Payroll deductions can be confusing. What are those little codes out beside the deduction totals, and how are these items calculated? Why is it impacting what I take home from my income?
Instructions
1. Look at the summary numbers on the pay stub. You will see the hours you worked, pay rate for an hours pay, and the total amount that you were paid which is referred to as the Gross Pay. If you'll will look at the other section of the stub you will more than likely see a bunch of codes. Sometimes an employer will spell the entire word out like Federal Withholding, but more times than not it is an abbreviation or code such as Fed or FIT.
2. Once you have found all those abbreviations you need to figure out what each one is. You can make it simple on yourself by going to your Human Resources Department and asking, but if you don't want to, then you can figure it out by elimination.Take the more obvious abbreviations like Fed or FIT for Federal Income Tax or S.S. for Social Security and slowly narrow the list down. Think of what you asked to be deducted, like insurance or life insurance.
3. After you have discovered what each of the deductions stands for you can start to understand how they were deducted and why.FICA is one possible code for Social Security. It is really meant to encompass Social Security and Medicare, but most payrolls put it as the abbreviation for just the Social Security part.Both Medicare and Social Security together make up a 7.65 percent deduction in Gross pay. S.S. is 6.2 percent and Medicare is 1.45 percent.
4. Federal and state income taxes are based on whether you claim single or married and how many dependents you claim. The deductions are listed in a grid that you can find on the internet by searching for federal or state income tax tables. You would then look for the table based on how often you are paid, such as weekly, semi-weekly, monthly, etc., and then look for the section on married or single, depending on what you chose for yourself.After finding the correct section you should look for your gross amount, then look across the columns based on the number of dependents you claimed.You will then see how much your federal or state tax deduction should be.
5. Insurance can come out of your pay before or after taxes. You will need to ask your HR representative if your plan is pre-taxed. The amount of the deduction will depend on your insurance and how many people are on your plan.If your plan is pre-taxed, you will take out the deduction before your federal and state taxes are figured as well as Social Security and Medicare taxes.401K deductions are another that are pre-taxed. 401K retirement benefits will be deducted at the percentage that you chose when you signed up for the plan. It should be taken out before federal and state taxes, but not before Social Security and Medicare.
6. Other deductions could be dental, life, Accidental Death, Flex Spending, Vision, Short Term Disability and Long Term Disability as well as deductions due to garnishments like child support or back taxes.You will need to ask your HR representative about the deductions related to health benefits. Any of them could be pre-taxed or not depending on the plan. If they are pre-taxed you would figure them the same way you figured the medical. Take it out before federal, state and FICA taxes. The Flex Spending is one that is always pre-taxed.Garnishment come out after taxes. They are either based on a set amount from the court or a percentage, but all garnishments have to adhere to one rule. They cannot deduct more than ten percent of your gross pay.
7. Now that you've gotten a little insight into how deductions are figured and what they mean you should be able to double check your payroll department every now and then and make sure you are being paid properly. After all they are human. They could make a mistake.
