What with all the recent excitement around Silicon Valley Bank, a couple of other bank collapses, and the Federal Reserve raising rates this week, I thought this was the perfect time to really go deep on paystubs (from a W-2 job). That’s right, I’m giving you my sizzling hot take on paystubs and why it’s awesome to analyze them.
It’s not that hard.
Most people open a paystub and look at only one number: the amount that went into their bank account. Then they either chuck it or file it away and forget about it. Don’t do that! Be a person who understands each element of your paystub because it is all about your money.
Scenario #1: You just started a new job. Naturally you are pumped the first time you get paid. You rip open that paystub and scan over the section about taxes withheld…oh dear, they aren’t withholding any state or city taxes. Solution: talk to HR to get that fixed so you don’t owe some huge bill when you file your next tax return.
Scenario #2: You got a raise at work (huzzah!) and so of course you study your paystub after the raise took effect. Oh wait, it’s the same as before the raise? Solution: talk to HR to get your money (they can give you a true-up payment next pay cycle).
Scenario #3: This year you and your spouse decided to get insurance through your spouse’s employer instead of yours, so you switch things up during open enrollment for benefits. The next year, you open your paystub and see that you are still having premiums deducted from your pay. Solution…you know it, talk to HR to get that fixed.
Scenario #4: You recently moved and the next time you get paid, you notice the old address on your paystub. Solution: Get that address updated with HR, and don’t sleep on it if you are in a new state as that could impact state income tax withholding.
Here are things you could learn from analyzing someone’s paystub:
- Personal info: marital status (because of tax withholding impact), Social Security number, mailing address,
- Wage info: salary/hourly wage, how frequently they get paid (weekly, monthly, etc), if they got any bonus or overtime,
- Taxes withheld: Social Security and Medicare (aka “payroll taxes” aka “FICA”), federal/state/local income tax, other taxes like for paid family leave,
- Payroll deductions for employer-sponsored benefits: premiums for health/dental/vision insurance, FSA/HSA contributions, retirement plan contributions (like a 401k or 403b),
- Employer contributions to a retirement plan for that person,
- Other payroll deductions such as union dues, pre-tax transit payment, for group insurance policies,
- If they have any wage garnishment (like for unpaid child support or for debt collection),
- If they have accrued vacation/holiday/sick/personal time (not all paystubs have this), and
- If they have their net pay going into one checking account or split into multiple accounts.
Some companies automatically send an email to employees when a new paystub is available. Some have an online portal where you can go to download new paystubs. Sometimes you have to make a request to get paystubs.
I think you should carefully review your paystub whenever you start a new job, get a raise, or have a change in benefits that impact payroll deductions. Really make sure the amounts are all what you expect. For the in-between paystubs, you can do a quicker skim.
I recommend keeping copies of paystubs at least until after you’ve filed taxes for the year in question. You may need recent ones for proof of income. Personally, I keep electronic records and since my old paystubs have small file sizes (they’re 1 or 2-page pdf files), I tend to keep them indefinitely. If you have paper copies and want to get rid of them, do use a cross-cut shredder (especially if they have your Social Security number printed on them).
So there you have my hot take on paystub analysis. I hope you didn’t get a sunburn.
One reply on “The Boring Newsletter, 3/25/2023”
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