Here are the major terms and figures on your pay stub with which you should be familiar. The amount you are being paid for the current pay period—whether it's weekly, biweekly, twice monthly, or monthly—generally comes first on your pay stub and is the most straightforward figure to understand. What you'll likely see in this section depends on whether you are a salaried or an hourly worker. If you work by the hour, your hourly rate and the number of hours you worked for the pay period will be listed.
You may also see overtime hours. If you earn an annual salary, you'll see your salary for the pay period and possibly bonuses. What appears in this section will depend on your employer's payroll software and how the pay stubs are configured, but typically, there are three figures to pay attention to:. Another section of your paycheck relates to the taxes you have paid. This is often the most complicated part of a pay stub because of the variety of taxes that different people have to pay.
The amount of taxes you pay depends largely on where you live, how many dependents you have, and where you are paid. Different states have different tax rates, so your taxes may be affected if your place of employment is not in the same state as your residence. There are three main types of tax that will generally appear on any pay stub.
The principle behind federal income tax is that the government withholds a certain percentage of the money you earn in a year. However, that percentage can be fiendishly difficult to calculate for any individual. The basic calculation is this: Your employer reports your annual salary as well as the number of dependents you report on your W-4 form to the federal government.
The Internal Revenue Service IRS then works out an estimate of how much federal income tax you should pay for a given year and divides this by the number of paychecks you will receive generally 12, 24, or They will then deduct this amount from each paycheck. The same process applies to hourly employees—if you are paid hourly, your employer will estimate your monthly income, and you will have a percentage of your pay withheld for federal income tax.
Sometimes, the amount of federal income tax deducted from your earnings may be too high or too low. This could be due to a job change or the birth of a child, for instance. If you have paid too much tax, they will calculate the amount you are due and pay you a refund. You may also see state taxes deducted from your paycheck. If you need to pay state taxes, they are calculated in much the same way as federal income taxes.
Some localities levy an income tax. Some do not. You will generally pay the same amount each pay period for both state and local income taxes, so long as the amount you earn remains the same. Some pay stubs will break down your contribution to the two funds separately, and some will not. The amount you are required to contribute to FICA is defined as a percentage of your income.
It works as follows:. Additionally, ensure that any overtime hours worked are calculated correctly at the appropriate rate — whether that is time and a half or double time. Accrual Rate Discrepancies: If your vacation time or other benefits are calculated based on time you have worked, ensure your benefits are increasing at the rate they are supposed to. This is especially true if your accrual rate has recently changed.
Say, your vacation time increases after one year at the company. Raises Not Accounted For: You got a raise! Make sure your raise is reflected beginning in the pay period your employer says it will be effective. Pay Stub Not Adding Up?
Leave a Reply Want to join the discussion? The earnings section shows your earnings from the pay period and includes overtime. It also shows pre-tax deductions for different employee benefits that you may receive, such as health insurance and retirement contributions. Deductions shows any additional deductions that might be taken out of your paycheck after tax, like group life or disability insurance. Withholding refers to the money that your employer is required to take out of your paycheck on your behalf.
Common pay stub deductions include federal and state income tax, as well as Social Security. These federal and state withholdings account for much of the difference between your gross income and net income. There may be other deductions as well, depending on the programs that you sign up for with your employer.
The following taxes and deductions are what you can expect to see on your paycheck, explained in detail below. The federal government is entitled to a portion of your income from every paycheck. This is known as your withholding tax — a partial payment of your annual income taxes that gets sent directly to the government.
These payments are managed by the IRS. For every allowance you take, less money gets withheld for federal taxes and more money gets added to your paycheck. Take fewer allowances, and a bigger chunk of your income will be withheld for your federal taxes. People who are subject to Social Security tax must also pay Medicare tax, which provides health insurance to qualified individuals.
Your employer withholds FICA taxes from your wages according to the rates the federal government sets each year. Both of these agencies administrate FICA. As of , employers withhold Social Security tax from employees' wages at 6. Medicare tax is taken out at 1. Employers pay these amounts as well for each worker. Self-employed people pay Social Security tax at Federal income tax must be withheld from wages as well.
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