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If you’ve ever worked as an employee, you’ve probably received a weekly or biweekly pay stub. This document lets you know about your wages, taxes, deductions, benefits, and other important financial items.
However, freelancers and business owners face their own questions and issues. While freelancers usually won’t receive pay stubs from clients, businesses may have to decide whether they need to provide them to their staff.
Are you wondering why you need pay stubs anyway? Keep reading for four reasons freelancers and business owners may need them.
1. Your State May Require Them
If you own a business, know that federal law doesn’t mandate pay stubs. However, your state may very well do so or else charge you a penalty along with other headaches you could face. So, find out before it causes issues for your company.
For example, the state of Ohio doesn’t require pay stubs, but California, Iowa, Texas, and plenty of other states do. On the other hand, some states just require that you give employees some access to their pay records.
2. You May Get Audited
Whether you get audited by the government or a private company, not having pay stubs or not providing them to workers can lead to complications.
For example, if your taxes get audited as a freelancer, not having pay stubs can make it hard to prove income. Businesses can get in trouble if an auditor finds they didn’t pay employees properly. It’s even worse if the company withheld pay stubs on purpose to hide this information.
Luckily, you can use a free pay stub template to show your earnings whether you’re a freelancer showing your own income or a business making these documents for workers. Just make sure to use accurate information either way.
3. Pay Stubs Make Tax Time Easier
As a freelancer, you can run into headaches trying to gather all your earnings data when you file your taxes without pay stubs. You also have to do calculations where you may make an error. Having pay stubs provides some assurance and saves you time and hassle.
But why do businesses need pay stubs for tax time? Well, having the pay stubs and data will make it easier to prepare tax documents for employees and double-check against errors.
4. You May Need Them in Daily Life
Are you wondering, “Do freelancers need pay stubs for things besides taxes and work stuff?” The answer is that many people from landlords to creditors may need them.
That’s because they serve as verification of your income and show both that you work and that you financially could qualify for what you want to rent or buy. For example, you might want a business loan, car loan, or apartment lease.
You can also expect to need to show a pay stub or some equivalent when you apply for income-dependent programs.
Now You Know Why You Need Pay Stubs
Whether you own a business or do freelance work, you now no longer have to wonder why you need pay stubs.
Even if you have to create them yourself, the effort can help you prevent some legal issues and make your life easier. But if you can’t get pay stubs for some reason, keep in mind you may have some other way to verify earnings.
Be sure to take a look at our blog for more business posts.