More than 60% of people in the United States regularly lose sleep over financial concerns.
Most of the time when people feel anxious like this, it is because they are unaware of solutions and are afraid to confront the problem.
To fully take control of your finances and get a good night’s rest, you must first understand your paycheck.
Continue reading to learn how to read a pay stub so that you know exactly where your money is going and you get paid for every minute worked!
1. Look at Your Gross Pay
The first thing you should do when learning how to read a pay stub is checking your gross pay.
Your gross pay is the total amount of money that you earned before taxes and deductions are taken out. This will be slightly more than the amount that will be going into your bank account.
Gross pay is calculated by multiplying your hourly rate and the time that you worked in the pay period. Make sure that all of this information is accurate when you receive your pay stubs.
Your gross pay is also important to watch because it will be needed on your W2 form.
2. Check the Taxes Taken out
After you have reviewed your gross pay and confirmed its accuracy, you can verify tax information.
Once taxes are taken out of your gross pay, it becomes your net pay. Multiple taxes are taken out in each paycheck that you should be aware of. Federal income taxes (FIT), Social Security (SS or FICA), and Medicare (MWT) are all taxes that you may see on your stub.
You may see more taxes taken out of your payment, depending on the state you live in as well.
3. Review Your Benefits and Deductions
Typically, after taxes have been paid, your benefits and deductions will be pulled out of your gross pay.
Health insurance, life insurance, and retirement savings are all factors that could be lowering the money in your bank account. Make sure you understand your plans so that you don’t pay extra money throughout the year.
It is important to note that dental and vision insurance may not always be included in health insurance. You may receive an additional bill for this coverage.
4. Track Your Time
If you don’t have a salary job or work independently, you may have to make pay stubs.
Using a paycheck stub maker can help you create documents needed during tax season. These are mainly used by business owners and independent contractors to prove income.
Make sure you use accurate information and track your time to be sure that you get paid for all of your work. You may need additional information if you plan to make a pay stub on your own.
5. Know Your Terms
If you want to correctly read a pay stub, you must know how it is different from a paycheck.
A paycheck is what you receive from work that is signed by your boss and given to the bank to be deposited into your account. The paycheck stub, however, is a document that may or may not be attached to your check.
These stubs should include a summarization of the correlating check, including the amount of the check and the deductions. With direct deposit becoming more prevalent, people can view their pay stubs online.
6. Understand Unemployment Taxes
If you have recently been laid off of work and are receiving unemployment checks, you may be familiar with the Federal Unemployment Tax (FUTA).
FUTA is a tax that is paid by your recent employer and state programs. The tax rate is currently 6%, but most employers can have a tax break of 5.4%. The State Unemployment Tax is another tax paid by employers to help employees who have lost their jobs.
You can work with your local representatives if you notice any issues with unemployment taxes on a pay stub.
7. Other Deductions to Look for
Although there are already many deductions and taxes taken out of your pay, there are a few more that you should know about.
Wage garnishment are deductions that happen when you need to pay off previous debts. This can come from unpaid child support, alimony, and unpaid taxes. If you default on your student loan payments, you may also see this deduction on your stubs.
Union dues are another deduction for union workers. Every year, as a part of the union, you are expected to pay dues or fees to be a part of it. This may appear on certain paystubs. Union fringe deductions, however, are taxable benefits that people can get as a union laborer.
Make sure you are aware of your dues and when the fees will be taken out of your pay.
Learn How to Read a Pay Stub With These Simple Tips
There are many reasons why you need to learn how to read a pay stub.
Not only can you ensure that you are accurately getting paid for the time that you worked, but you can also regain control over your finances. Checking your hours worked and matching it up with your payment is recommended, as human-error occurs.
Paying attention to the money that is being taken out of your paycheck is also important to watch so that you know where it is being spent. You can also look at how much you have made in the year, up to your most recent paycheck.
Don’t be afraid to talk to your accounting or HR team about any confusion with your paystubs.
Be sure to check out our blog for more articles about regaining financial control and understanding your paychecks!
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