Understanding and Calculating Year to Date (YTD) in Payroll

What is Year to Date (YTD) in payroll?

Year to date (YTD) is cumulative earnings accrued from the beginning of the year (January 1st) to the current date of the payroll. YTD is calculated as a straight sum of similar line items on each paystub from the beginning of the year. The paystubs keep track of various YTDs like regular earnings, withholdings and other deductions along with gross pay and net pay.

Why is Year to Date (YTD) important?

Employers have to provide their employees with paystub each time they are paid. The paystub contains various earnings, taxes, deductions, and any reimbursements for the employee in that pay period along with total gross and net earnings. Along with the pay period values, the paystub will also contain the YTD values of each earnings, taxes, and deductions.

What employers should know?

• The YTD values on paystub allow employers to get a handle on how much they have incurred in a particular month, quarter, and year.
• Apart from balancing the accounting books, these numbers play a significant role in calculating and filing quarterly and yearly tax liabilities.
• Typically, the quarterly filing includes IRS form 941, and other state withholding and unemployment insurance filings.
• For example, YTD values are used to calculate the Lines 2, 3, and 5a to 5d on Form 941.
• YTD values as the name stands are used in the annual filing of payroll and employment forms - W2/1099, IRS form 940, and other state annual reconciliation forms.
• It also helps employers compare the payroll expenses with their annual budget.
• Understanding the Year to Date helps employers keep track of their tax liabilities, project payroll cost, and help them make decisions on new hires and other financial activities of their business.

What employees should know?

• Employees should pay attention to the YTD numbers on their paystubs to see how much they earned year to date, how much they have paid towards taxes and other deductions.
• A proper paystub will have all the earnings broken down as regular earnings, holiday pay, overtime, etc. The taxes and deductions include Federal and State Withholdings, FICA (Social Security and Medicare), Health Insurance, and other benefit deductions. Many a time, the paystub will also have employer only payments like FUTA and SUTA.
• The employees can compare the YTD values to the annual W2 they receive from their employer. For example, the total earnings reported on Box 1 on W2 must match the total YTD of the earnings on the last paystub for the year.

Typical YTD values reported on a paystub

YTD is used to describe multiple factors on the paystub, such as

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• Enter Company Details like Name, EIN, Address, and Logo
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