Happy New Year!
If you receive a paycheck, whether paper, direct deposit or paycard:
Check Your Paystub!!
With the new year upon us its a good idea to check your paystub.
With each new calendar year comes changes to how your pay is calculated.
So grab your paystub if you are still given one, or more ideally, go to your companies payroll portal to view your stub online.
Hot tip 1) Your company may have changed their payroll provider, or changed the way you can access your paystubs online, so make sure you know how to get in to the new system.
Paycheck stubs have evolved over the years. They come in many different formats and the information you find on them will vary depending on your state, the current IRS tax laws and what your own personal deductions are.
You’ll want to review all these items to make sure that they are accurate.
You may see some or all of the following:
Identified often as RATE or EARNINGS, this is your gross pay ( pay before deductions). You may have had a raise to your base salary or other change to your compensation plan, so you want to make sure your gross pay is accurate. If you are an hourly employee, make sure that your hourly rate is correct. You will see YTD all over your pay stub. This is “Year To Date” and shows what that item is so far in the pay year. Each pay period it increases to include the most recent information.
All of the following taxes and/or other deductions are taken from your Gross Pay to calculate your Net Pay, also known as your Take Home Pay.
Abbreviations such as FT, FWT and Fed Tax are all commonly used when providing the deduction amounts for federal income tax withheld from a paycheck. This amount varies based on your personal situation and your completed Form W-4, which tells the employer how much to withhold for taxes. You want to check to make sure that your amount is correct. You may have had a change to the number of dependents you can claim on your tax return. For instance if a child has been added, or one has gotten old enough to no longer be claimed, or you’ve gotten married, or divorced; all these life events may affect the selection you make. FICA (Federal Insurance Contributions Act) taxes are for Social Security and Medicare and are more fully described below.
You may see FUTA (Federal Unemployment Tax Act), or FedUn, or some such entry which would be for federal unemployment tax.
Abbreviations such as ST, SWT and St Tax or even just the word STATE all refer to the amount deducted from a paycheck for state income tax. This amount also depends upon your personal situation and your W-4. You might see your state abbreviation along with the word “tax” to show this deduction, especially if you have state tax deducted for the state in which you reside and for the state in which you work. You may also see SUI or UI which would be for State Unemployment Insurance or SDI for State Disability Insurance.
Local tax deductions are commonly for a locality such as a city, county, township or school district. Not all locations, or employers, withhold local tax.
Social Security & Medicare Tax
The combination of Social Security and Medicare is known as FICA. Social Security tax is most often abbreviated as FICA, SS, SSWT or OASDI on pay stubs. Medicare tax may be abbreviated as MWT or Med. Most wages are subject to these two types of taxes even when the earnings are not subject to federal, state and local taxes. For 2014 the tax rates are: Social Security 6.2% and Medicare is 1.45%
Some employers offer health insurance, life insurance, retirement plans, charitable contributions and other savings plans that involve automatic deductions from each paycheck. If you have health insurance, or Long Term Disability, Short Term Disability, Additional Life Insurance, AFLAC, Christmas Club, etc. you may have made changes during your companies open enrollment period. Those selections, and your companies new plan year with their health insurer, typically go into effect on January 1. Your costs therefore may have changed, so your net (take home) pay may have changed a bit. If it is unclear why an amount has been deducted from your pay, take your stub to the person in charge of payroll at your company or human resources or the payroll department and ask.
Hot tip #2) If you question a certain deduction, see whether the abbreviation makes sense with the name of the insurance company, savings plan and charitable organizations offered through your employer.
Hot Tip #3) Check with your financial planner, your accountant or tax preparer for whether you should withhold differently.
Wishing you all the best for prosperous 2014
If you ever have payroll related questions, don’t hesitate to utilize me as a resource to answer those questions.
Connecting the Dots: a payroll related informational series created for the friends and clients of Mitch Zucker…