6 Tips For Understanding Your Paycheck Stub
The real pay stub is a document you get alongside your paycheck. Basically, it explains the amount of money you get and includes detailed information about earnings, deductions, benefits, taxes, and so on. The truth is that not all employees receive it.
If you have just got a job, this is probably the first time you have this document in front of you. The most common mistake that young people make is that they try to calculate their income based on the hours and a pay rate. However, this sum of money is usually higher than the one they actually receive. This is why it is crucial to understand your real pay stub fully, and here is how to do it.
As with any other document, the top of the page is reserved for your personal information, such as your name and address. This is also where your employer’s data is listed, as well information regarding your employment (employee ID, location, the first and last day of the pay period, etc.)
The earnings section
Okay, let’s start with this section that everyone loves. Here, you will see how much money you have earned, but depending on the type of your employment, the information will be depicted differently on the real pay stub you get.
What are we talking about? Well, if you receive a traditional salary, the section will be fairly basic. You will see the sum you earn after each period, whether it is monthly or bi-weekly. On the other hand, if you are paid by the hour, this section will be a bit more complicated.
Firstly, there will be the pay rate, and next to it, you will see the number of hours you have worked during the pay period (two weeks or an entire month). In addition, if you have worked any extra hours, these will also be stated on your real pay stub. Depending on the state, the pay rate may be doubled for this work.
In addition, if you were on sick leave, parental leave, or you took a paid vacation, there will be one more section. Here you will see the number of these hours as well as the pay rate for them. If this still seems too complicated, you should look for a pay stub example online.
The deduction section
Now, let’s discuss this section that displays all the money you don’t get. First of all, there are federal income taxes. As you can assume, this is what you pay the federal government out of your paycheck. This amount depends on your income, so every time you join a new company, you will get a W4 form, and the exact sum will be displayed on it.
Similar to this one, there are also state income taxes that are based on your earnings. Finally, you may also have to pay local taxes. There is only a small number of cities and districts that charge these, so a pay stub example may be of help once again to see how this amount is displayed.
Finally, there is something called FICA taxes, which are split between employees and employers. Firstly, you pay Social Security taxes at a rate of 6.2%. Secondly, there is Medicare. When it comes to this one, 1.45% of your salary goes for this, and your employer pays the exact same sum.
Before and after-tax deductions
The bottom half of the real pay stub depicts the before and after-tax deduction section. When it comes to the former, it lists all the deductions taken from your gross pay before all the taxes are included. Naturally, these reduce the amount of money you get in the end. The latter shows all the deductions that are taken but only after the taxes have been included. Here, you will see some basic information such as descriptions of the deductions, as well as the money that is taken for the current pay period and also the previous calendar year.
When it comes to this section of the real pay stub, it shows all the costs paid by your employer. These usually include health insurance, pension plan, disability insurance, life insurance, and so on. Nevertheless, keep in mind that some of these are taxable, meaning that you may have to pay federal, state, Medicare, and Social Security taxes.
Finally, we have reached the section of the real pay stub where you can find all of your earning and deductions calculated. First of all, there is the total gross, which displays how much money you have earned based on your salary or hourly pay. Next, there is a fed taxable gross, which is basically the sum of money that is used to calculate the income taxes. Total taxes depicts the exact amount of money that is deducted from your paycheck for taxes. Total deduction is the sum of the above-mentioned before and after-tax deductions. Lastly, there is your net pay. In a nutshell, it is the amount of money you will get at the end, after paying for all the taxes and deductions.
Can you make your own paystub?
If, for any reason, you didn’t receive this document, yes, you can make it on your own real pay stub using a free pay stub generator. All you have to do is visit www.paystubsnow.com and follow the instructions. Naturally, you need to have all information that is required to do this correctly. Upon gathering them, all you have to do is fill out the chosen template, and a free pay stub generator will do all the calculations. This whole process will only take a few minutes, and once it is completed, the document will be sent to your email address. It is as simple as that.
To sum up, in this article, we have provided you with a detailed description of each section of the real pay stub. Yes, this document can seem to be complex, but as already mentioned, it is of crucial importance to understand it completely. Otherwise, you cannot have realistic expectations about your monthly and annual earnings.