Did you know there is a specific, well-thought-out plan that goes into place by your employer for how much money is taken out of paychecks?
No one likes to think about losing out on any of the money they are making, but in the United States, there are certain things that the government requires us to contribute to through our pay.
How much do you really know about your pay stub deductions?
If you are curious about your pay stub deductions and want to learn more, keep reading below!
Types of Pay Stub Deductions
A pay stub has a lot of information on it, but you can’t understand each category until you know what those categories are actually telling you.
Not all employers are required to give employees pay stubs, but if you receive one and don’t know what the information on it means, that won’t help you much.
If you need a pay stub now and aren’t able to use the one you get from your employer (or your employer doesn’t provide one), you can use a check stub creator to make one for yourself.
Using your pay stub to track how much you pay for different things can help you budget better, but it also can help you find errors.
If you notice something is wrong, it is your responsibility to find it and report it to your HR department or payroll provider.
Federal Income Taxes
The federal government is authorized to collect part of your income on each paycheck. This is called the withholding tax and these are managed by the Internal Revenue Service.
The amount that is withheld is going to depend on how much income you receive. It also depends on the information given to your employer on your W-4 form.
State Taxes
You may need to pay state income taxes in certain states. Not all states require this, but if yours does, you need to be aware of how much is going to come out of each paycheck.
Social Security
The federal government asks that all Americans with a paycheck contribute some of their money to Social Security. This system was established to supplement retirement programs in the US and provide benefits to those that receive those benefits.
You will need to contribute 6.2% of your gross income to Social Security.
Medicare
Another program that the federal government requires all Americans in the workforce to contribute to is Medicare. This plan provides medical benefits for Americans that are 65 years old or older. It also can provide benefits for people that have certain disabilities
Each worker in the US will pay 1.45% of their gross income to this program.
Insurance
You may have the option to get medical insurance, dental insurance, or life insurance through your employer. Some employers offer other insurance plans as well, like pet insurance or disability insurance.
If you have chosen to get any of these plans, they will be deducted from your pay each check.
Retirement Plans
Another option your employer may have for you is a retirement savings plan, such as a 401K plan. If you have signed up for one of these plans also, part of your payment will also go to your retirement savings.
Understanding Your Pay Stub
In order to understand your pay stub, you have to know what types of deductions you pay and how much you pay for each.
Now that you’ve got a better idea of how to read your pay stub, you’re more prepared to find discrepancies or plan for your financial future!
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