What Are Pay Stubs? The Basics You Need to Know

Are you the type of employee who checks their pay stub regularly? Or do you ask your co-workers “what are pay stubs?”

Regardless of what you know, there’s always more to learn. Keep reading below to learn what information is on a pay stub, how to effectively read one, and the importance of saving it.

What Are Pay Stubs?

A pay stub is a record of all your earnings at a job. You typically get this stub with your paycheck. Pay stubs have historically been printed but more companies are now offering them as digital files.

Here is the information on a pay stub:

  • Your personal information (name, address, employee number)
  • Earnings (gross pay before taxes, net pay after taxes, and how much you’ve made for that pay period and year-to-date)
  • Deductions (health benefits, life insurance, or retirement accounts)
  • Withholdings (federal and state taxes, social security, worker’s compensation, and more)

Not keeping accurate records of this information could mean less money in your paycheck, or worse yet, owing money to the IRS at the end of the year.

Tips for Reading Pay Stubs

If this is your first job or you’ve never really paid attention before, understanding pay stubs can be complicated.

Your first step should be learning how it’s formatted and the basic pay stub terminology. For example, what’s the difference between a deduction and withholding? Or how is gross pay different from net pay?

Payroll offices make mistakes too so it’s important to check your earnings for every paycheck, especially if you’re expecting overtime.

It’s also important to keep on top of your pay stub deductions to make sure extra money isn’t being taken out for services you didn’t sign up for.

The Importance of Saving Pay Stubs

Besides looking at your stubs on payday, you should also be saving them for that tax year. The obvious reason is that it could come in handy if you have a dispute with an employer or tax collector.

More importantly, pay stubs are proof of income. You may need this if you’re applying for a mortgage, car loan, or even certain jobs.

Having proof of income is even more important for freelance and part-time workers. Many of these non-traditional workers use a pay stub maker to keep on top of record keeping. These online tools are also helpful for employers who struggle with organizing their payroll operations.

If you’re unsure of how long to keep your stubs or when to utilize them, contact your accountant.

Time for You To Read a Pay Stub

Don’t stress if you haven’t been reading your pay stubs. After reading this article you went from asking “what are pay stubs” to knowing exactly what to do.

Or you can always sign up to use an online pay stub maker.

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