Your Paystub is talking, are you listening?

If you're like most people, your pay stub is one of the last things you want to deal with. But what if I told you that your pay stub has a lot to say? It turns out your paystub is packed with valuable information, and it's talking to you every time you get paid. So are you listening? Hopefully, this blog post will help make sense of all those numbers and letters on your pay stub and show you how to use them to your advantage. Stay tuned!

The anatomy of a paystub is not all that complex. I will break it down piece by piece and show you what it all means. We will look at both federal and state rates because there are slight differences between them in some cases. Ready? Let's begin!

Date - The date on your pay stub is essential because ... well ... it tells you when you get paid! Pretty self-explanatory, right? 

Pay Period- On your paystub, you will see something like this: "Pay Period 01/01/2016 – 01/07/2016". Pay period means the time frame from which payroll must calculate taxes and deductions for you for a specific length of time (usually one week). It's important to know the days included in the pay period and when it ends. Companies can have many different pay schedules, for example, a company may pay every two weeks starting Monday and ending on Sunday. The pay date for the payroll could be any day Monday-Friday of the first week in the pay period.

Gross Pay: This may be one of the most essential pieces of information on your paystub, and you should know it inside and out. Gross pay is how much you made in gross income during this pay period (the numbers BEFORE taxes and deductions). It is vital to note that if this number is different from your net amount when you get paid next time, something happened with your tax deductions or payroll contributions.

Net Pay: This is the total amount of money remaining after all deductions have been recorded for a specific date range. 

Employer Deductions: This area of the paystub lists all the federal and state tax deductions, as well as any payroll contributions you made that will be deducted from your income for this specific pay period. 

Employer Contributions: These are payroll deductions made by your employer on your behalf. This can be for things such as benefits, company savings plans, or something you negotiated in exchange for a decrease in salary. 

Other Deduction: You will see an area where other deductions may be noted on the paystub. These are often related to garnishments, loans, court orders, or different types of obligations that must be paid periodically.

Retirement Contributions: These deductions reflect any contributions you made to a retirement plan, such as a 401k or 403b plan. 

After-Tax Deductions: These deductions reflect any deductions apart from regular tax withholding, including things like health care premiums for medical, dental, or vision plans offered by the employer. These are taken "after-tax," meaning that they are post-income tax-deductible.

Earned Income Credit (EIC): If applicable, this deduction reflects an Earned Income Tax Credit is applied to lower-income workers who qualify for it. EIC can also show up in the "Other Deduction" section if it is not enough to be able to claim it as its own deduction. 

Federal Tax Withheld: This number represents the amount of federal (Fed) tax already withheld for this specific pay period. The Fed tax withholding may change in future pay periods depending on any changes in your personal or financial situation that can affect your taxable income, such as job status (leave of absence, maternity leave), marital status (single vs. married), and how many allowances you choose (if any). For example, full-time students get at least one allowance, so their Fed tax withholdings are very low because they have low incomes overall. Married employees are allowed more exemptions than single employees, so their Fed taxes are typically higher because they get more withholding allowances. 

State Tax Withheld: This area reflects how much state tax has been withheld for this pay period. The amount of state tax withheld may change in future pay periods depending on any changes in your personal or financial situation that can affect your taxable income (see above). The state and federal tax withholdings should be the same except in some states, such as Oregon and Washington, which do not have an income tax. In that case, the net amount would be different from what you see here if it were included in your Fed amount. 

Social Security Tax Withheld: These are the Social Security taxes deducted for this specific pay period. As with all other deductions, these will likely change slightly based on personal or financial changes varying your taxable income. There is a maximum amount of Social Security tax you will pay throughout the year whether you make more or less money in a given year, so this number may differ from what you paid last time. 

Medicare Tax Withheld: This represents the Medicare tax deducted for this specific pay period. You can typically find both the federal and state Medicare deductions under "Other Deduction" if they don't show up as separate deductions on any given pay stub. 

Additional Pay Information:  In addition to previous deductions, other federal withholding information such as W2/1099 reporting statements, additional pay items not listed elsewhere.

Hours / Overtime - This is another way of showing how many hours you've worked during this pay period, so it varies from one pay period to the next, as shown in the example above. For example, if you work part-time, you might see something like "15.0 Hours / Overtime," meaning that you worked almost nine hours of overtime during this pay period. If the amount is negative, you've worked less than your scheduled hours which can happen if, for example, an employee calls in sick or if their schedule was changed during the workweek due to lack of work, etc. 

Vacation and Sick Leave - This shows the amount of time you've taken off during this pay period. It is usually "0.00 Hours" on your first pay stub because it's a new job, and you haven't yet taken any time off during that workweek. 

Total Amount / Balance - This reflects anything that was not included in the above deductions for this specific pay period, such as tips, bonuses, or reimbursement expenses. Some companies may show these amounts under separate headings, but they are also included in what you see here. 

Meals & Misc. - Here's where we can find out how much money has been deducted towards meals and other ancillary expenses such as uniforms and tools. These deductions are usually made per pay period rather than monthly, even though they can't exceed a maximum dollar amount in some cases, which is common in unionized labor environments. Other examples might include when the employer decides to start deducting for housing, transportation, or other living allowances when employees relocate from one location to another.

Your pay stub is a document that shows exactly what you are being paid for your work. If you have any questions about its information, don't hesitate to ask contact CLE Bookkeeping Solutions. We will be glad to help. What did you learn from reading our blog post? Did we answer all of your burning questions about how your paycheck works? Let us know in the comments below, and we will get back to you promptly! As always, thanks for following along on this journey into understanding paystubs!