It is essential to have an understanding on how to compute the W-2 wages when filing tax returns. This article has outlined the procedure for determining the W-2 wages from a paystub hence you ought to read it.
The first step will be to compute the gross income. The way forward so as to have a figure of the gross income will be to add each and every wage that will be paid. You will not have anything to subtract on finding the gross income. This is the amount of money which will be indicated on the paystub. The product of the number of hours which you will have worked with the hourly pay rate will give you the gross income in case you will have wages paid on an hourly basis. the monthly salary which you will get will could also be the income. The pay which will be made on the work which will have been done as overtime, the commissions and the bonuses will have to be incorporated in determining the gross income.
From the gross income. You will have to subtract the non-taxable wages as the second step. Those wages which will not be subjected to taxation are the non-taxable wages. Gifts, insurances or the disability benefits are some of the examples of the non-taxable wages. All the non-taxable wages will have to be summed up so as to get their totals. The next step will be to deduct the wages which will need not to be taxed from the gross income.
The third step will be to examine the additional deductions. You will need not incorporate the pre-taxed wages to the total taxable income and you ought to know that that there could be several such cases on your income. Subtraction of the pre-taxed wages from the total taxable income will be a very important step. The paystub will be inclusive of this pre-taxed wages of which the employer benefits and insurance could form part of.
The fourth move which ought to be carried out will be to compute the total yearly taxes. You will have to note the amount of taxes which will have been deducted from the taxable income. This will be obtained by deducting the final taxed pay from the total taxable income. You will then have to multiply these amounts with the number of times you will be paid within a year so as to get the annual taxes you will have remitted.
Determination of the W-2 earnings is the last step which you will have to make. This process will involve deducting the total annual taxes from the yearly taxable income. Net annual income is the term that is used to refer to the resulting amount that you will get from such a deduction.