It’s important to review your paystub occasionally to check for any errors and to see if any changes need to be made to your withholdings. However, it can be a little confusing trying to make heads or tails out of the numbers and information on your paystub. We’ll walk you through a typical paystub and break down all the details so, going forward, you can do it on your own.
Navigating your paystub
Most paystubs have the employer’s information in the upper left-hand corner, followed by the pay period for the paycheck.
Moving down on the left-hand side, a section titled “Gross Pay” lists the employee’s gross salary per pay period, along with any additional payments, such as overtime pay and benefits. Running parallel to these numbers will be two columns, one labeled “Current,” and the other labeled “YTD” (Year-to-Date). The right side of the paystub will be designated for tax information and deductions. Each of the items on the right-hand side of the paystub will have separate numbers for current amounts and YTD.
Finally, the paystub will summarize all the numbers listed and provide a total for net pay. Now let’s talk about what each of these terms mean.
Gross pay refers to the employee’s taxable income, or the total amount of money earned in a pay period before taxes or deductions are withheld.
The columns labeled “Current” and “YTD” help the employee track how much they’ve earned and how much they’ve paid in taxes and deductions for the pay period (in the “Current” column) and for the entire year through the respective pay period (in the “YTD” column).
The Gross Pay section often includes the employee’s rate per hour and the number of hours worked. There may also be various other payments listed here, such as overtime pay, bonuses and commissions.
In this section, the paystub lists the various taxes the employee and employer pay each pay period. Here are the most common taxes listed on paystubs.
- Federal income tax
The employer uses several pieces of information to determine the employee’s annual tax liability, including the worker’s marital status, income level and the amounts of allowances listed in their W-4. Employees can adjust the amount deducted from each paystub by changing the number of allowances listed in their W-4s.
- State taxes
Some states collect state income tax and Colorado is one of the states that does. Just like federal income tax, state tax is withheld from every paycheck. This deduction shows up on its own separate line.
- Federal Insurance Contributions Act (FICA)
This refers to the law requiring every employee to contribute to the Social Security and Medicare programs with each paycheck. These contributions sometimes appear separately.
By law, every employee must pay 6.2% of their gross income to the Social Security fund. Employers must contribute an additional 6.2% for each employee. Self-employed workers must pay both the worker and employer portions of this tax, effectively doubling their Social Security tax liability.
Medicare tax liability is calculated as 1.45% of a worker’s gross income. Employers must pay an additional 1.45% for each employee they hire. Here, too, the self-employed must cover both contributions and pay 2.9% of their earnings to Medicare.
Besides taxes, many workers will find additional deductions on their paystubs. These could include deductions for insurance coverage, health savings accounts, retirement contributions and childcare costs. Some paystubs will include a sub-section for employer contributions, which refers to any employer-sponsored contributions for the purposes listed above.
The final section of a paystub summarizes all the information and highlights the employee’s net pay. Net pay refers to the amount an employee takes home after all the above-mentioned payroll deductions have been withheld. It’s the amount your paycheck is made out for.
Now that you know what each section on your paystub means, you can easily review it to check for errors and ensure the correct amount of taxes is being withheld.