When you create pay stubs, you are not only making paycheck stubs online but fulfilling your responsibility and releasing yourself from worries. 2018 is about to end soon and tax season is arriving in no time. It is the time of the year to calculate your wages and prepare the earning statements beforehand as you might have to file W2 Forms and 1099 Forms after that.
Let’s see how it helps in calculating wages smoothly and gets you sorted.
Create Pay Stubs & Sort and Managing Income
It takes a few minutes to Create Pay Stubs but its impact is much more. If you are regularly creating paychecks then you will already hold a digital copy of that respective paystub which can be printed instantly. One should always take care while using online pay stubs that the entered information is to-the-point and accurate. This will further assist you in filing tax returns with precise details.
Related Read: How Paycheck Stubs help in managing company finances?
How a Pay Stub assists?
Determine Gross Income
It is required to determine the gross income first. As it is about wages, the hourly rate is multiplied by 40 hours per week. It will also reflect the number of hours worked overtime, the commissions pay, and bonuses per pay period. So, you need to sum up your gross earnings which you will need to enter in the check stub maker. Basically, this is your basic earnings which are available before any kind of deductions, calculations, and withdrawal of taxes.
Deduct Non-Taxable Wages
You might get surprised that some states don’t even have state, federal, or income taxes. Gifts, State without Income Tax, Partnership Income, Disability Wages, and Employer Insurance are included in this. Gross income is deducted from the total non-taxable wages. Also, it should be known that these conditions might not apply to all. Income from scholarships and tuition fees are non-taxable. Against this, if you are renting a room is subject to taxes.
Determine the Deductions
Pretax deductions are the ones for which you are eligible and they also help lower your taxable income amount. Life Insurance, Health Insurance, Retirement Accounts, Employer Benefits, and Transportation Programs are the instances. The aggregate is subtracted from the amount achieved after deducting non-taxable wages.
Here, the total figure after deductions should match the amount in Box 1 of the W2 Form when it arrives. If you find any mismatch, you can ask for clarification from the payroll department. You will finally get annual income which is subject to Federal Tax.
Estimated Annual Taxes
Check your Pay Stub’s current tax column and write down the local, state, and withheld income taxes. You need to multiply your payment amount with that particular pay period. For instance, you have to multiply by 12 months if you’re getting paid monthly. This way, you will get an overview of the tax amount to be withheld for that particular year. You can then identify if you’re qualifying for a tax refund or not.
It is very easy and convenient to determine your taxable income and understand your wages with these four simple steps and a pay stub generator. Also, keep in mind that not all pay stubs are the same because the wages differ from job position, employee performance, and company.
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What is a pay stub, and why is it important to create one?
A pay stub is a document that details an employee's earnings, deductions, and net pay for a specific pay period. Creating a pay stub for each pay period is important to provide transparency and accuracy in employee pay and deductions.
How can I create pay stubs easily and quickly?
You can easily and quickly create pay stubs using an online pay stub generator or software. These tools typically require inputting basic information such as employee details, pay rate, hours worked, and tax deductions.
How do I calculate wages for my employees accurately?
To calculate wages for your employees accurately, you must consider several factors, including their pay rate, hours worked, and any overtime or additional pay earned. You will also need to factor in any tax deductions, benefits, or other deductions that may apply.