What Important Information Is Available on a Paycheck Stub?
Your pay stub is more than just a receipt. Discover how to interpret this vital document for complete insight into your compensation.
A paycheck stub provides a detailed record of earnings and deductions for a specific pay period. It confirms the compensation received and how that amount was calculated. Understanding this information allows individuals to verify their pay accuracy and manage personal finances. This record is also important for verifying employment and income when applying for loans or housing.
Essential Identifying Information
Every paycheck stub includes basic identifying details for both the employee and the employer. This includes the employee’s full legal name, mailing address, and a unique employee identification number. The employer’s legal name and business address are also displayed.
The stub also specifies the pay period, indicating the start and end dates for which wages were earned, alongside the pay date. Payment method information is present, such as direct deposit details showing the bank name and the last few digits of the account number. For physical checks, the check number is provided.
Gross Earnings Breakdown
Gross pay represents the total amount an employee earns before any deductions or taxes are withheld. Regular wages or salary, calculated based on an hourly rate or a fixed amount, form the primary part of gross earnings. This section shows the hours worked and the corresponding rate for hourly employees.
Overtime pay, earned for hours worked beyond the standard workweek, is listed separately, often at one and a half times the regular rate. Bonuses, which are additional payments for performance or as incentives, are also itemized. Commissions, earned based on a percentage of sales, appear as another distinct earning type. All these components are summed to arrive at the total gross pay for the period.
Tax Withholdings Explained
Mandatory government taxes are a significant portion of paycheck deductions, and each type is itemized. Federal income tax is withheld from gross earnings based on the employee’s W-4 form and current IRS tax tables. This amount contributes to the funding of federal government operations and programs. The accuracy of this withholding depends on the allowances claimed by the employee on their W-4.
State income tax is another mandatory withholding, though its applicability and rates vary across different states. Some states do not impose a state income tax, while others have progressive or flat tax structures. Local income tax may also be withheld in certain cities or counties, depending on the employee’s residence or place of work. These local taxes contribute to city or county services and infrastructure.
FICA taxes, which stand for the Federal Insurance Contributions Act, are mandatory and comprise two parts: Social Security and Medicare. Social Security has a current tax rate of 6.2% on earnings up to an annual limit, which is $168,600 for 2024. Medicare is withheld at a rate of 1.45% on all earned income without an annual limit. Both Social Security and Medicare contributions are split equally between the employee and the employer.
Other Deductions and Contributions
Beyond mandatory government taxes, paycheck stubs display other common deductions and contributions that are not tax-related. These are categorized as either pre-tax or post-tax deductions, impacting an employee’s taxable income differently. Pre-tax deductions are subtracted from gross pay before income taxes are calculated, reducing the amount of income subject to federal, state, and some local income taxes. Common examples include health insurance premiums, contributions to a 401(k) retirement plan, Flexible Spending Accounts (FSAs), and Health Savings Accounts (HSAs).
Dependent Care Flexible Spending Accounts (DCFSAs) are also pre-tax, allowing employees to set aside funds for eligible childcare expenses. Conversely, post-tax deductions are withheld from an employee’s pay after all applicable taxes have been calculated and deducted. These deductions do not reduce taxable income. Examples of post-tax deductions include contributions to a Roth 401(k), which are taxed upfront but offer tax-free withdrawals in retirement.
Other post-tax items include union dues, wage garnishments, and charitable contributions. Each of these deductions is itemized separately on the paycheck stub, showing the amount withheld for the current pay period. Understanding the distinction between pre-tax and post-tax deductions aids personal tax planning and financial management.
Year-to-Date Totals and Accrued Balances
Paycheck stubs feature “Year-to-Date” (YTD) totals, providing a cumulative summary of earnings and deductions from the start of the calendar year. This includes YTD gross pay, YTD federal income tax, YTD FICA taxes, and YTD amounts for all other pre-tax and post-tax deductions. These cumulative figures help track financial progress and prepare annual income tax returns.
Beyond monetary figures, paycheck stubs also display accrued leave balances. This section outlines current balances for vacation time, sick leave, or paid time off (PTO). It may also show the amount of leave accrued during the current pay period and the amount used. This information helps employees manage their time off and understand their available leave benefits.