Before the economic downtown, there were 80 million hourly workers in the United States and nearly all of them were getting a pay stub.
This important document is generally the weekly or bi-weekly window into how much money you are making, how much tax is being withheld, and if you have been properly paid.
It’s also important if you are trying to secure a loan or avoid tax trouble with the IRS that you know how to read your pay stub.
Never looked at a pay stub before? You can view a sample pay stub on a few online sites for a clear example.
Why Are Pay Stubs Important?
Pay stubs are important because they serve as one of the sure ways that employees, employers, and potential auditors can track wages, taxes paid, and withholding.
Some of the important information contained on a pay stub includes the employee’s personal information (name, address, social security number), similar data about the employer, and the dates of the pay period.
You can access your paycheck stub generator and see withholding, deductions, and employee contributions listed.
Lastly, the rate, gross, and net pay also appear on the pay stub.
It should be noted that pay stub requirements differ from state to state and that the federal government has employer requirements for bookkeeping and tax withholding, there is no federal mandate on pay stubs.
How Does Gross Pay Work?
According to the IRS, gross income “includes all income you receive in the form of money, goods, property and and services that is not exempt from tax.”
So gross pay is in line with that definition: Any payment that is not exempt from tax.
Under the gross pay of the pay stub, you’ll not only see the total amount of payment before taxes but the pay rate, hours worked, and additions. Basically, these three factors are how the gross pay is calculated for the pay rate. Your pay stub should also see the amount of gross pay calculated so far that year.
Pay rate: This is the amount of money paid (generally) per hour. This section will also delineate for hourly workers the regular hours worked, holiday or vacation hours, overtime, and sick time. Salary workers may just see the pay period.
Hours worked: The hours worked section of a pay stub should clearly delineate how many regular hours were worked as opposed to other hours of payment (sick, holiday, etc.) Salaried workers should still see readouts for regular hours, overtime etc.
Additions: This line will include bonuses and other miscellaneous payments for the pay period.
Taxes, Deductions On A Sample Pay Stub
This section of the pay stub accounts for all the withholding on a pay stub. Like gross pay, the tally of withholding for the year, as well as the pay period should be part of the readout.
Taxes: Federal, state, local, and city tax withholdings are all listed in this section. Obviously, the number of fields here will change depending on where the person works, lives, and which governing body is withholding the tax.
Deductions: These itemized subtractions from your gross pay can range from insurance premiums to charitable contributions.
Employer contributions: These are the taxes the employer pays during the pay period but are not withdrawn from the employee’s gross pay. Examples of these include social security and FUTA.
The net pay, or take home, on the pay stub is the actually amount the employee is paid after all deductions from the gross have been made.
Again, the total net pay for the pay period and the year-to-date should appear on your sample pay stub.
For more on how deductions affect pay and new taxes under consideration, search for more pay stub related articles on this site. If you like what you’ve read here, please feel free to share on Facebook, Twitter or your favorite social media feed.