Tax season is back once again and nobody is happy about it. It adds stress and hassle to the already very tiring days of our lives. Here in this article, we are going to be talking about taxes and how to go about that entire process of calculating your W-2 wages from a paystub, so scroll down now to learn more.
Most people don’t jump in on the entire tax process without getting their W-2. The reason to this is because when you prepare your tax return, you will need all the information that can be found in your W-2 form. 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.
Before we dive right into it, let’s tackle one of the most commonly-asked questions out there: what is the difference between a paystub and a W-2? If you are new to this entire tax process thing, then don’t get mixed up between a paystub and a W-2. It is vital that you will know the distinctions and differences between the two so as not to encounter road bumps in the tax process. So in this site, we’ll be telling you exactly what a paystub, final paystub, and a W-2 is.
Let’s talk about the paystub first. At the moment you get paid, your employer will hand you your paycheck – this is what we refer to as 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. With those deductions and taxes aside, the paystub will tell you your net earnings, or the actual amount of your income that you can get from your paycheck.
The very last paystub of the whole year is called the final paystub which, upon receiving it, you will find out the gross and net income you gained for the whole 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.
The first thing to do is look for your gross income. Next, add up non-taxable wages and subtract them from your gross income. Third, subtract other deductions from that number, and fourth, determine annual taxes and multiply them with the number of times you are paid yearly. And finally, subtract the total taxes withheld from your income from the number you came up with in step three, and you will have your net income.