- Dec 6, 2023
How to Calculate Your W2 Wages with Your Pay Stub?
Do you live on paychecks? If you work in the United States, there is a 78% chance that you live on paychecks. Moreover, 82 million American employees have had some payroll errors during their careers. Not knowing how much money will be in your bank account next week is hard enough. Now, you can generate W2 free with Stubbuilder.
It is more vital than ever to calculate wages with your pay stubs. Read this blog to know more about how you can calculate W-2 wages with your pay stubs.
Diagnosis of a Paystub
To calculate wages using a pay stub, you must first understand what is included on a pay stub.
Gross & Net Income
Gross Income is what you make per hour before anything is taken out. Net Income is what you get in your hand after taxes and other deductions.
What is the Difference Between W2 and Paystub?
If you are unfamiliar with the payroll, you might get a pay stub mixed up with your W-2. This can get even more confusing once you receive your final pay stub because your total earnings do not match your final pay stub and your W-2.
What is a W2?
A W-2 is a tax form that lists the total amount of taxes hidden from your paycheck that particular year. This includes both the state and federal taxes.
What is a Final Paystub?
A final paystub is the last paystub you receive at the end of the year. This will show how much gross and net Income you have made for the entire year.
Non-taxable wages and Other Deductions
Examples of non-taxable wages include gifts, disability wages, and employer insurance. Other types of deductions reduce the amount of your taxable wages: life insurance, 401(k) account, etc.
The typical tax employees pay are:
Federal Taxes: This is the tax you pay to the Internal Revenue Service. The rate depends upon several factors, including your marital status, number of dependents, pay frequency, and gross Income.
Social Security and Medicare Rates: Once you have paid your Social Security taxes on $132,000 of the taxable Income, you no longer need to pay the Social Security taxes for the rest of the year.
State and Local Taxes: State taxes depend on your state, and each will have its own rate. You shall be responsible for a separate local tax depending on the country. If you live in Alaska, Florida, Nevada, South Dakota, and Washington, you won’t have a state tax.
How To Calculate a w2 With Your Pay Stub?
Now you know everything about a pay stub. Now it’s time to do the maths.
Find Your Gross Income: Your gross income is the first step of calculating W-2 wages from a pay stub. This is the total amount of money you have earned without any deductions. For many people, this is an hourly rate multiplied by a particular number of hours a week. Your pay stub will show you this amount.
Subtract Non-taxable Wages: Once you have the number, you will want to subtract any non-taxable wages from your gross income. Non-taxable wages are those you receive that do not have state, federal, or income taxes. This may include things like partnership income, disability wages, or employer insurance.
Account For Other Deduction: Many people are eligible for pre-tax deductions that lower the amount of their taxable income. These deductions may include employer benefits, health insurance, and retirement accounts. You can find the total of these deductions on your paystub. Once you have received this number, subtract it from the number you got in the second step. If you have your W2 form, the number you are left with should match the amount in Box 1 on your W-2 form.
Determine Annual Taxes: Find the amount of state, local, and income taxes on your earnings. Next, multiply these numbers by the times you get paid every year. For example, if you get paid twice a month, you multiply it by 24. The number that comes in the end is the total amount of taxes that will be held from your earnings at the end of the year.
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. You are left with your net income for the particular year.
Now, you do not have to wait around for your W-2 to find out the calculation of W-2.