Identify the income sources to include (wages, salary, bonuses, commissions, tips, interest, dividends, rental income, royalties, self-employment net profit, alimony/maintenance received, other taxable income)
Choose the time period (calendar year or last 12 months)
For each income source, collect the amount received over the chosen period
If paid hourly or biweekly:
Multiply hourly rate by average hours worked per week by 52 (calendar year) or by the number of weeks in the period
If paid biweekly:
Multiply gross pay per pay period by 26 (calendar year) or by the number of pay periods in the period
If paid semi-monthly:
Multiply gross pay per pay period by 24 (calendar year) or by the number of pay periods in the period
If paid monthly:
Multiply gross monthly pay by 12 (calendar year) or by the number of months in the period
If income varies (commission/bonus/overtime/tips):
Use the total actually received during the chosen period and divide/multiply to annualize if needed
For self-employment:
Use net profit (business income minus business expenses) for the chosen period
Annualize using the same method as above if the period is not a full year
For interest/dividends:
Use the total received during the chosen period (or totals from statements/tax forms)
For rental income:
Use gross rent received during the chosen period, then subtract deductible operating expenses if calculating net income
Decide whether to use gross income or net income:
Gross income: before taxes and deductions
Net income: after allowable deductions (commonly business expenses for self-employment; may vary by purpose)
If you need annual income from a partial year:
Annualize by multiplying by (12 / number of months in the period) or (52 / number of weeks in the period)
Or compute based on average monthly/weekly income times 12/52
Add all annualized income amounts together to get total annual income
If required by the form/purpose:
Exclude non-recurring one-time payments
Use “average” annual income based on prior months/years (e.g., last 12–24 months)
Record the final figure as the total annual income (and specify gross vs net if needed)