Can't Wait for Your W2? Calculate Wages With Your Paystub
When preparing your tax return, the information on your W2 form is usually quite valuable. But you just don't want to wait until February to get your W2 to calculate wages. Well, a paystub can help, too. Your paystub comes with the information you need for your calculations. It gives you details on your take-home pay and employee deductions, such as federal taxes, Medicaid, social security, and state taxes.
In this post, we're going to show you the steps to calculate your wages using the paystub. Read on to find out more.
1. Determine Your Gross Income
First, determine your employee earnings. As a salaried employee, that's usually your hourly rate multiplied by 40 hours per week. It will also show your overtime hours, commissions, and bonuses for a particular pay period. Get the total of all your gross earnings. This is the total amount you usually have before deductions, contributions, and taxes are withdrawn.
2. Deduct Non-Taxable Wages
These are any wages you get that have no state, federal, or income taxes. These include gifts, states without income tax, partnership income, disability wages, and employer insurance. Find the total of your non-taxable wages and deduct the amount from your gross income. With non-taxable wages, keep in mind that it might not apply in all conditions. For example, the income you get due to a scholarship and certain costs, such as tuition fees, are non-taxable. However, the amount you use to board or rent a room is subject to taxes.
3. Determine the Deductions
Pretax deductions are those deductions you're eligible for, and they help to lower your taxable income amount. Examples include life insurance, health insurance, retirement accounts, employer benefits, and transportation programs. Get their aggregate and subtract the amount from the resulting figure in step 2.
Keep in mind that the total figure after your deductions should match the number in Box 1 on your W2 form when it finally arrives. If they're incorrect, you can take the matter to your company's payroll department. At this point, you'll arrive at your annual income that is subject to federal tax.
4. Estimate Your Annual Taxes
On your paystub, check the current tax column and write down the local, state and income taxes that were withheld. Depending on when you get paid, multiply the amount by that particular pay period. For example, if you get paid monthly, multiply by 12 months. This will give you an overview of the amount of tax that will be withheld for a particular year. It will help you determine if you'll qualify for a tax refund.
Calculate Wages - The Takeaway
With these straightforward steps, you can easily determine your taxable income and understand your wages. However, bear in mind that not all paystubs are the same. They vary by state and employer, so you want to take the time to understand the details on your paystub. Be sure to reach out to your payroll department if you suspect a possible error or wrong addictions. Do you have any questions on using your paystub to calculate wages? Feel free to get in touch with us for help.