Is understanding your pay check like trying to read a foreign language?
It’s always important to understand how much you’re being paid and where your deductions are going. Your pay stub, provided by your employer, should have all of the necessary information to learn about these things.
When you go to file taxes or provide proof of employment to a landlord or lender, you need to understand your paycheck. Today, we’re going to help you do that by giving you 5 key tips. Don’t stay in the dark when it comes to your income, let us help you.
1. Vital Info
The first thing you’ll see at the top is the information regarding you, the employee, your employer, and the pay period for which the pay stub was issued. This just lets you know who’s pay stub it is and the period of time you’re being paid for. They might also have your SSN and the employer ID displayed here.
Depending on the check stub maker that your employer uses, the template will differ slightly, but this and the rest of what follows here should all be included.
2. Your Pay
The main chunk of the pay stub will display your payment info. Your gross pay, if you’re a salaried employee, will be the same every time a paycheck is issued. For hourly employees, your gross pay is calculated by multiplying the number of hours you worked during the pay period by your hourly wage.
If you worked any overtime, this will also be displayed here, with the number of overtime hours worked and the overtime wage. Add your regular and overtime pay together and you’ve got your total gross pay before deductions.
The biggest part of your pay stub will be the deductions that are removed from your gross pay. Let’s start with the ones that every employee will be subject to; your tax deductions.
Every employee in America has to pay federal taxes and the percentage you pay will depend on the bracket you’re in. Beyond that, you’ll have to pay state and local taxes, which will differ on, you guessed it, where in the country you live.
4. Other Deductions
The rest of the deductions are dependent on what programs you pay into and what your employer provides.
Your insurance policies (medical, dental, life), your health savings account or medicare, and your retirement savings plan will appear as deductions on your check. It’s important to track your deductions to ensure that everything’s in order and that you’re not missing any money.
5. Your Take Home
The last integral thing that you’ll see on your pay stub is what you take home. This is calculated by subtracting all of the deductions for the pay period from your gross pay. It’ll be displayed at the bottom of the pay stub with your gross and net pay to date for the year, as well as your deductions to date for the year.
Understanding Your Pay Check Is Important
You don’t need to do a deep analysis of it every time, but understanding your pay check and where the money goes is important for keeping your finances in order. Come tax season, you’ll be happy you read this guide.
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