Most companies can get a lot of stress during the tax season. Having a W2 is the only way a business will be able to undergo the tax process easily. It is essential to ensure that you have data from the W2 form when preparing a tax return. If you don’t have the W2 however, you can go ahead and get this information from your paystubs. A W2 tells you how much taxes have been taken out of your paycheck. You can also know the amount of net income you have made throughout the year. If you don’t have a W2 form, you don’t have to wait to know how much net income you have made. You can follow the steps below to use your paystub.
You can first calculate your gross income. This is usually the total amount of money you have earned without any deductions or tax withholdings. The number of hours in a week are multiplied with the hourly rate you get. Your pay stub will be showing you the amount you will be using Your paystub will show overtime hours, bonuses and other commissions.
You can then go ahead and subtract non-taxable wages in the next step. You can get the total amount of non-taxable wages and deduct them from your total amount of gross income. Non-taxable wages are usually the wages you receive that are not eligible to federal, state or income taxes. Examples of non-taxable wages include partnership income, disability wages, gifts or insurance of the employer. You will need to add all the non-taxable wages and then subtract the amount you get from the gross income.
Accounting your deductions is the next step when it comes calculating W2 from a paystub. There are pretax deductions that affect everyone. These deductions are the ones that lower the amount of taxable income. Life insurance, retirement benefits, health insurance and employer benefits are some of these deductions. You can find the total number of deductions on the paystub. You can deduct the total number of deductions from the number you got from the second step. This is your taxable income from that particular year. The next step will be to determine your annual taxes. All the local, state and income taxes that have been withheld from your earnings can all be found from your paystub. You can go ahead and multiply these numbers with the amount of income you earn every year. You should then ensure that you go ahead and calculate your W2 earnings. The total taxes will then be deducted from the amount you got from step three to give you the net income for that year.