PAY STUB Definition & Meaning

However, if an employee is hired, promoted or terminated, that payroll may begin or end in the middle of the usual pay period. For salaried employees, the partial pay rate can be calculated by dividing the annual salary by the number of work days in one year. States use this information to enforce laws and benefits such as welfare assistance and fraudulent use of collecting unemployment insurance. The Federal Insurance Contributions Act (FICA) mandates a payroll tax to be imposed on both employees and employers. This tax is then used to fund such programs as Social Security and Medicare. The amount an employee pays in payroll taxes over the course of his or her career may be indirectly related to the level of benefits for which he or she is eligible.

Step 1: Gather All Payment Details

The information contained within a pay statement is subject to federal and state employment recordkeeping laws. The IRS requires employment tax records to be saved for four years after filing fourth-quarter taxes for the year. Under the Fair Labor Standards Act (FLSA), employers must retain payroll records for three years and save documentation showing how they determined wages for two years. If a state has different requirements than the federal government, employers must abide by whichever length of recordkeeping is greater. Employers and employees use pay statements to verify that compensation is accurate.

Do I have to give pay stubs to my employees?

This guide is intended to be used as a starting point in analyzing an employer’s payroll obligations and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services. Employees who don’t have pay stubs and need to prove their source of income can request copies from their employer. Alternatively, lenders sometimes accept bank statements or copies of previous tax returns. Employers usually provide pay statements because it’s required by a state or local jurisdiction. Under normal circumstances, payroll processing takes place at the predetermined end of a pay period.

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• Most often, deductions are made for items such as health benefits and union dues.
• This is important for both employers and employees in case there is a dispute with the payment amount.
• Pay stub templates are the cheapest option but the most error-prone.

Before the advent of digital banking and electronic records, maintaining a physical trail of financial transactions was crucial. Check stubs served as an efficient way to track payments, manage budgets, and ensure financial accountability. Even today, they remain relevant, particularly for those who prefer paper-based record-keeping or need check stub definition tangible proofs of transactions.

In other words, there are some specific paystub abbreviations that are company dependent. There are several different taxes typically displayed and taken out of your pay stubs. Form 1099NEC refers to a set of tax forms used to report income outside of traditional employee wages. This form is most often used by freelancers and independent contractors. Unlike the Form W-2, Form 1099NEC does not require a company to withhold taxes or other deductions.

What Is a Pay Stub? Quick Facts for Employers

A check stub refers to a small piece of paper that is attached to a check that provides details about the payment made. It serves mainly as a record for the person https://www.givefirstaid.au/publication-463-2024-travel-gift-and-car-expenses/ writing the check and may contain information such as the date, amount, payee, and a description of the transaction. A check’s portion retained as a record by the check writer; for account keeping purposes, such as the stub part of a payroll check. The stub has an area for payments to date and information about the current paycheck.

Proof of Income

• Also known as “Transmittal of Wage and Tax Statements”, it’s sent to the Social Security Administration (SSA) every year at the same time as the W-2.
• The IRS requires employment tax records to be saved for four years after filing fourth-quarter taxes for the year.
• A paycheck is the actual transfer of wages from the employer to the employee.
• Some payroll companies use their own set of these abbreviations while some don’t.

Additionally, imputed income may be used to determine an amount for child support payments in some states. ” Understanding the different types of checkstubs and how they work is important for business owners. This ensures that payroll information remains accurate and up to date. By understanding check stubs, you can easily solve pay-related issues.

Date of Payment

It’s important to retain them in a safe place and securely dispose of them. Employees who lose pay stubs may want to monitor their credit report and alert their bank cash flow and credit reporting agencies so they can flag any suspicious activity. If a copy of the lost pay statement is needed, employees can usually request one from their employer’s HR or payroll department. Although no federal laws require employers to provide pay statements to employees, many state and local jurisdictions do.