When your employer creates a pay stub, they are required to deduct various taxes and deductions from your gross salary. You are sure to be taken aback by the different deduction codes you see when you check your heel maker..
Here are some of the pay stub deduction codes that are commonly found in your pay stub.
Federal Income Tax- This tax is levied on every person who works in the United States. You must pay this tax under all circumstances. It may appear on the payslip maker like FED for short or federal tax in full. If your payroll department makes a mistake in allocating tax, you may have to pay a much larger amount of tax or a fraction of it.
The best way to verify the deduction is to understand the tax brackets defined in the US federal tax rules.
State income tax- Most states in the United States charge additional state income tax in addition to federal income tax. The few that do not include Florida, Alaska, Texas, South Dakota, Washington and Wyoming. In fact, two others, Tennessee and New Hampshire, do not even tax earned wages. Anyway, for those who do, state income tax is stated in the payslip generator as initials, for example, Ohio State Income Tax is shown as “OH ST TX”.
FICA- On each pay stub, you will find a deduction for FICA or Federal Insurance Contributions Act. This is a Social Security deduction for which you and your employer will contribute about 6.2% of your paycheck.
This is a social levy for specific medical use. From your pay stub, about 1.45% is deducted for this. It is indicated as’ MED ‘,’ FICA MED ‘or FIM’ in your pay stub.
Deduction for other benefits
Many other benefits are deducted from your pre-tax income. For straightforward processing, your payroll department may use initials to identify them. For example, dental insurance can be abbreviated as “DEN” or “DENT”.
Any additional insurance that you have taken out with your employer will be deducted from your gross salary. This includes health, dental care, home or any other type of insurance.
Retirement savings plans
If you plan to benefit from a retirement savings plan such as the 401k plan, this will also be deducted from your salary. With this plan, you choose a chosen percentage of your pre-tax salary that you would like to contribute to this retirement plan.
Flexible expense accounts
You can also choose to sign up for a flexible spending account where a set percentage of your pre-tax income is used to pay co-payments for health insurance, prescription drugs, and other deductibles.
Health savings accounts
This is another plan in which you set aside a portion of your pre-tax income for medical expenses. The deductible amount for this is also quite high. For this you will need to choose a high deductible health insurance plan.
Remember that all of these deductions are payable by you either by your consent or if mandatorily required by federal and state government rules. Check your online w2 form to find out what has been deducted from your pre-tax income.