A pay stub usually show a breakdown of deductions make from your monthly earning. All paychecks usually come with a pay stub so that you can see the amount removed for taxes and insurance. Another feature of a pay stub is the codes for earnings and deductions which are usually specific to individuals. For some people, it is always challenging to interpret the information contained in a pay stub and thus are forced to raise complaints. As an employee, you should know the deductions from your salary and the reasons as to why. The article herein is, therefore, a guide through pay stub deductions.
Your paycheck is usually less than what the employer promised. 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. As an employee, you have the legal obligation to contribute towards the Social Security Program. Social Security Program 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.
The state is also entitled to a share of your income as state tax. 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. The amount that you pay as a federal tax depends on the allowances and tax rate. 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). The deduction is usually meant to take care of people living with disability. In California, SDI deduction is usually mandatory. In the event of a family or disability leave, you will receive a fraction of your salary. Finally, a pay stub usually contains miscellaneous deductions. Miscellaneous deductions compromises of deductions that you sign up for such as health insurance and retirement. The deductions are usually given priority hence a suitable means of lowering your taxable income.
Therefore, before you start your job, you should learn about all the deductions that you are subject to. The deductions usually differ in states. In case of an issue with your pay stub, you should report to the relevant authorities.