If you are just entering the workforce or have never received a paper or electronic pay stub, you might be unsure about the importance of a pay stub. Knowing what a pay stub is and how to read one is essential because it contains important information about your salary and tax obligations.

If you have been wondering how do pay stubs work, this short and simple guide is for you.

What Is a Pay Stub?

A pay stub is a document attached to the paycheck you receive from your employer. Your HR department will typically use a pay stub creator to create this important document that details the total salary you earned, any deductions taken from your total salary, and the remaining amount you receive.

Pay stubs are convenient for giving you an overview of how much you made during that specific pay period.

What Information Is Included in a Pay Stub?

Learning to read your pay stubs is essential because there is a lot of important information included on your pay stub. The information found on a pay stub included:

  • The pay period dates, starting and ending
  • Your pay rate, whether it is hourly or salaried
  • The number of hours you worked, including overtime, as well as your overtime pay, if applicable
  • Additional compensation, such as paid time off, holiday pay, bonus pay, etc.
  • Your gross pay, or the amount you earned before deductions
  • Your net pay, or the amount you will receive after deductions
  • Your year-to-date earnings
  • A complete list of withholdings and tax deductions, such federal, state and local taxes and medicare and social security deductions
  • Your benefits, or the amount you pay per check for your health, retirement, and any other offered benefits
  • Your employer’s contribution towards your benefits
  • Any wage garnishments that may apply, such as child support, back taxes or payment for any judgments against you

By understanding the information listed on your pay stub, you’ll be able to quickly see what you earned, what was deducted from your earnings (and why), and the exact amount you will receive for that pay period.

Why Do You Need a Pay Stub?

If you’re wondering how to use pay stubs, there are a few situations when being able to provide your pay stub will come in handy.

You can use your pay stub for proof of income, proof of employment, proof of length of employment, and filing your taxes. For this reason, you should always save a minimum of 1 year of your pay stubs for tax purposes, and so you can provide proof of employment and income at a moment’s notice.

How Do Pay Stubs Work: The Bottom Line

By reading this guide, you should no longer have to wonder about how do pay stubs work. The information in this guide will give you the tools to read your pay stub and stay informed about your salary and tax information.

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