The WRONG Way to Calculate Annual Income

By Deb Bechetti, Compliance Analyst

I have been to many properties lately where I have seen the weirdest income calculation I have ever come across.

The employment verification in use asks for the year-to-date (YTD) total. The property manager takes the amount listed, calculates the number of days worked from January 1 through the date of the verification, divides that number by 7 to get the number of weeks worked so far, and then rounds up at .5 so that they obtain a whole number. Next, they divide the YTD number by the “number of weeks worked”, and multiply by 52 to get an annual amount.

I don’t know where this calculation came from, but I have seen it at numerous properties and it is completely wrong. The YTD figure rarely if ever starts on January 1. There is almost always time worked the previous year included as the first pay period started in that year. You cannot therefore assume that started after January 1. One more issue is that it cannot be determined by just the employment verification if the through date for YTD is the latest payroll end date, the latest pay date, or in the case of bi-weekly pay periods, if it’s the mid week between periods.

If you have both the beginning and ending date of the YTD amount, and if you determine if the end date is the pay date or payroll period end date, you can calculate the annual income by dividing the YTD amount by the number of pay weeks and multiplying by the appropriate pay period (weekly, bi-weekly, semi-monthly).

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