As an employer, you must pay close attention to a significant payroll expense, your cumulative year-to-date (YTD). Payroll YTDs are required for record-keeping, calculations of tax obligations, and providing accurate tax documents at the year-end to employees. The reconciliations between the YTD values and the year-end form values must match in order for the IRS to accept year-end tax forms.
What is Year-to-Date?
Year to date (YTD) is a term covering the period of time from the first day of the current calendar year or fiscal year up to the current date. YTD payroll is the amount of money your business has spent on the payroll since the beginning of the calendar or fiscal year, up to the current payroll date. For employees, YTD payroll represents their gross income.
How is YTD used?
YTD information can be used to show a company’s earnings, net pay, or investment returns. You can also use your current YTD value to compare your employee payroll expenses to the annual budget for those costs. This allows you to determine the amount paid for payroll versus your total business income.
YTD is also important for completing your employee’s W2s. YTD will help you determine your quarterly and yearly tax liabilities.
How to Calculate YTD?
Year-to-date is calculated based on your employees’ gross income. To calculate YTD payroll, look at each of your employee’s pay stubs and add their YTD gross income values. Gross income is the amount an employee earns before taxes and deductions are taken out.
YTD and Pay Stubs
As a business owner, while it is not required, it is suggested that each time you pay your employees, you should provide them with a paystub. A pay stub will show employees their wages earned for a specific pay period and the wages earned from the YTD. Pay stubs are essential documents for employees and will help them manage their pay, cash flow, and taxes.
Common YTD values reported on a Pay Stub
Employees are able to see their YTD earnings on their pay stubs. On a pay stub, the YTD value shows the total of your wages or earnings from the start of the current calendar year to the present. Besides your gross income, a paystub may also show various YTD values:
YTD Gross- the amount a person earned for the year before deductions
YTD Net Pay- the amount a person earned for the year after deductions
YTD Deductions and Benefits- the amount that was deducted from a person’s YTD Gross for taxes, 401(k) plan, health savings account, commuter benefits, etc.
YTD Hours- How many hours a person worked for the year.
YTD State Taxes – Contains the total amount of states taxes withheld from the employee paycheck for the year
YTD Federal Taxes – Contains the total amount of federal taxes withheld from the employee paycheck for the year
Reporting YTD numbers on pay stubs can be very useful for your employees to keep track of their earnings in the long run. 123PayStubs is here to help you generate pay stubs with accurate year-to-date calculations.