If you’re an employee, employer or independent contractor, there are various reasons as to how long to keep pay stubs.
Not only does a pay stub help you streamline the tax filing procedure, but it also helps avoid legal trouble in the event of an audit.
Individuals can use pay stubs to get a loan, open bank accounts, and ensure that their deductibles are appropriate.
This blog will outline everything you need to know about how long you should keep a pay stub and why you should do so.
What is a Pay Stub?
A Pay Stub is a document that shows an employee’s earnings and total deductions during a particular pay period. These documents indicate how much income tax, social security contributions and other benefits are deducted from an employee’s salary.
A Pay Stub contains the following information:
- Personal Details including postal address, full name and Social Security Number.
- Employer’s Address.
- Number of hours worked.
- Gross pay before deductions.
- Any taxable deduction and benefit.
- Net income after deductions.
How Long To Keep Pay Stubs and Do Employers Have To Provide Pay Stubs?
The Fair Labor Standards Act (FLSA) states that employers should keep a record of the following:
- Each employee’s personal information, including their full name and address.
- Any information relating to an employee’s compensation. This includes worked hours, hourly rates, overtime and deductions.
Although employers are required to record employees’ compensation, they aren’t necessarily required to provide them with digital or paper pay stubs.
States where employers are required to issue pay stubs are:
- New Hampshire
- New York
- New Jersey
- North Dakota
- Rhode Island
- South Carolina
- West Virginia
States Where Employers Are Required To Issue Pay Stubs:
- South Dakota
While some states do not require pay stubs to be issued to employees, formal institutions like banks need them as proof of income.
This means that the employees need to create their pay stubs. In this case, employees can use their contracts to know how much they earn.
How Do You Get Pay Stubs as an Independent Contractor?
Independent Contractors are self-employed individuals who provide services to different clients and firms.
Examples of Independent Contractors are writers, painters and graphic designers.
Why Should I Keep Old Pay Stubs?
Employees, employers and independent contractors must keep their old pay stubs for various reasons. Let’s see what those reasons are:
Employers: Business owners must accurately record their employee’s information, including compensation-related details. If a business has financial statements like pay stubs in hand, they might find themselves on the right side of the law, leading to an investigation.
For example, an employee has filed a complaint against their employer about their salary. An employer can use pay stub records while filing an employee’s income tax returns.
Employees and Independent Contractors:
No law requires employees or independent contractors to monitor their earnings and deductions.
It helps to ensure you are paid adequately: When you receive your pay stubs, you can check and monitor your earnings and deductions.
This ensures that the right taxable deductions are subtracted from your wages and that you are being paid in an orderly fashion as per your employment agreement.
You can use Pay Stubs as Proof of Income: Many formal institutions need proof that you have a stable income before you can use their financial services. For example, banks will only allow you to take out a loan with proof of income. You can use pay stubs as proof of income, though you will be able to repay debts.
Paystubs make Tax Filing Easier: You need to use your pay stubs to calculate wages and deductions on your W-2 when you file your taxes. Your annual income will dictate how much tax you must pay, your health and other insurance premiums, and the Social Security benefits you are eligible for.
How Long Should I Keep Pay Stubs?
Record-keeping requirements differ from state-to-state. Generally, employers are encouraged to keep their financial records for at least three years.
Employees and Independent Contractors:
It is recommended that you should keep your pay stubs for at least 12 months. You shall need your pay stubs to accurately file your W-2 forms and Social Security contributors to ensure you are paying the correct amount of tax on time.
What are Some of the Best Ways To Store A Pay Stub?
Trying to store and organize the physical copies of your pay stubs for several years can be hectic. Not only does this take up a lot of space, but it will be frustrating to search for the documents if everything needs to be properly organized.
Using the cloud-based digital solutions where you can easily store your documents online makes this manageable. You can scan and upload the physical pay stub copies to your computer to keep digital records.
The basic deadline for the question How Long Should I Keep Pay Stubs is 12 months. In case you are looking for an easy and affordable tool to create paystub online free, eFormscreator is your one-stop shop. The user-friendly tool is fully automated, allowing you to create pay stubs quickly.