Did you know that about 82 million Americans have experienced errors on their paychecks? Those are the errors that are known.
The reality is that there are probably many more paystub errors. Most people get their paychecks through direct deposit and don’t bother to read the pay stub.
You have to know how to read a pay stub in order to catch these errors. You could be paying too much or too little in taxes that can affect you down the road. Remember, there are people that are doing payroll. They can make mistakes.
Read on to learn how to read a pay stub so you can catch these errors and get them corrected.
The Pay Stub Codes
When you look at your pay stub, you’re going to see a bunch of codes and amounts next to them. This is your first
Gross Pay: This is the amount of money you earned in a given pay period.
OASDI: This acronym stands for Old Age Survivor and Disability Insurance. It’s your Social Security tax, which comes out to 6.2% of your wages.
FITW: This is the federal income tax withheld from your income.
STATE: If your state has an income tax, this will show the amount of state taxes you’re paying.
MED: You have to pay 1.45% of your wages for Medicare.
401(k): If you contribute to a 401(k) plan at work, this will list the amount of your contribution.
FSA or HSA: You may contribute to a health saving or flexible spending plan. Your amount contributed will be here.
Net Pay: This is the amount you should receive in your bank account or in your paycheck. It’s the gross pay minus all of the deductions.
There may be slight variations in the abbreviations used, but these are the most common pay stub codes and withholdings. If you don’t have a pay stub to read, or if you’re self-employed, you can create one using a PayStubCreator.
Income Tax Brackets
How is federal income tax calculated? There are a lot of variables that come into play to figure out your federal taxes.
Your income, allowances, filing status, and contributions to a qualified retirement plan all factor into your federal taxes.
Spotting Potential Errors
Did you notice some inconsistencies or spot an error on your pay stub? You’ll want to ask the person who processes payroll to explain the issue.
You need to approach it like you’re asking for clarification, not accusing them of wrongdoing. The people at your place of employment are doing the best that they can. Treat them with kindness and they’ll be more than happy to help you out.
How to Read a Pay Stub
It’s really your responsibility to take control of your finances. The best way to do that is to start with your income.
When you know how to read a pay stub, you can spot payroll errors, and make sure that you’re taking home the correct amount of money each paycheck.
That can save you from having a big tax bill or getting the refund that you expected. Plus, you have knowledge and understanding as to how taxes work.
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