Many people get overwhelmed when they are required to pay taxes. Most people delay their tax process since they have not yet received their W2 which has the required information. Below is a guide that will assist you in calculating your W2 wages from a pay stub and therefore speed up your tax process.
What You Need to Know about Pay Stubs
The paycheck you receive from your employer each time you are paid is called a pay stub. The pay stubs give details on your salary, and all taxes and deductions that have been subtracted from your pay. Pay Stubs will also include your net earnings or click here for more info.
Definition 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 indicates your entire year's gross and net income.
Definition of a W-2
You can know how much taxes were withheld from your entire year's paycheck. This is a crucial part when filing your tax return. Check https://www.paystubcreator.net/blog/how-to/how-to-calculate-w-2-wages-from-a-paystub to learn more.
Using a Pay stub to Calculate The W-2 Wages
Apart from W2 forms indicating the tax deductions, gives the amount of net income raised for the entire 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. The total earnings are calculated by multiplying the rate per hour by a given number of hours for that 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. Deduct all the non-taxable payments from the gross income.
Get to Know Other Deductions
These deductions include employer benefits, and health and life insurances. Sum up all these deductions and subtract from the figure in the step above.
Find out The Yearly Taxes
Determine the amount of local, state and income taxes that are to be withheld from your full salary. If you want to see the amount of tax that you will have to pay at the end of the year, multiply the total amount of taxes by the number of times you get to spend them in a year.
Get to Know 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 amount you remain with is the yearly net income.
The only time you will get your calculated amount varying from the W2 one is when mathematical errors have occurred. Read this article about income: https://en.wikipedia.org/wiki/Paycheck