A pay stub usually show a breakdown of deductions make from your monthly earning. Every paycheck is usually accompanied by a pay stub that shows all deductions such as taxes and insurance. In a pay stub, you will get different codes for the individual earnings and deductions. Most people are usually not informed about a pay stub thus reporting complaints to their employers when they receive their checks. For that reason, you will understand your pay stub so that you can know why the deductions are made from your salary. The article herein is, therefore, a guide through pay stub deductions.
Your monthly earning are always less than the salary that you agreed when you landed a job. One of the things that will reduce your monthly earnings is Federal Insurance Contributions Act (FICA) deductions. The money that is deduced by FICA is usually channeled to Medicare program meant for individuals who have reached 65 years. Apart from Medicare program, another deduction will be made from your earning towards Social Security Program. Social Security Program deduction is usually indicated as Fica SS Tax. Once you attain the retirement age, you can claim your SS benefits.
State income tax is the other thing that you will find in your pay stub. State tax is column is only found in pay stubs of individuals in specific states. As a resident of Texas, Nevada, Alaska, Florida, and Washington, you will not have to worry about this deduction as it is not applicable. The other tax that is associated with the government is the federal tax. Some of the things that influence federal tax include allowances and tax rate among other things. The other things that dictate the share of your salary to the federal government include retirement contributions and pre-tax expenses on health and insurance.
The other item in your pay stub is State Disability Insurance (SDI). This is a contribution towards taking care of people living with disability. As a resident of California, you will have to pay SDI deductions. You will be entitled to a fraction of your salary if you go for either family or disability leave. The last item that you will find in your pay stub is miscellaneous deductions. Miscellaneous deductions usually include retirement, cafeteria plan, and health insurance among other things that you have signed up for. Signing up for miscellaneous deductions is a suitable strategy for reducing your taxable income as they are always deducted before taxes.
When you land your first job, you should research on all the deductions. The deductions that you will find in your pay stub are usually specific to states. You should not hesitate to report to the relevant authorities if you notice that things are not adding up in your pay stub.