When preparing tax returns, the W2 form gives us the important figures that are needed in out calculations. If you W2 form is delayed then you might be at a loss on how to do your tax returns knowing that all the information about your income is there. You don’t have to wait for the W2 form to calculate your net income; a simple paystub can help you with the figures. You simply need to apply basic math using figures in your paystub to calculate W2 wages. Check the procedure 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.
You final paystub is what you get at the end of 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. You final paystub shows your gross income and this includes your monthly salary plus the extra overtime hours, bonuses, or commissions.
You the need to subtract non-taxable wages to your gross income. The items included in non-taxable wages are disability wages, partnership income, employer insurance or gifts. You need to add up all the non-taxable wages and subtract it from your gross income.
Now consider your other deductions. There are many people wo are eligible for pretax deductions that can lower their taxable income amount. 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. This total should be deducted from the amount you got in the previous step. This figure that you get after deduction is your total taxable income for the year.
Next, you need to find out the total taxes withheld from your income for the entire year. The taxes withheld for a certain period is indicated in your paystub. 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. The total tax withheld should then be subtracted from your total taxable income calculated in the third step. This figure is your net income for the year.