You can easily calculate your net income with the use of the W2 form. If you W2 form is delayed then you might be at a loss on how to do your tax returns knowing that all the information about your income is there. The good thing is that even without the W2 form, you can actually calculate your net income or W2 wages from your basic paystub. With just a paystub in hand, you will be able to calculate W2 wages using just your basic math. Check the procedure 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. Click here for more info about How To Calculate W-2 Wages From A Paystub.
At the end of the year, you get your final paystub. This shows 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.
After finding your gross income, determine non-taxable wages and subtract it from the gross income. The items included in non-taxable wages are disability wages, partnership income, employer insurance or gifts. You need to add up all the non-taxable wages and subtract it from your gross income. Get more tips on How To Calculate W-2 Wages From A Paystub by clicking here!
You also need to determine your other deductions. There are many people wo are eligible for pretax deductions that can lower their taxable income amount. Employer benefits, retirement accounts, health insurance, life insurance, transportation programs, etc. are some of the other deductions that can be applied to your gross income. You total deductions will also be indicated in your paystub. This total should be deducted from the amount you got in the previous step. The difference is your total taxable income for the year.
Next, you need to find out the total taxes withheld from your income for the entire year. Every paystub gives you a figure of total taxes withheld. How many times are you paid the whole year? Multiply that number with the tax withheld indicated in your pay stub. A workers who receives wages every 15 days receives his salary 24 time a year. The total tax withheld from your income the whole year is the tax withheld per payroll times 24. Finally, you need to subtract this total taxes withheld from your total taxable income which we found in step 3. The results would be your net income for the year. Be sure to click this website to gain more details about income statement https://www.britannica.com/topic/financial-statement.