No matter what your role is, it is important that you understand what you’re looking at when you’re viewing a pay stub. The information on a pay stub allows you to know important information for tax purposes as well as proving your income to potential lenders.
While pay stubs don’t contain a lot of information, the information on pay stubs is important. Continue reading this article to learn what information is on a pay stub and why it is important.
Hours Worked
If you get paid by the hour, it is important to know how many hours you worked each week. If the hours don’t stack up to your calculations, you can ask for verification of how hours were calculated.
Gross Wages
Gross wages allows you to see how much money you had coming to you before any taxes or other deductions came out of your paycheck.
Taxes
Taxes are always included on a pay stub and include both state taxes and federal taxes. All employees are subject to tax deductions out of their paychecks and the amount of taxes coming out of the paycheck is determined by the W-4 the employee filled out.
Deductions
Taxes aren’t the only deductions that can be shown on a pay stub. If an employee gets health insurance through their work then health insurance may be listed on the pay stub. A flexible spending account for health can also be deducted for future use for medical bills.
These deductions are not necessary but the employee opts in for these deductions.
Net Pay
After everything else has been taken out of the paycheck, that leaves you with the net pay. The net pay is important on the pay stub because that lets you know what is going to be left after all taxes and other deductions.
This is often known as take-home pay.
Other Important Parts of Pay Stubs
There are other parts of pay stubs you should consider when you’re using a pay stub maker.
Depending on the business, there may also be an employee contribution section on the pay stub. Many companies offer a match to 401(k) accounts and this would be listed on the pay stub.
You may also notice there are sick days, vacation days and paid time off that is listed on the pay stub which allows you to quickly look at whether you have paid time off available.
You’re a Pay Stub Pro
Now that you know more about how to read a pay stub and what information is on it, you’re a pro. While the information isn’t complicated, it can help you if you have a run-in with the taxman or if you need to get a loan.
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