How to generate a pay-stub for 2021

Presented by Paystrubmakr.com      By John Wolf and Tom Cullen CPA

A pay stub is a slip where you can see the pay period’s payment and the payroll deductions for Social Security, health insurance, and state and federal income tax deductions. It can come attached to the paycheck or appear online with the information on a direct deposit on your employer’s website.

 

Pay stubs importance

Payroll tax 2021

Why are pay stubs important? Employees should know what tax they are paying and have it ready for the tax year declaration. By federal law, there is no obligation to issue a pay stub for the payments to the employees. Most of the states do obligate the issue of a pay stub for the payroll. WHAT ARE THE TAXES ON YOUR PAY STUB

 New York requires employers to issue specific pay stubs to the employees, either electronic or fiscally. 

•  California requires employers to facilitate that employees will receive electronic pay stubs to print them easily.
• Opt-out states require the employee’s permission for any change in the way employees view their pay stubs. The employee’s call will be above the employer’s.
• Opt-in states requirement is that employers offer paper pay stubs unless an employee asks to get their pay stubs electronically. Paystubs can be different depending on the state’s employment law and the industry requirement. New York 

Restaurants can add tips and wages to their waiters. Other industries can add “allowances” or “credits.”

Here are the items your paystub should have:

• Employee details
• Dates covered
• Gross wages
• Net wages
• Hours worked
• Rates paid

The total working time multiplied by the rate per working time like hours or months plus overtime or other bonuses in any period agreed is the Gross payment.

When the employee is working based on hours, you will use the hour times the rate per hour. If the basis is a salary, it will be calculated weekly, biweekly, or monthly.
When the basis is yearly, you need to divide it into twelve months and issue a monthly pay stub.
Contractors will have no deduction on their paystub; they will have to manage their taxes independently.

Deductions

 

Deductions are the amounts taken out of the gross wages. Deductions include state and federal taxes, contributions to benefits like health insurance and social security.

Income tax laws have tax brackets to deduct the money from the gross payment. IRS Tax Brackets: Here’s How Much You’ll Pay in 2021 on What You Earned in 2020

Taxes

Income taxes and FICA tax are calculated and presented on a paystub and Medicare and Social security.

A critical issue for small or one-person companies is ensuring that the employer transfers the respective authorities. All ends on a correct W-4. 

Contributions

Contributions by the employer are part of the income that is subject to tax paying. If there is a contribution by the employer for 401 K, it is another kind of deduction that should be calculated as taxable income. 

Contributions for an employee stock purchase plan (ESPP) or a pension plan can be made. 

Net pay

The net pay will be the money left after all the deductions and will appear on the pay stub and the paycheck or direct deposit.