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. The good thing is that even without the W2 form, you can actually calculate your net income or W2 wages from your basic paystub. It is easy to calculate W2 wages using figures in your paystub and it only takes basic arithmetic to do so The procedure is given 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. Included in the paystub are the deductions taken out from your wages and what is left from the paycheck.
At the end of the year, you get your final paystub. 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. Your final paystub will show your gross income which is the sum of all your regular wages including your extra overtime hours, bonuses, or commissions.
You the need to subtract non-taxable wages to your gross income. Disability wages, partnership income, employer insurance or gifts are non-taxable income. 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. These deductions can include employer benefits, retirement accounts, health insurance, life insurance, transportation programs, and more. Your paystub will indicate the total of these deductions. In the previous step we ended up with a figure and deductions should be taken out from this figure. This figure that you get after deduction is your total taxable income for the year.
Then find out the total taxes withheld from your income the whole year. The taxes withheld for a certain period is indicated in your paystub. This amount should then be multiplied by the number of times you were paid that year. If you receive your salary twice a month, then the whole year you get paid 24 times. Multiplying the tax withheld every payroll by 24 gives you the total tax withheld the entire year. Finally, you need to subtract this total taxes withheld from your total taxable income which we found in step 3. This figure is your net income for the year.