Millions of people have had an error on their paycheck. Some have been overpaid, had too many deductions for their checks, or have been underpaid.
Since most people get paid through direct deposit, it’s easy for these mistakes to get overlooked. That’s why you have to understand your paystub and what all of those codes mean.
Your paycheck is processed by humans. Humans can easily make mistakes. Knowing the paycheck stub abbreviations and what the amounts tied to them should be will protect you.
You can end up with less money or pay a huge tax bill if you don’t read your paystubs regularly. Read on to learn what those paystub codes mean and how you can make sure you’re getting the money you earned.
When Do You Get a Paystub?
Do you usually get paid through direct deposit? If so, you may not get a paystub. How can you tell if your information is correct if you can’t locate your paystub?
Federal law doesn’t require employers to issue pay stubs to employees. Employers should keep good records in case they’re audited by the IRS, but the law doesn’t require them to.
State laws will determine if and how paystubs are issued. These laws are divided into a few categories. Some states have no requirements. Most states require employers to provide access to printed or electronic access to employees.
You’ll want to check with the labor laws in your state to learn what the requirements are. You can then work with your employer to get a copy of your paystub.
If you can’t get access to a paystub and your employer is violating the law, you may have to file a complaint with your state’s labor board.
You can’t wait for that issue to get resolved, so use a paystub generator to create your own paystubs.
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Reading Paycheck Stub Abbreviations
Once you have access to your paycheck stub, it may feel like you have to get a decoder ring to figure out what it all means. Here are the most common abbreviations and the financial implications they can have.
Usually, when you get paid, you only care about one code. That’s NET. NET is the net earnings of your check. This is the number that usually appears at the bottom of your paycheck stub.
It’s calculated by taking your gross earnings and subtracting all of the deductions. Your NET earnings may be off if there is a miscalculation elsewhere on your paystub.
Name & Address
Your paycheck stub always starts off with basic information, such as your name and address. It’s important to make sure that this information is correct in your employer’s system.
At the beginning of each year, your employer will send a W-2 form. This is the form you use to do your taxes. An incorrect address can delay your W-2.
This means it will take longer for you to do your taxes and get a tax refund. If you see that your employer is using an old address, take care of it right away.
The pay period is the date range that covers your earnings. This is usually a two-week period, though some employers pay monthly or weekly.
This needs to be checked to make sure all of your hours worked are counted and applied. Keep track of the days and hours worked during the pay period.
This means year to date. YTD totals all of your earnings and deductions from January 1 of each year. You can use this figure to check your total withholdings for the year and estimate if you will owe money or get a refund on your taxes.
Your gross earnings total the amount earned before deductions. You can calculate this yourself to make sure it’s right.
Hourly employees take the number of hours worked in the pay period and multiply by your hourly rate. For example, if you worked 80 hours in a pay period and get paid $18 an hour, your gross is $1440.
Salaried workers take the annual pay and divide by the number of pay periods.
This is the amount of federal taxes withheld, which will depend on your income bracket, filing status, and income.
The state income taxes withheld will depend on your state. Some states have a progressive tax system, others have a flat tax, and there are a few states with no income tax.
FICA is often the most confusing part of the paycheck. You may see it listed at OASDI. Some paycheck stubs will have the abbreviations listed separately, such as MED and SS.
This is your withholdings for Medicare and Social Security. You pay 1.45% to Medicare and 6.2% to Social Security.
Almost half of all Americans get health insurance through their employer. Employers used to pay 100% of insurance costs.
Since the costs of heal insurance have increased, you’re sharing the costs of your health insurance premiums. This line shows you how much you pay each pay period for health insurance.
If your employer uses MED as your Medicare deduction code, health insurance may be abbreviated by your health care plan. For example, BCBS would be Blue Cross Blue Shield.
IRA & 401(k)
These paycheck stub abbreviations show your contributions to your retirement plans, such as an IRA or 401(k). They may be shown as RET for retirement.
Decode Your Paycheck Stub
There is important information hidden in your paycheck stub. The paycheck stub abbreviations can make it difficult to understand what you earned and if that amount is correct.
It’s ultimately your responsibility to make sure you’re getting paid what you earned. You also have to make sure you’re getting the proper amount of taxes withheld.
The simple act of learning to read a paystub is the first step in good financial housekeeping.
For more financial tips, be sure to check out the home page of this site for more personal finance insights.