create paystub Archives - Eformscreator

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.

Free Paystub Generators: Everything You Need to Know

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:

Alaska
Arizona
Idaho
Illinois
Indiana
Kansas
Kentucky
Maryland
Michigan
Missouri
Montana
Nebraska
Nevada
New Hampshire
New York
New Jersey
North Dakota
Oklahoma
Pennsylvania
Rhode Island
South Carolina
Utah
Virginia
West Virginia
Wisconsin
Wyoming

States Where Employers Are Required To Issue Pay Stubs:

Alabama
Arkansas
Floria
Georgia
Louisiana
Mississippi
Ohio
South Dakota
Tennessee

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.

Paystub Deduction Codes

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?

Employers:

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.

Self-Employed? Here’s How To Show Proof Of Employment

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.

Conclusion

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.

To correct payroll, you need the right information, including the data required to create paystub. A pay stub lists all the valuable information about an employee’s pay.

A Deduction Code identifies types of deduction codes, like significant medical, health benefits, credit union payments, charitable contributions, etc.

Employers and workers must understand the information on a pay stub. Employers must generate authentic pay stubs that match the gross pay, tax withholdings, and other payroll amounts.

This blog explains the information required to create a paystub and view the most common paystub deduction codes.

What is a Pay Stub?

In most cases, a pay stub is being provided to the employees. It includes essential information about an employee’s payment, such as wages earned for a pay period, essential deductions, and the amount of money an employee takes home.

This information can fluctuate depending on your state, though many states require you to give pay stubs to your employees. You should keep a copy of each pay stub for your payroll record.

Why are Pay Stubs Crucial?

The employees and employer can use pay stubs to record previous wages, but they can also make sure that the payments are accurate.

By viewing how their payment is broken down, employees can understand their tax deductions and know how much of their tax is going where.

If there is no equality between you and your employer, you can use the pay stubs to prove they were paid equally. Employees can use the pay stub to help them complete their W-2 forms when completing taxes.

Information Needed To Create Paystub:

Regulate the information for each employee:

Payroll Cycle: The payroll Cycle is defined as the number of pay periods that determine how much salary is paid on each payroll date. It also determines the start and end days for computing hourly payroll.
Wages: Gross pay and Net pay. Wages might be based on salary using an hourly rate of pay.
Tax Withholdings: State, Federal and Local amounts withheld for taxes.
Benefit Withholdings: Amounts withheld for the employee’s share of insurance premiums to be invested in a retirement plan.

The rules regarding the pay stub vary state by state. Some states require employers to provide workers pay stubs, while others do not.

Employees should keep their most recent pay stubs as evidence of income. If an individual applies for a loan, the paystub confirms the borrower’s gross income.

The pay stub information should match the data on each employee’s year-end W-2 form, which the individuals use to file their personal tax returns.

Understanding FICA, FUTA and SUTA Taxes

A pay stub shall report FICA, FUTA and SUTA Tax information.

FICA tax is collected to fund Social Security and Medicare. FICA is a compulsory payroll tax for the Federal Insurance Contributions Act.

The FICA Tax comprises two separate taxes which fund two large programs managed by the Federal Government: Social Security and Medicare.

The Medicare rate is 1.45% on all wages, and high-income taxpayers will pay an additional 0.9% tax for Medicare.

Employers also pay 7.65%, deducting the cost as a business expense. The employer’s payment is generally included in the pay stub.

The FUTA funds unemployment programs, taxes and the SUTA tax. The employer pays these amounts, but is also reported on the pay stub.

Pay Stub Deduction Codes

The most common pay stub deduction codes include:

FED, FIT, FWT: Federal Income Tax Withholding.
SIT, State, SWT: State Income Tax Withholding.
FICA: FICA taxes paid for Medicare and Social Security.
YTD: Year-To-Date.
MED: Insurance deductions for health, vision and dental insurance.
INS: Insurance deductions for other coverage like life insurance.
401(k): 401(k) contributions into a retirement plan.
FSA or HSA: Contributions into a flexible spending account (FSA) or health savings account (HSA).

What is a Stub Deduction?

Standard pay stub deductions include state and federal income tax and Social Security Tax. State and federal withholdings account for much of the gross and net income gap.

Conclusion

Deduction Code identifies deduction codes, like significant medical health benefits, credit union payments, charitable contributions, etc. Create Free Paystub easily with eFormscreator for free!