It's that dreaded time of year again... tax season!
Most people don't get the tax process started until they have their W2. After all, you need the information from your W2 form to prepare your tax return. But what if you don't have your W2 yet? You don't have to keep waiting. You can get the same information that'll be on your W2, from one of your paystubs. In this guide, we'll teach you how to calculate W2 wages from a paystub. So let's get started!
What's The Difference Between A W-2 And A Paystub?
If you aren't familiar with the payroll or tax process, you might get a paystub mixed up with your W2. This can get even more confusing once you receive your final paystub because your total earnings won't match up on your final paystub and your W2. Understanding how they're different is an important distinction.
We'll take a closer look at the differences between your paystub, your final paystub, and your W2 below. Here's what you need to know.
What Is a Paystub?
A paystub is a paycheck you receive from your employer every time you get paid. This paystub includes details about your pay, including how much money you've earned for that pay period and the year-to-date payroll. It will also show what deductions and taxes have been taken out of your total earnings.
After these things have been taken out, the paystub will list your net earnings, or the amount of money you actually get from the paycheck.
What Is A Final Paystub?
A final paystub is the last paystub you receive at the end of the year. This will show you how much gross and net income you made for the entire year.
What Is A W-2?
A W2 is a tax form that lists the total amount of taxes that have been withheld from your paycheck that year. This includes both state and federal taxes. This is also an important part of filling out your tax return.
How To Calculate W2 Wages From A Paystub
Because a W2 form tells you how much taxes have been taken out of your paycheck, it also tells you how much net income you've made throughout the year but, waiting around for your W2 isn't your only option especially if you can calculate your W2 wages from any of your paystubs.
A paystub might not give you the same information as a W2 form, but it has everything you need to figure out your overall net income on your own. Here's how it works.
1. Find Your Gross Income
The first step of calculating your W2 wages from a paystub is finding your gross income. This is the total amount of money you've earned without deductions or tax withholdings. For many people, this will be an hourly rate multiplied by a certain number of hours a week. Your paystub will show you this amount. It will also include extra overtime hours, bonuses, or commissions.
2. Subtract Non-Taxable Wages
Once you have this number, you'll want to subtract any non-taxable wages from your gross income. Non-taxable wages are any wages you receive that don't have any federal, state, or income taxes. This might include things like partnership income, disability wages, employer insurance, or gifts. Add up all your non-taxable wages and subtract the total amount from your gross income.
3. Account For Other Deductions
Many people are eligible for pretax deductions that lower the amount of their taxable income. These deductions might include things like employer benefits, health insurance, retirement accounts, life insurance, transportation programs, and more. You can find the total of these deductions on your paystub.
Once you have this number, subtract it from the number you got in step two. If you already have your form W2, the number you're left with should match the amount in Box 1 on your W2 form. This is your total taxable income for the year.
4. Determine Annual Taxes
Find the amount of local, state, and income taxes on your paystub that are withheld from your earnings. Next, multiply these numbers by the number of times you get paid every year. For example, if you get paid twice a month, you would multiply these numbers by 24. The number you end up with is the total amount of taxes that will be withheld from your earnings at the end of the year.
5. Calculate Your W-2 Earnings
Finally, subtract the total taxes that will be withheld from your income from the number you calculated in step three. The number you're left with is your net income for the year.
Get Ready For Tax Season By Calculating Your W-2 Wages From Your Paystub
You don't have to wait around for your W2 to find out what your taxable income is. As long as you have some basic math skills, you can learn how to calculate W2 wages from a paystub yourself. If your calculations don't match up with the numbers on your W2 form, go through the process a few more times to check your math for mistakes.
If the numbers still come out different, you should talk to your company's payroll department. It's possible they've made a mistake. Bringing it to their attention can help resolve the problem. Try out our paystub creator today and get a head start, or you can just use our form W-2 generator and we'll do the rest!