Of importance when filing the tax returns is the knowledge of calculating the W-2 wages. You will need to check on this page for the procedure of computing W-2 wages from a paystub.
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. On this gross income, there will have no deductions of any form made. This is the amount of money which will be indicated on the paystub. In case you will be paid on an hourly rate, this amount will be obtained by multiplying the rate and the number of hours which you will have been in duty. The gross income could also incorporate the salary which you will be paid after a month. There will have to be inclusion of the bonuses, commissions and the overtime work done pays.
The income which will need not to be subjected to taxation will have to be deducted from the gross income. The income which ought not to be tax is referred to as a non-taxable wage. Examples of non-taxable wages are gifts, insurances or the disability benefits. The total non-taxable wages will have to be obtained by summing up all these wages. You will then need to subtract the cumulative non-taxable wages from the gross income.
The extra deductions will have to be noted hence the need for evaluation so as to find out if there will be any. 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. As such, these amounts subjected to pretax deductions will have to be deducted from the taxable income. The paystub will be inclusive of this pre-taxed wages of which the employer benefits and insurance could form part of.
The total annual taxes will have to be determined in the fourth step. You will have to note the amount of taxes which will have been deducted from the taxable income. The taxable income minus the paid taxed wage will result to the total taxes charged. To determine the total annual taxes which you will have paid, you will have to multiply the taxes with the yearly periods when payment will be made.
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. This last figure that you will get is the net annual income.
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