What Are Pay Stubs? The Basics Explained

With tax time coming around, you may be getting those nervous feelings that many of us experience. Forty-eight percent of Americans don’t even know what tax bracket they’re in, so trust that you’re not alone there. Taxes are confusing, and even more so when you aren’t exactly sure how to track your income. 

If you have an employer, chances are you getting handed a pay stub every week, every two weeks, or every month. But, what are pay stubs? What does the information on them even mean, and can you ever tell how much you really made?

Don’t worry. It’s not actually as confusing as you think. Keep reading for the answers to all of those questions and more.

What Are Pay Stubs? 

Employee pay stubs are a great tool to use to track your income, which can make tax time a lot easier, especially if you’re self-employed. They show your total earnings for that pay period, deductions from the total, and your net pay after the deductions. 

If you get paper checks, pay stubs are usually attached or included with the check. If you get direct deposit, you can most likely view your pay stub online, with direction from your employer. 

Information Included on Pay Stubs

Though you may know what a pay stub is now, reading a pay stub is the next important step. What’s included on pay stubs varies depending on state employment laws and industry requirements, but there are a few basic things you should look out for.

Gross Wages

Your gross wages show the full amount your employer paid you before any deductions were taken out. Included in this could be overtime pay, bonuses, paid time off, and payroll advances.

Deductions

Deductions are cash amounts that are taken out of the employee’s gross wages. This could be taxes, contributions, meal allowances, and more. You will see your deductions in two places on your pay stub: current deductions and deductions year-to-date. 

The current deductions show what is being taken out of your gross wages for that pay period. The year-to-date deductions show the total amount that was taken out for the entire year. 

Taxes

Taxes are often listed as deductions on your pay stub, but they are also often separated by type of tax. This could include FICA taxes that go to Social Security and Medicare, and federal and state tax withholdings. 

Net Pay

Your net pay shows the amount left over that you will receive after the deductions are taken out. Often called an employee’s take-home pay, this is the amount that you will actually receive. 

Why Are Pay Stubs Important?

Pay stubs are important for tracking your income, so you can budget your money, and for being able to provide proof of income. If you want to rent a house, buy a car, or get a credit card, you’ll need to provide pay stubs.

If you’re self-employed, you won’t have an employer handing you a pay stub every pay period. Consider creating a pay stub yourself, using the best pay stubs generator. This easy process takes only a few minutes and a little bit of information and easily provides your proof of income. 

Using Pay Stubs as a Tool 

Now that you know the answer to “what are pay stubs?”, you can begin using them as a tool. Though you might not find tracking your income important now, chances are sometime in the future, you’ll need to provide proof of income.

Or, you’ll need to do your taxes, and having it already set can save you a lot of time. If you enjoyed this article, consider browsing through more of our posts today!