes. However, partnership income, disability wages, and employer insurance can be added. Sum up the non-taxable payments and subtract from the gross income.
Determine Your Other Deductions
Other deductions may include benefits of the employer, and health and life insurances. Using the figure obtained in the step above, subtract all the other 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.
Determine Your 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.
If you will find that the amount you get differs from that in the W2 form, cross-check the process for any math mistakes.