Tax season is the time of the year that no one is ever excited about. It is the cause of anxieties and excessive hassle that people deem unnecessary in their lives. In this article, we are going to tackle a matter regarding taxes and going through that process more conveniently so stick around and learn how to calculate W-2 from a paystub now.
Most people don’t jump in on the entire tax process without getting their W-2. This is because the information contained in your W-2 form is needed in preparing your tax return. So if you’re itching to get the whole thing over with, yet you don’t have access to your W-2 forms yet, you don’t have to keep worrying as the information you will need from there can be found and obtained from just one of your paystubs.
But first, let’s address this common question: what exactly is the difference between a W-2 form and a paystub? If you are new to the payroll or tax process, you might confuse your paystub with your W-2. It is essential that as early as now, you will understand what makes the two of them different because if not, you will encounter huge potholes in the tax process. Thankfully, you will learn in this site, the meaning and purpose of each – a paystub, a final paystub, and a W-2.
Let’s talk about the paystub first. When you get paid, you will receive a paycheck from your employer and this, my friends, is what we call a paystub. When you get your paystub, you will be able to see information like how much money you’ve gained in the duration of that pay period, the year-to-date payroll, the deductions and taxes that have been removed from your total earnings. After removing those deductions and taxes, you can see from your paycheck the actual amount that you can get from the paycheck, or more commonly referred to as your net earnings.
You will know how much gross and net income you earned for the entire year when you receive your final paystub, the last paystub, at the very end of the Year.
Lastly, a W-2 form will tell you the total amount of taxes – including state and federal taxes – that have been withheld from your paycheck of that entire year.
So a paystub might not give you the exact same information as a W2 form, but it has all the details that you need to figure out your general net income by yourself and this is how it works.
First, find your gross income. Second, subtract your total non-taxable wages from it. Third, subtract other deductions from that number, and fourth, determine annual taxes and multiply them with the number of times you are paid yearly. Lastly, subtract the total taxes withheld from your income from that number you obtained in the third step and you will have your net income.