Are you employed? Do you earn a certain amount of money annually?
The money earned annually, in one fiscal year sums up your all income. It constitutes all your earnings done in a year. Bonus, commission, tips, overtime, and part-time income are also a part of your yearly income.
Still, confused about your annual income?
You will find many easy ways to calculate it. There are various types of income included in our yearly income. You should be aware of all types of income and their calculations.
HOW TO CALCULATE ANNUAL INCOME OF SALARIED EMPLOYEES?
For calculating the annual income of salaried employees, few steps need to be followed:
1. List all the sources of income
This includes all the sources of income in addition to your regular salary. It can include various sources of income like commission, bonus, tips, part-time and overtime incomes.
2. Calculate the gross salary
You need to multiply your regular salary by the total number of intervals you get it in a year. For example, you get $12000 every month as your salary. Then you would multiply it by 12 (if your company pays you for 12 months). So, the gross pay would be $ 144000 (12000 x 12). This is your gross yearly earnings before your tax deduction.
3. Add all the other incomes to the gross pay
The remaining incomes should be added to your gross pay. For determining the actual annual income adds all the incomes together including gross pay. For example, you earn $ 5000 annually by selling your kitchen garden vegetables. Then your annual income would be $ 149000 ($ 144000 + $ 5000).
Read Also: What’s the Difference Between Gross Pay vs Net Pay.
HOW TO CALCULATE ANNUAL INCOME OF HOURLY EMPLOYEES?
For calculating the annual income of hourly employees, few steps need to be followed:
1. List all the sources of income
This includes the additional wages you earn other than the hourly wages given by the employer.
2. Calculate the hourly gross pay
You need to multiply your hourly salary by the total number of hours you get it in a week. Then multiply it by the total number of weeks in a year. For example, you get $15 in an hour and you work for 40 hours a week. You earn $ 600 a week. So your gross pay would be $ 31200 annually.
3. Add all the other incomes to the gross pay
The remaining incomes should be added to your gross pay. For determining the actual annual income adds all the incomes together including gross pay. For example, you earn $ 3000 yearly by doing others housework. Then your yearly income would be $ 34200 ($ 31200 + $ 3000).
Read Also: What is minimum wage?
WHAT IS ANNUAL SALARY?
Annual salary is the amount of money earned from your employer in return for the work you perform for him in a year. The salary every employee receives depends on the 40 hours of work per week.
Not every time your salary depends on an hourly basis.
Sometimes you get wages on a weekly or monthly basis. The salary of a person does not include other benefits in it.
Anything paid to an employee other than salary is called their benefits.
Salary, wages, compensation, and other benefits are different sources of income.
HOW TO CALCULATE ANNUAL SALARY?
Following steps should be followed to calculate the annual salary of a wage earner:
- If you are a wage earner then multiply your hourly income by the total number of hours you work in a week. Then you will be called a wage earner.
- Determine your hourly salary. If you do not know your hourly salary and you get weekly payments. Then divide your weekly income by the total number of hours you worked in a week.
- If you work for a fixed number of hours in a week. Then directly multiply your weekly income by 52. By this, you will get to know your annual salary. If you do not have the fixed number of working hours every week. Then find the average of 4 weeks working hours. And multiply it by 52.
- If you earn a different amount every week then find the average number of working hours per week. Then multiply it by 52.
- Add all the overtime earnings. If you have worked more than 40 hours a week, then add it to your income. This is how you know your actual annual income.
- This step depends on the terms and policies of your company. If you get paid sick leaves or paid vacations then do not include it. But if not then adjust the average number of leaves from your total calculation of yearly salary.
Read Also: What is Income Effect?
Following steps should be followed to calculate the annual salary of salaried employees:
- Ascertain the fixed salary of an employee. If you are given a job on a salary basis then your yearly salary is disclosed in the beginning only.
- Go through your pay stub. Paystub includes in it all kinds of deductions. Deductions can be federal, local taxes, state and social security, and health care. Other deductions are insurance premiums, flexible spending accounts, and retirement savings plans. Net salary is the gross salary after all deductions.
- Determine the payroll schedule. It can be weekly, monthly, quarterly, twice a year, or yearly. This verifies how and when will you get your salary.
- Calculate your overtime income as well.
- Calculate the annual salary by adding your salary, overtime earning, and by subtracting all the deductions.
- Add the bonus to your salary if applicable.
FREQUENTLY ASKED QUESTIONS
Is annual income before or after taxes?
There are two types of Annual income:
Gross income: It is a yearly income before deductions and taxes are made from the pay.
Net income: It is a yearly income after deductions and taxes are made from the pay.
Is annual salary before or after taxes?
Annual salary can also be of two types:
Gross salary: It is a yearly salary of an employee before any kind of deductions or taxes are made. It is the highest number visible on the pay statement.
Net salary: It is a yearly salary of an employee after all the taxes and deductions are made from the salary.
What does annual pay mean?
Annual pay refers to the total amount of money that an employee receives from his employer in a year in exchange for work he has performed. It can be of two types:
Gross pay: It is the amount of money received before deductions, and taxes are taken out from the yearly pay.
Net pay: It is the amount of money received after deductions, and takes are taken out from the yearly pay.
CONCLUSION
The total income earned during a fiscal year is called annual income. And you must know your yearly income. There are different steps to be followed to determine the yearly income. These steps must be taken care of before its calculation. Gross and net income have major differences in them.
Our annual income defines our financial health. And this impacts the way you live and your lifestyle. Whether you want a loan or a credit card, you must know your annual income. It saves your time and stress also.
