When it comes to calculating taxes; most companies are always under a lot of pressure. Understanding the tax process can be a problem unless you know the tax process. To prepare a tax return, it is vital to ensure that you have information from your W2 form. You can go ahead and get this information from paystubs if you don’t have the W2 form. A W2 informs you of how much taxes have been taken out of your paycheck. You will always understand the total amount of net income you have made that year using a W2. Without a W2 however, you should avoid waiting around to calculate your net income. You can follow the steps below to use your paystub.
You can first calculate your gross income. Without deductions and tax withholdings, the total amount of money you have earned is the gross income. You can multiply an hourly rate with a specific number of hours in a week. You will be able to get the total amount of money you will spend in your paystub. 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. Partnership income, disability wages, bonuses or insurance of the employer are some of the non-taxable salaries in a business. You will need to add all the non-taxable wages and then subtract the amount you get from the gross income.
You can also calculate W2 wages from a paystub is by accounting for other deductions. There are pretax deductions that affect everyone. These are the ones that lower the amount of the taxable income they earn. Such include life insurance, retirement benefits, health insurance and employer benefits. 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. The amount you get will be your taxable income for that year. You can then go ahead and determine your yearly taxes. Your paystub will also indicate all the local, state and income taxes that have been withheld from your earnings. You can go ahead and multiply these numbers with the amount of income you earn every year. You can then go ahead and calculate your total W2 earnings. You can then get the net income for that year by subtracting the total taxes from the amount you got from step three.