Usually, people cannot commence with their tax process without their W2. After all, the information you need for your tax return is on the W2 form. But what if you do not have a W2 yet? It is okay not to wait for your W2. Your paystubs actually contains information that are in your W2. We will teach you how to calculate W2 wages using your paystubs in this page.
What is a Paystub?
The check that you receive when you get paid is called a paystub. It includes information about your pay, as well as the total amount you’ve earned as of the current pay period, and the total amount you’ve earned for the year-to-date payroll. It also shows the deductions and taxes that will be reduced from your earnings. Given this, the paystub indicates your net earnings or the amount that you will actually receive.
A W-2 is a tax form that contains details about the taxes withheld from your paycheck for the year. In filling out your tax return, this is significant.
Computation of W-2 Wages From A Paystub.
Although the W2 form is very much helpful in computing for your W2 wages because it already contains the taxes withheld thus, your net income for the year, waiting for it is not the only option because you can actually compute for your W-2 wages through your paystubs. Though the paystub may not have all information from your W2 form, it is however sufficient to be utilized for figuring out your overall net income. Here’s how you do it.
Compute for your Gross Income.
The initial step is computing for your gross income which is the total amount of money you have earned before any deductions or tax withholdings. Gross income is usually equal to the hourly rate multiplied by the number of hours worked in a week. Your paystub contains this information as well as your overtime hours, bonuses and commissions.
Deduct Wages That Are Non-Taxable.
After you got your gross income. You should deduct from it the wages you received that are non-taxable. These non-taxable wages are the wages you’ve earned that do not have income taxes, federal taxes, or state taxes due. Examples of these wages are income from partnership, wages due to disables, insurance of employers, or gifts.
3. Determine Other Deductions.
Mostly, there are people who can avail of pretax deductions so as to decrease their taxable income. Examples of such deductions are employer benefits, retirements accounts, life insurance, transportation programs, health insurance, etc. You paystub contains the total amount of these deductions.
You subtract the total amount of pretax deductions from the total amount you have derived in step 2. This amount should be comparable to the amount in Box 1 of your W2 form.
4. Compute Your Annual Taxes.
Find the total amount of state, local, and income taxes withheld and multiply it by the number of times you are paid every year. If for example you are paid twice a month, then you multiply these numbers by 24. The total amount of withholding taxes at the end of the year is the product.
5. Compute Your W-2 Earnings.
Lastly, subtract the total amount of taxes withheld from the amount you got in step three to get the net income.