This Article is written to help new bees understand a paycheck and various taxes employers deduct in the United States. A standard paycheck has various items. But, 2 parts "EARNINGS" and "DEDUCTIONS" are important.

Most Employers process payroll in one of the following pay cycles. However, some unprofessional employers do not follow any pay cycles.

Weekly Once a Week - This is not a standard for IT Consulting Jobs, ConsultPal.Com offers weekly process too

Bi-weekly Once every Two weeks

Semi-monthly Once every 15 Days i.e. 1-15 and 16-30 of each month

Monthly 1st to 30th, entire calender month

Earnings = These are the gross payments for your work (Calculated by the hour or by year - If by year, divided based on pay cycle) 

Deductions = All the monies being cut from your paycheck like Taxes, Health Insurance Contributions, Salary Advances etc. 

Paystubs contain a lot of information, from federal income tax, Social Security, Medicare tax, State and Local taxes.All paycheck stubs will show the Gross Earnings — This is total amount you earned before any taxes were withheld for the pay period. It will also show your net Earnings/pay — The total amount of your check after all withholdings. 

Commons items on your pay stub. 

Federal Tax

Federal income tax may be abbreviated Fed Tax, FT or FWT. This amount is withheld against any tax you would owe to the federal government (IRS). The amount withheld from your pay depends on whether you're married or single and how many allowances you claim on the Form W-4 you filed with your employer. 

Social Security & Medicare Tax

Social Security tax may be abbreviated FICA, SS, SSWT or OASDI. Even if you have $0 withheld for federal, state and local income taxes, you generally must have Social Security and Medicare taxes withheld. If you earn at least a specified amount for at least 40 quarters, you'll be able to receive Social Security benefits when you retire. The amount withheld for Social Security from each of your employers is 6.2% of your gross income (up to income of $106,800 for 2009). Your employer pays an additional 6.2% for you that doesn't come out of your check. 

Medicare tax may be abbreviated MWT or Med. This amount is withheld so you'll be covered by Medicare when you reach age 65. The amount withheld from your pay is 1.45% of your gross income. Your employer pays an extra 1.45% that doesn't come out of your check. There are no income limits. All covered wages are subject to Medicare tax.  

State Tax

State income tax may be abbreviated St Tax, ST or SWT. Your paycheck may also show the abbreviation of the state for which the tax is being withheld (for example, NJ tax). Depending on where you live, you may not have state withholding or you might have withholding for more than 1 state (the state you live in and the state[s] you work in). The amount withheld from your pay depends on whether you're married or single and how many allowances you claim on the state equivalent of Form W-4 you filed with your employer. 

Local Taxes

Local income tax may be withheld on wages earned inside city, county and school district boundaries. If you live or work in a jurisdiction that levies a tax, wages will be taxed by that jurisdiction. 

Unemployment Tax

You will also pay Unemployment (UI) based on the State where you work. This deduction may be paid by Employer or both. This is usually for a certain amount of Gross Earnings. For example, you only pay UI for up to $15,000 of earnings in a Year. This varies from state to state. 

Remember, you will pay State Taxes to the State where you live and pay UI to State where you work. 

Examples:

You live and work in NJ, you pay both to State of NJ 

You live in NJ and work in NY, you pay State Taxes to NJ  and UI to NY.

Year-to-date

Your paycheck stub may also show year-to-date totals. This information is good to have, especially if you're trying to estimate whether you'll have a refund or balance due at the end of the year. Save the last check stub to compare with your W-2. The amounts on the last check stub and the W-2 amounts generally should match. Contact your payroll department if there are any differences. 

Other Items

Your paycheck stub might show deductions for health or life insurance. If it does, your stub may show whether the premiums were deducted "before tax" (which will reduce the income that you pay tax on to the federal, state and local government) or "after tax." 

Some employers offer their employees the chance to contribute to retirement plans, such as 401(k)s. Others offer child care or adoption assistance. Your stub will generally show deductions for such items if you chose to take advantage of them. 

Written by :

Administrator