If you’re self-employed, your main focus will be securing new consumers and delivering a quality product. However, there is more to growing your business, including payroll-related issues. Use our free paystub generator to generate professional-looking pay stubs to maintain productivity.
Understanding Pay Stubs
Pay stubs are the key to all the crucial employee pay information. While reviewing a pay stub, it is important to note the difference between the current pay period and the year-to-date amount. Both are important as the employer and the employee understand if the amount is correct.
The pay stub provides wages, tax withholdings, and benefit withholding information.
Self-employment pay stubs do not have any withholdings from their pay.
You can issue a pay stub to a contractor who lists out the gross amount paid, and the contractor can use the pay stubs for contractors to prove his earnings to the lender.
The rules and regulations regarding pay stubs vary from state to state. Most states must provide pay information to workers, while others do not. Businesses should make a confirmation statement of the requirements in each state where they employ workers.
Employees should keep their most recent pay stubs as a proof of income. If an individual employee applies for a loan, the pay stub confirms the borrower’s gross income. Employers should keep pay stubs on their file if it’s generated.
Information Required to Create a Pay Stub
Keep in mind to check the following things:
- Payroll Cycle: The number of pay periods decides how much salary is paid on each payroll date.
- Wages: Gross and net pay. Wages may be based on the employee’s compensation or calculated upon the hourly pay rate.
- Tax Withholding: Federal, State, and local amounts withheld for taxes.
- Benefit Withholding: Amount withheld for employee’s share of insurance premium.
How to Calculate Net Pay?
For example, Janet’s annual income is $5,000, and your company processes payroll 26 times yearly. Julie’s gross wages each pay period total $5,000/26 or $1,923 pay per period.
Based on her allowances on the W4 forms, the company should withhold 20% of her gross pay for federal taxes and 5% for state taxes. Janet also pays $50 each pay period for her shares of the company’s health insurance plans.
Janet’s net pay is $1,923, less than $480 for taxes and $50 for her health insurance premiums. Her net pay is $1,393.
The pay stub will include all of the information as mentioned above for the current payroll period and year-to-date. The pay stub that you generate also includes unemployment tax payments. Hourly workers need details on their total hours worked and any hours paid as overtime wages.
Should you be Paying Yourself Like an Employee?
A Pay stub demonstrates that your company pays you regularly just like any other employee, meaning that the Federal, State, Social Security, and Medicare taxes are withheld from your paychecks.
The withholding amount keeps you in check with the taxes owed at the year’s end; it is easier to withhold from each paycheck. The pay stubs showcase regular income.
This is important if you’re applying for a loan. Self-employment pay stubs generally have a shift via extra hoops to prove stable earnings. If you have a pay stub and a W-2 form, which your company generates at the end of the year, you can show consistency of income.
eFormscreator provides you with a free pay stubs generator, which is user-friendly, and takes less time in generating pay stubs. Use eFormscreator to create pay stubs and streamline your process.