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If you’re not one of the 16 million Americans who work for themselves, chances are you’re used to seeing a pay stub at the end of each month.
However, you might not comprehend all the terms you see on your pay stub. Understanding your pay stub requires you to do a little research.
It’s important that you take the time to do this, as it’s the best way to ensure that you’re getting paid the right amount and to show you the impact taxes have on your pay.
The three tips below cover the most important details you should be aware of when it comes to your pay stub.
1. Your General Details
The first thing you’ll usually see when you open your pay stub is a breakdown of your personal details. The slip should feature your name, date of birth, address, and social security number.
These details should also appear on your W-4 form, in which you indicate the exemptions you’re entitled to claim from your taxes. If your family circumstances change, you may be entitled to claim additional exemptions.
If you’re an employer, keeping on top of these kinds of details can be challenging, especially if you have a large number of workers. Investing in a pay stubs generator could be a good idea if you spend a long time on this kind of administrative work each month.
2. Income & Taxes
The most important details on any pay stubs relate to the amount you earn and the percentage of this you get to keep. Depending on where you live, the difference between these two numbers can be significant.
No matter where in the US you are, you’ll have to pay federal taxes. You may also have to pay tax at a state and local level. However, the levels of these taxes vary widely from one state to another, and some states do not levy income taxes at all.
3. Voluntary Deductions
As well as the federal, state, and local taxes that have to come out of your gross pay, you can also elect to make further voluntary deductions. While you don’t have to make any of these payments, there are advantages to doing so in many circumstances.
If, for example, you choose to make a deduction for a retirement plan, this money will come out of your gross pay rather than your net pay. That means you can enjoy the benefits of it without giving a cut to the IRS.
Using Your Pay Stub to Your Advantage
Your pay stub might look like it’s full of useless jargon. However, the information it contains can be very useful if you’re trying to cultivate a better understanding of your income breakdown.
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