The purpose of a pay stub is usually to provide an individual with information regarding the deductions made from their earnings. All paychecks usually come with a pay stub so that you can see the amount removed for taxes and insurance. In a pay stub, you will get different codes for the individual earnings and deductions. For some people, it is always challenging to interpret the information contained in a pay stub and thus are forced to raise complaints. Hence, you should learn about the amount being withheld from your earning and why. Keep reading this article so that you can learn some vital information regarding pay stub deductions in your monthly earnings.
When you receive your salary, you will realize that the figure is not the same as what you agreed with your employer. One of the things that will reduce your monthly earnings is Federal Insurance Contributions Act (FICA) deductions. The reason for the Federal Insurance Contributions Act FICA deductions is to finance Medicare which is a healthcare program for people who have reached 65 years. As an employee, you have the legal obligation to contribute towards the Social Security Program. In your pay stub, this deduction is usually indicated as Fica SS Tax. You should know that you can claim your SS benefits when you reach 67 years which is the retirement age.
Next on your pay stub you will find state tax deductions. State tax is not always applicable in all 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. Apart from state tax, you will find federal tax column in your pay stub. Some of the things that influence federal tax include allowances and tax rate among other things. Apart from allowances and tax rate, the federal tax also depends on retirement contributions and pre-tax expense on health and insurance.
State Disability Insurance (SDI) also have a share in your income. The deduction is usually meant to take care of people living with disability. As a resident of California, you will have to pay SDI deductions. Therefore, if you are going for a family or disability leave, you will receive a percentage of your salary. Finally, the reduction in your salary is attributed to miscellaneous deductions. Miscellaneous deductions compromises of deductions that you sign up for such as health insurance and retirement. Miscellaneous deductions usually come before taxes hence you can sign up for them to lower your taxable income.
When you land your first job, you should research on all the deductions. Also, you should note that the items you find in a pay stub usually vary from one state to another. In case of an issue with your pay stub, you should report to the relevant authorities.