Category: General

Form 1099-MISC vs 1099-NEC: What You Need To Know.

With the inclusion of the 1099-NEC tax form, the Internal Revenue Service (IRS) has changed how business owners and other taxpayers file for certain types of income and taxes.

In the past, the 1099-MISC form was used to report income for independent contractors.

Now the 1099-NEC is the new kid on the block and has replaced the 1099-MISC for reporting all payments made to contract workers and non-employees.

However, the 1099-MISC is still used to report business expenses unrelated to non-employee payments.

This article looks at the key differences between these 1099 forms and which ones you need to use to get through the tax season.

• There are a number of different 1099 tax forms used to report various business expenses. The most commonly used ones are the 1099-MISC and 1099-NEC forms.

• Form 1099-MISC is used to report any miscellaneous business expenses paid during the year, including royalties, rent, prize money, and many others.

• Form 1099-NEC is used to report any payments made to non-employees for services rendered during the year, including their compensation and other service-related payments.

What Are the 1099 Tax Forms Used For?

The 1099 forms are used to report taxable payments made to different kinds of employees and for different expenses.

Using these forms correctly ensures that you can track all your business expenses accurately.

As a business, you are responsible for sending the correct 1099 form to relevant employees and contract workers so that they can file their taxes.

The most commonly used 1099 forms are the 1099-MISC and 1099-NEC. Let’s take a closer look at which expenses these forms report to help you understand how to use them.

Form 1099-NEC

The 1099-NEC form was included in the tax system in 2020 and is used to report the taxable income of nonemployees specifically.

This includes freelancers, independent contractors, and other self-employed individuals that are subject to self-employment tax.

It’s also used to track any other compensation paid to non-employees, including:

• Compensation like prizes and awards for services performed by a non-employee.
• Oil and gas payments.
• Payments for the use of entertainment facilities.
• Payments to vendors for services rendered.

This form is used to track nonemployee compensation and report it to the IRS.

It also gives self-employed individuals an official document to attach to their 1040 tax return, replacing the W-2 refund form.

Create Your 1099-NEC

What should be included on the 1099-NEC form?

Although the 1099-NEC is fairly straightforward, you’ll need to ensure that you include all of the relevant information. If you miss something, you might face monetary penalties from the IRS.

The following needs to be included on your 1099-NEC forms:

• Name, address, and TIN of the nonemployee.
• The business name, address, and TIN of the entity issuing the form.
• The amount of taxable income paid during the year.
• The amount of state or federal income tax withheld from the nonemployee, if any.

Remember that every individual that receives a 1099-NEC form, must also get a W-9 form. Both must be filled in correctly and sent to the IRS.

Who requires this form?

Form 1099-NEC is used to report non-employee compensation businesses paid during the year.

Self-employed individuals must also submit this form with their tax returns to be eligible for a tax refund.

This form should be sent to the relevant people by January 31 of the applicable tax year.

Form 1099-MISC

This is the most common 1099 form and is used to report miscellaneous compensation to individuals and entities during the year. It’s also used for reporting any business expenses. 

Previously, the 1099-MISC form was also used to report non-employee compensation to track independent contractor income and expenses.

However, the 1099-NEC has replaced the 1099-MISC for reporting this expense.

The form serves as a filing record for the IRS and can be used as a receipt of payment by the person or entity that receives the compensation. The payee can also use this form to file their tax returns.

Form 1099-MISC is used to report on rent, royalties, prizes, awards, legal settlements, and other qualified reimbursements.

Businesses should also use it to indicate health care payments, payments to an attorney, and fishing boat proceeds if these have been made during the course of trade.

It’s also a common form for businesses and individuals who earn income from investments or rent from real estate, or who regularly purchase supplies from a number of clients.

Create Your 1099-MISC

What should be included on the 1099-MISC form?

To report payments on a 1099-MISC form, you must obtain the taxpayer identification number (TIN) of the person or entity to whom payment was made.

The form typically requires some personal information, like the person’s full name, address, and Social Security number (SSN).

If you’ve made payments to another business, you’ll need to include their Employer Identification Number (EIN).

Who requires this form?

A 1099-MISC should be filed if your business had miscellaneous expenses of at least $600 during the tax year.

This form should be sent to each person or entity to whom you’ve made payments. You should also ensure that you send this form to the relevant people by January 31 of each tax year. 

Filing deadline for on-paper submissions: February 28, 2023.

Filing deadline for electronic submissions: March 31, 2023.

What Are the Key Differences Between Form 1099-MISC and Form 1099-NEC?

It may seem like the 1099-MISC and 1099-NEC are the same forms. However, they do differ in a few key areas.

Remember that the 1099-NEC replaces the 1099-MISC for non-employee compensation, but you still need to use the 1099-MISC to report miscellaneous business expenses.

We’ve compiled the table below to help you make sense of these differences.

	Form 1099-MISC	Form 1099-NEC
Form is sent to the recipient.	Yes.	Yes.
Form is required by the IRS.	Yes.	Yes.
Type of taxpayer that requires this form.	Companies that have paid any miscellaneous business expenses during the year.	Nonemployees like freelancers, contractors, and other self-employed individuals. Businesses that make use of nonemployees during the year.
When is this form required	For any royalties exceeding $10. For expenses of $600 and above for: Prizes. Rents. Awards. Fishing boat proceeds. Medical and health care. Attorney fees. Nonqualified deferral compensation. For a comprehensive list of expenses, you can read the official IRS instructions.	At any time when the services of a non-employee are used during the year.

Why Do These Differences Matter?

Knowing the difference between the 1099-MISC and 1099-NEC forms helps you to file your taxes correctly. You’ll also be able to track professional expenses more accurately.

In the event of an IRS audit, all registered businesses must be able to prove that they’ve been filing the correct forms to avoid legal problems and fines.

It also ensures that the relevant people are sent the correct forms when they are filing their personal taxes. Employers must send the relevant forms to recipients by January 31.

Exceptions for the 1099-NEC and 1099-MISC Forms

Some taxable expenses don’t have to be recorded on a 1099-MISC or 1099-NEC and can be added to other tax forms. These include:

• Payments to a corporation, including a limited liability company (LLC) that is treated as a C or S corporation). 
• Payments for merchandise, telegrams, telephone, freight, storage, and similar items.
• Payments of rent to real estate agents or property managers in certain instances.
• Wages paid to employees that can be reported on a W-2.
• Military wage payments made to employees while they are on active duty.
• Business travel allowances paid to employees that are reportable on Form W-2.
• Cost of current life insurance protection.
• Payments to a tax-exempt organization—including tax-exempt trusts— like the United States, a State, the District of Columbia, a U.S. possession or territory, or a foreign government.
• Payments made to or for homeowners from the HFA Hardest Hit Fund or similar State programs.
• Compensation for injuries or sickness by the Department of Justice or under a State program that provides benefits for surviving dependents of a deceased public safety officer.
• Compensation for wrongful incarceration for any criminal offense for which there was a conviction under federal or state law.

You can visit the IRS website for more information on navigating the exceptions when filing Form 1099-MISC and Form 1099-NEC.

Create Your 1099-NEC

Common Mistakes to Avoid When Filling Out 1099 Forms

There are a few things that can go wrong while completing a 1099 form. These mistakes can lead to late penalties that can become costly.

When you’re filling out your 1099 forms, avoid the following common mistakes:

• Not writing off all of your business expenses.
• Not keeping the appropriate records for your business.
• Counting expenses more than once.
• Failing to report all of your income.
• Missing the filing deadline.
• Filing the incorrect 1099 form. 
• Filing on paper if an electronic copy is required.
• Using improper formatting.

You should also ensure that all the relevant information—like the addresses and TINs—is included on the form and that this data is correct.

Are There Any Penalties for Filing the Wrong Form?

If you file the wrong 1099 form, you may face a penalty for missing a deadline and will have to apply for a filing extension.

The penalties vary between the two forms, but you can typically expect to pay between $50 to $280 per form for missing a deadline. 

If you intentionally file the forms incorrectly, you may face a penalty of up to $570 per form or 10% of the income reported on the form. 

Failing to report any business expenses on either 1099 form can also lead to the IRS flagging your business as a tax liability. This can lead to further monetary penalties often worth thousands of dollars.

However, if you notice this problem and notify the IRS, you may be able to avoid a monetary penalty. Instead, you will have to file a corrected form that contains the right information.

Take the Hassle Out of Tax Season with Form Pros

Filing taxes, filling in forms, and sending them to the relevant people can be overwhelming—especially during a busy tax season.

When you don’t have enough time, it can be tempting to avoid documenting certain expenses.

That’s why Form Pros is here to help. Our intuitive software is designed to generate error-free tax forms, containing all of the necessary information to make filling them out a breeze.

These forms are affordable and 100% legally binding, saving you the cost of hiring notaries and lawyers.

Not only are our forms highly customizable, but you can even fill them out online or print them out, depending on your preferred filing method. 

The best part? It only takes a few minutes to create these professional-looking documents.

Take the hassle out of tax season with Form Pros today.

Create Your 1099-NEC or Create Your 1099-MISC

Understanding Your Pay Stub: All About YTD

Whether you’re a business that creates the pay stubs or an employee that receives them every month, the various YTD abbreviations on a paycheck can be confusing.

We’ve put this article together to help you make sense of the YTD abbreviation and what it means for your monthly income.

Understanding YTD amounts is an important step in ensuring that the deductions and insurance contributions on a pay stub are accurate.

Key Takeaways

• YTD stands for year-to-date and is used to report an employee’s yearly income, taxable deductions, and other contributions.

• YTD can be used to report multiple forms of income and deductions such as gross wages, net pay, earnings, and returns. 

• YTD amounts are helpful for annual budget planning and setting financial goals since they estimate how much employees will earn in a specific pay period.

• Employers can use YTD to track how much the business is spending on payroll and use the amounts to decide on expenses for the year.

Create Your Pay Stub

What Does Year-To-Date (YTD) Mean in Payroll?

On an employee’s pay stub, year-to-date NET represents an employee’s total income, less their taxes, and other deductions. This includes contributions to: 

• Social Security. 
• Health Insurance.
• Retirement Plans.

Why Is Year-To-Date (YTD) So Important?

For employers

YTD amounts allow employers to estimate the amount of money they will spend on employee payroll expenses during the year.

These amounts often include money paid to independent contractors—these are self-employed people hired for a specific, one-off job.

Business owners can use this information to compare their year-to-date payroll expenses to the total budget for the company.

Knowing what  employees’ gross incomes are can also help employers to:

• Determine if employees are fairly compensated.
• Determine if the business will be able to afford to hire new employees.
• Ensure compliance with state-specific or national tax and employment policies. 

YTD amounts also help businesses estimate if they will be able to meet their projected growth targets for the year and helps predict their yearly tax liabilities.

This is the total amount of tax a business owes for a certain period of time.

Employers also use the YTD amounts to fill out Form W-2s for current employees. This is the document used to report an employee’s annual wages and taxes to the IRS.

For employees and independent contractors

YTD amounts are useful for telling employees and independent contractors how much they’ve earned in a given year.

It also helps them plan for the future by setting financial goals and estimating their tax payments.

YTD and Pay Stubs

The YTD NET abbreviation on a pay stub represents the total annual amount for income and taxable deductions for each employee. 

Since payroll systems can sometimes make mistakes, it’s important for employees to make sure that the amounts on their pay stubs are accurate throughout the year.

If they are wrong and the employee ends up paying less tax, they may owe a large amount of money to the IRS to make up for the error. 

To ensure that the amounts are accurate, you’ll need to understand how to calculate YTD for each deduction.

Create Your Pay Stub

How do I calculate my YTD amount?

Calculating YTD is fairly straightforward if you know what to look for on your pay stub. Let’s take a look at how this is done.

Step one: Gather the necessary information.

To calculate YTD as an employee, you’ll need to know:

• The pay period or the number of months you want to calculate the YTD for.
• Your monthly earnings less the deductions on the pay stub you received from your employer. 

Step two: Calculate the YTD.

Use the information you’ve gathered and multiply the two values to calculate the YTD.

For example, calculating YTD for an employee would be: $10,000 x 12 months = $120,000 YTD.

As an employer, calculating YTD for your business’ payroll works the same, except you’ll add the employees’ annual wages together.

For example, if employee A earns $120,000 annually and employee B earns $100,000, the business payroll’s YTD amount will be: $120,000 + $100,000 = $220,000.

What if I don’t receive pay stubs?

In some cases, employers aren’t required to give their employees monthly pay stubs. Luckily you can still calculate YTD the same way you would if you had pay stubs.

This time, the pay period might be a bit more flexible.

For example, if you want to calculate YTD for someone who only worked for two pay periods and earned $1,000 per period, your calculation would be:

$1,000 x 2 = $2,000

To calculate YTD for the current payroll date if your business doesn’t issue pay stubs, you will follow the same steps we’ve mentioned in the previous section.

In other words, you will add the annual year-to-date wages for each employee together. 

For example, if employee A earns $130,000 and employee B earns $110,000, the business payroll will be:

$130,000 + $110,000 = $240,000.

What Are the Different Types of YTD Values?

YTD can be used to describe multiple forms of income and deductions on your pay stub.

Year-to-Date Gross Pay

This amount indicates an employee’s annual salary before any deductions have been made.

Year-to-Date Net Pay

YTD net pay is the amount that the employee takes home after all of their deductions.

Year-to-Date Earnings

This amount indicates the employee’s total income for the financial year. It includes returns on investments, overtime, and any other additional income above the base salary.

Information about contributions to Medicare, Social Security, and income tax payments can also be found here.

Year-to-Date Returns

This amount is used to indicate profit or losses the employee has made from investments.

YTD returns can also help shareholders to determine whether their investments are performing well or not

Create Faultless Pay Stubs with Form Pros

To help employees ensure that their income and deductions are distributed correctly, they need to understand the different terms on their pay stubs.

For employers, being able to calculate accurate YTD amounts is part of running a successful business.

If you are looking for an easy and affordable way to create pay stubs and calculate YTD amounts, Form Pros is the right tool for you.

Our user-friendly online platform allows you to create faultless pay stubs in just a few easy steps.

You can create these forms without any hidden fees and with the peace of mind that they are private and secure. Start streamlining your payroll process with Form Pros, today.

Create Your Pay Stub

How Long Should You Keep Your Pay Stubs?

Whether you are an employer, formal employee, or independent contractor, there are many important reasons why you should hold on to your pay stubs.

Not only can pay stubs streamline tax filing, but they also help businesses to avoid legal trouble in the event of an audit.

Individuals can use pay stubs to open bank accounts, get loans, and ensure that their wages and deductibles are accurate. 

In this article, we outline everything you need to know about how long you should keep pay stubs and why.

We also share the best ways to create and store your pay stubs to ensure you have access to them when you need them.

Key Takeaways

• Pay stubs are documents detailing an employee or independent contractor’s earnings and deductions during a specific period.

• Pay stubs should be kept for at least 12 months or until your W2 or annual Social Security tax forms have been filed.

• Employers should hold on to important financial documents like pay stubs for at least three years to cover themselves in the event of investigations and audits.

• Storing your pay stubs digitally is one of the best ways to ensure that you have everything you need in one place when tax season rolls around.

Create Your Pay Stub

What Are Pay Stubs?

Pay stubs document an employee’s earnings and total deductions during a specific pay period.
These documents also indicate how much income taxes, Social Security contributions, and other benefits are deducted from an employee’s salary or wages.

What information is documented on a pay stub?

A pay stub typically contains the following information about an employee:

• Their personal details, including their full name, postal address, and Social Security number.
• Their employer’s address.
• Their number of hours worked.
• Gross pay, before deductions.
• Any taxable deductions and benefits.
• Net pay, after deductions.

Do Employers Have to Provide Pay Stubs?

The Fair Labor Standards Act (FLSA) states that employers must keep a record of:

• Each employee’s personal information, including their full name, address, and sex.
• Any information relating to an employee’s compensation. This includes hours worked, weekly or hourly rates, overtime, and deductions.

Although employers are required to record employees’ compensation, they aren’t necessarily required to provide them with digital or paper pay stubs.

Depending on state laws, employers might not have to provide pay stubs at all. Below we outline which states require employers to issue pay stubs, and which don’t.

States where employers are required to issue pay stubs

• Alaska.
• Arizona.
• Idaho.
• Illinois.
• Indiana.
• Kansas.
• Kentucky.
• Maryland.
• Michigan.
• Missouri.
• Montana.
• Nebraska.
• Nevada.
• New Hampshire.
• New Jersey.
• New York.
• North Dakota.
• Oklahoma.
• Pennsylvania.
• Rhode Island.
• South Carolina.
• Utah.
• Virginia.
• West Virginia.
• Wisconsin.
• Wyoming.

States where employers aren’t required to issue pay stubs

• Alabama.
• Arkansas.
• Florida.
• Georgia.
• Louisiana.
• Mississippi.
• Ohio.
• South Dakota.
• Tennessee.

While some states don’t require pay stubs to be issued to employees, many formal institutions, like banks, need them as proof of income and employment.

This means that employees may need to create their own pay stubs. If this is the case, employees can use their contracts to find how much they earn.

Online platforms can help employees and independent contractors calculate the deductibles they need to include in their pay stubs.

For example, tools like Form Pros make it easy to create customizable pay stubs in a matter of minutes.

You can also include the details of your salary, add deductions, and calculate accurate total earnings.

Create Your Pay Stub

How to Get a Pay Stub as an Independent Contractor

Independent contractors are self-employed individuals that provide services to different companies and clients.

Some examples of independent contractors are writers, florists, painters, and graphic designers.

Since independent contractors aren’t classified as formal employees, independent contractors often don’t receive pay stubs.

They would have to use invoices and other wage agreements they receive from their clients to create their own pay stubs.

Why Do You Have to Keep Your Pay Stubs?

Employers, employees, and independent contractors have to keep their old pay stubs for a number of reasons. Let’s take a look at what those are.

Employers

Business owners are required by law to keep an accurate record of their employees’ information, including details that relate to compensation.

If businesses don’t have financial statements like pay stubs on hand, they may find themselves on the wrong side of the law in the event of an audit or investigation.

Let’s say an employee files a complaint about their wages with their employer. 

If the business owner has sufficient documentation that details the employee’s earnings and deductions, they can avoid legal action and settle the complaint more easily.

An employer can also use pay stub records when filing an employee’s income tax returns.

These documents can help the employer ensure that the employee’s deductible amounts and earnings are correct. This makes reporting employee income tax on a W-2 form much easier.

Create Your W-2 Form

Employees and independent contractors

Although there is no law that requires employees or independent contractors to keep their paycheck stubs, doing so has a few advantages.

It helps to make sure that you are paid correctly

When you receive your pay stubs, you can check and keep track of your earnings and deductions.

This helps you ensure that the right taxable deductions are subtracted from your wages and that you are being paid in line with your employment agreement.

You can use pay stubs as proof of income

Many formal institutions need proof that you have a stable income or form of employment before you can use their financial services.

Banks, for example, won’t allow you to take out a loan or apply for a credit card without proof of income.

You can use pay stubs as proof of income since they show that you will be able to repay debts. 

Pay stubs can also be used as proof of income to apply for insurance, home loans, and rental agreements.

Pay stubs can make filing taxes easier

You need to use your pay stubs when you file your taxes to calculate wages and deductions on your W-2.

Your annual income will indicate how much tax you’ll need to pay, your health and other insurance premiums, and the Social Security benefits you are eligible for.

It’s important to ensure that these amounts are accurate to ensure that you don’t pay too much or too little.

Since pay stubs indicate your tax deductible amounts, keeping your pay stubs can help you keep track of these payments.

How Long Should You Keep Your Pay Stubs?

Employers

Record-keeping requirements differ from state to state. Generally, employers are encouraged to keep their financial records for at least three years.

This helps the business keep track of their spending and ensures that financial records are accurate.

Employees and independent contractors

It’s recommended that you keep your pay stubs for at least 12 months or until you file your annual taxes.

You’ll need your pay stubs to accurately fill in your W-2 forms and Social Security contributions to ensure you’re paying the right amount of tax.

Once the year’s tax season has ended, you can discard your pay stubs for that financial year.

What Are the Best Ways to Store Pay Stubs?

Trying to store and organize physical copies of your pay stubs for a number of months or years can be difficult.

Not only does this take up a lot of space, but it can also be frustrating to find the documents you need if everything isn’t organized.

Using cloud-based or other digital solutions where you can store documents online makes this much more manageable.

You can scan and upload physical pay stub copies to your computer to store digital records.

Effortlessly Create and Organize Pay Stubs with Form Pros

If you are looking for an easy and affordable way to create and download pay stubs, Form Pros is the right tool for you.

Our user-friendly online platform is fully automated and allows you to create pay stubs in just a few easy steps.

It also calculates deductions and income tax withholdings for you, ensuring accurate totals every time.

You can create these forms without any hidden fees and with the peace of mind that they are private and secure. 

Start streamlining your payroll process with Form Pros, today.

Create Your Pay Stub

W-9 vs W-4 Forms: What’s the Difference?

There are over 800 different Internal Revenue Service (IRS) tax documents in the United States. 

At the end of the tax year, it’s essential that you understand which forms apply to you and how to fill them out correctly. 

Two of the most common tax documents are Forms W-9 and W-4. Due to their similarities, these are also the forms that people get confused by the most. 

In this article, we outline what the differences are between Forms W-9 and W-4, as well as how to fill them out and create them easily online. 

A Quick Recap on the Internal Revenue Service (IRS)

The Internal Revenue Service (IRS) is a US government agency responsible for the collection of federal taxes and enforcement of tax laws. 

It was established in 1862 by President Abraham Lincoln and operates under the authority of the U.S. Department of Treasury.

The primary purpose of the IRS is to collect individual income and employment taxes, as well as corporate, gift, excise and estate taxes.

What Is a Form W-9?

The Form W-9 is also known as the Request for Taxpayer Identification Number (TIN) and Certification. 

This is a one-page tax form that employers use to get the TIN from self-employed workers and independent contractors. 

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Who qualifies as an independent contractor?

An independent contractor is defined by the following characteristics:

• Workers who have the majority of control over when and how they complete a task
• Those who not receive health insurance, 401(k) matching and other benefits from employers
• Individuals who pay all their own taxes

Other commonly used terms for independent contractors are vendors and freelancers.

Some examples of independent contractors are consultants, graphic designers, writers, landscapers or repair persons. 

One of the defining features of an independent contractor is that they receive non-employee compensation from the companies that they do work for. 

Some examples of non-employee compensation include fees, commissions, prizes, and awards for services completed.

The Form W-9 also provides other personal information to employers, such as the independent contractor’s full name and address. 

Unlike other tax forms, the Form W-9 is not filed with the IRS. Instead, it’s submitted to the independent contractor’s supervisor or the company’s payroll department. 

Towards the end of the tax year, independent contractors must submit a Form W-9 to the companies they did work for so that they can get a 1099-MISC in return. 

Independent contractors have to submit a 1099-MISC to the IRS if they were paid more than $600 that year. 

It’s also important to note that the Form W-9 should be submitted to employers before the deadline on 31 January.

If this date falls on a Saturday, Sunday or a legal holiday, the filing deadline would be the next business day.

Any income you receive from a client who classifies you as an independent contractor rather than as a formal employee is classified as non-employee compensation.

Form W-9 and Tax Implications

The Form W-9 also acts as an agreement that independent contractors are responsible for withholding taxes from their own income. 

Full-time employees have their federal income taxes, Medicare and Social Security taxes withheld from their paychecks by their employers. 

Since independent contractors are self-employed, they do not have employers to make these withholdings on their behalf. 

What Do Independent Contractors Include on a Form W-9?

• The name of the payee or their business name
• The payee’s federal tax classification. This could be a single-member limited liability company (LLC), C Corporation, S Corporation or an individual/sole proprietorship. 
• The payee’s current, full mailing address.
• The payee’s taxpayer identification number (TIN), which includes either an Employer Identification Number (EIN) or Social Security number.

Create W-9 Form

What Is a Form W-4?

Form W-4, also known as the Employee’s Withholding Allowance Certificate, is a federal form that employees must complete when starting a new job.

Employers use the Form W-4 to determine how much income tax to withhold from their employees’ paychecks. 

The amount of income tax withheld from the employee will be based on their wages and the number of withholding allowances they qualify for. 

Withholding allowances are based on the employee’s filing status, how many dependents they have, and their anticipated tax credits and deductions.

It’s important that employers make sure that the information on each of their employee’s’ Form W-4s is correct. 

If the incorrect amount is withheld from an employee’s paycheck, they could face expensive tax bills or penalties from the IRS. 

Employees must ensure that their Form W-4s are submitted to employers within the first month of starting a new job.

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What Do Employees Include on a Form W-4?

• Full name, postal address and ZIP code
• Social Security number
• Marital status
• How many dependents they have
• Any additional money the employer should withhold. This could include Medicare taxes or passive income from investments

Create W-4 Form

Comparing Forms W-9 and W-4 

Now that you have a better idea of what Forms W-9 and W-4 are, let’s take a closer look at their differences and what their implications are for taxpayers. 

Form W-9 vs W-4: Key Differences at a Glance

Form W-9	Form W-4
Independent contractors fill out a Form W-9.	Employees fill out Form W-4.
Self-employed workers use the Form W-9 to provide their taxpayer identification number (TIN) to companies that they do work for.	Employees use the Form W-4 to inform their employers of how much income tax to withhold from their paycheck.
W-9 Forms should be submitted to employers before the 1099 deadline, which is usually 31 January.	W-4 Forms should be submitted to employers within the first month of starting a new job.
Businesses send a blank Form W-9 to complete before independent contractors start working for them.	Ideally, employers should issue their employees with a Form W-4 on their first day.
Independent contractors can file a Form W-9 annually, but it is not required.	Employees need to file a new Form W-4 each time they start a new job or need to report changes to their financial situation.

The main difference between these two documents is that a formal employee fills out a Form W-4, whereas a self-employed worker fills out a Form W-9.

It’s also important to remember that a Form W-9 is simply an “information return” that gives a business an independent contractor’s personal details and is not submitted to the IRS. 

As we mentioned earlier, independent contractors submit a copy of the Form W-9 to the companies they did work for so that they can get a 1099-MISC in return.

Unlike a formal employee, an independent contractor has the sole responsibility of making sure that they pay the correct amount of income tax to the IRS. 

If the independent contractor works for multiple different companies, it’s likely that they will have to fill out several Form W-9s in the same year. 

In contrast, the Form W-4 is filled out by full-time employees.

The W-4 Form has important implications for employers because it outlines how much tax to withhold from each employee’s paycheck.

Employees must fill out a new Form W-4 whenever their financial situation changes. 

In addition to starting a new job, this could include a change in marital status, having a child or a pay raise. 

All of this information is relevant to an employer because it could indicate a change in the employee’s payroll taxes at year-end. 

Do I Have to Fill Out Forms W-9 and W-4? 

Self-employed workers don’t always need to fill out a Form W-9. However, many businesses ask independent contractors to complete one to avoid costly penalties from the IRS. 

If an independent contractor refuses to complete a Form W-9, the company that they work for can withhold a certain percentage from their pay. 

This process is known as backup withholding and could mean that the employer withholds 28% of your pay and submits it to the IRS. 

If you choose not to complete a Form W-4, the employer will still provide you with a paycheck. 

However, employers will have to withhold income taxes at the highest rate for single filers with no other adjustments. This could mean that you pay more tax than what is necessary.

Say Goodbye to W-9 and W-4 Form Guesswork 

We know that the process of creating and filling out IRS forms can be overwhelming and time consuming.

That’s why our Form W-9 and Form W-4 generator has been designed to be efficient and easy to use. 

Employers and independent contractors can easily produce, fill out and print Forms W-9 and W-4 in a matter of minutes.   

We also don’t require our customers to download any additional software, which will save you even more time and money. 
With our affordable subscription plan, you can create unlimited Form W-9s and W-4s at a lower cost. Click here to find out how to create tax forms in three easy steps with Form Pros.

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The Definitive Guide To Understanding Your Paycheck Stub Abbreviations

So, you’ve received your monthly paycheck and now you’re stuck wondering what all of the abbreviations mean.

Luckily, we’ve put this article together to help you make sense of common pay stub abbreviations and what they mean for your monthly income and deductions.

Not only is this critical for ensuring that the amounts on your pay stub are accurate, but it will also help you keep track of your insurance and other monetary benefits.

Create Your Pay Stub

Key Takeaways Understanding the abbreviations on your pay stub helps you keep better track of your deductions and additional earnings. Knowing what the abbreviations mean can also help you check for errors and irregularities that may occur on your pay stubs. Since pay stubs are often used as proof of income, you’ll need to understand the abbreviations to make sense of how your income is distributed. This can help you determine whether you’ll be able to take on the financial responsibilities of debts, loans, or rent.

Why Do I Need to Understand My Paycheck Stub Abbreviations?

There are various reasons why understanding the abbreviations on your pay stub is valuable. In the section below, we look at the most important. 

Understand your tax deductions

Common pay stub deduction codes indicate taxes and contributions to different insurance programs.

Understanding the abbreviations on your pay stub will help you figure out how these deductions affect your monthly income.

This helps you see whether your employer is withholding the correct amount of money for your taxes and insurance each month.

Create Your Pay Stub

If you notice that you are overpaying for deductions on your pay stub, you may be liable for a tax return at the end of the financial year.

Check for errors and irregularities

It’s not uncommon for employers and payroll systems to accidentally withhold the incorrect amounts from pay stubs. 

However, you’ll only be able to notice these irregularities if you understand what the abbreviations on your pay stubs mean.

Errors can include:

• The amount of taxes paid.
• Unpaid overtime.
• Inaccurate benefit or insurance deductions.

Use Pay Stubs as Proof of Income

Pay stubs are one of the most common ways to present proof of income if you want to:

• Get a credit card.
• Apply for a loan.
• Get approval for a lease.

When you know what the abbreviations on your paystubs mean, you’ll be able to understand how your income is distributed.

Create Your Pay Stub

This will also help you to see if you would be able to take on the financial responsibility of loans, debt, or rent.

A Guide to Paycheck Stub Abbreviations

Common Pay Stub Abbreviations

Gross Pay

This indicates your full salary or hourly wages pre-tax deductions.

Net Pay 

This amount indicates how much of your salary you’ll take home after all of your deductions have been cleared.

Federal Tax Amount 

This amount tells you how much federal tax you’ll need to pay to the Internal Revenue Service (IRS) each month.

The amount will vary depending on the tax bracket you fall into and the number of exemptions you claim.

State Income Tax

This is state-specific as not all states have income-related taxes.

State taxes are calculated through a percentage based on your income after deductions.

These taxes make up state budgets and are used to fund:

• Healthcare.
• Garbage collection.
• Infrastructure.

Local Tax

This is the amount of tax you’ll pay to your local government. It’s a requirement for some cities, counties, and school districts.

Local tax helps fund public services such as:

• Police and fire departments.
• Libraries.
• Road maintenance.

Social Security

Social Security is a system of retirement, disability, and other support programs set up by the U.S. government.

It acts as a form of financial insurance if something happens to you that results in you being unable to work.

Federal law requires working Americans to contribute a portion of their wages to the Social Security program each month.

Medicare

Medicare is a U.S. government program that provides medical benefits to Americans aged 65 and older. These include hospital and surgical benefits.

The law requires working Americans to contribute at least 1.45% of their gross income to the Medicare program. 

Employers will likely contribute the same amount on behalf of the company.

Create Your Pay Stub

Year to Date (YTD)

YTD can be broken up into two categories to indicate the employee’s total income and contributions during the year. This includes:

YTD Gross

This is the total income that the employee has earned during the year, before any deductions are made.

YTD Net

This is the total amount paid to the employee after their deductions. 
It’s important for employees to ensure that their deductions are accurate. If they are less than what they should be, they may have to pay a large amount of money to the IRS.

Header Abbreviations and Codes

Social Security Number (SSN)

This is a government-issued number that is used to report your wages to the IRS. You can also use your SSN to track your eligibility for Social Security benefits.

You’ll need this number to obtain employment, file taxes, and receive medical care.

Check Number/Check No.

Employers use this number to identify and track each paycheck for their company’s accounting records.

Employer Identification Number (EIN)

The EIN is a number assigned to a business by the U.S. government and IRS. It also helps the IRS to identify tax returns and employers.

Earnings Abbreviations

With Form Pros, you can customize your paystub by adding any custom earnings like BRVMT, CMP, or PTO to your paycheck.

All you need to do is select ‘additional earnings’ when creating your pay stub, and then add the descriptions and rates.

Let’s take a closer look at some of the most common earnings abbreviations below.

Gross Pay

This is your total salary or hourly wages before deductions are cleared. 

Net Pay

This amount indicates what you’ll take home after taxes and other deductions.

HR

This abbreviation indicates ‘hourly rate’.

Your employer is required by law to pay their workers the hourly wage that is shown on the pay stub. 

OT

This stands for ‘overtime pay’ and indicates work done past an employee’s regular working hours.

Add Earnings

This section indicates ‘additional earnings’. It’s used to report any income received above a regular salary.

Additional Pay often includes:

• Overtime.
• Paid time off.
• Wellness bonuses.
• Tips
• Stipend for expenses

BRVMT

This abbreviation stands for ‘bereavement pay.’

It’s defined as compensation an employee receives when they take time off work after an immediate family member has passed away.

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Cmp Pyot

This term indicates ‘compensatory time payouts.’

It’s used when employers give workers paid time off to balance any hours the employees worked beyond their regular schedule. Usually in place of working overtime. 

Hol/PTO

This abbreviation indicates ‘paid time off’ or ‘holiday leave’ and is used to indicate that you’ve earned wages while you were on vacation.

‘Hol’ can also indicate if you’ve worked on a day most employees usually get off. 

Lastly, ‘Hol’ can indicate a holiday savings account where a certain amount of your wages is put aside for unpaid vacation days.

Jury

This term reflects compensation received for attending jury duty and will be included when your taxable income is calculated.

Move Rem

This abbreviation indicates ‘move reimbursement.’ It’s used to compensate employees who are obligated to move to a new place of residence due to a company transfer.

On-Call 

On-call pay is the compensation you receive for being available to work outside of the company’s regular hours.

On-call payments are often used in unpredictable shift-based industries such as:

• Doctors or other health care professionals.
• Repair workers.
• IT technicians.

Sign-On

This abbreviation is used to indicate a ‘sign-on bonus pay.’ This is additional compensation paid to a new employee when they accept a job.

This can either be a lump sum or be paid over time.

Severance

This term indicates ‘severance pay’ and refers to compensation paid to employees who have been dismissed.

Severance Pay also includes:

• Health insurance.
• Outplacement assistance to help you find a new job.

Tax Deduction Abbreviations

You can also tailor your pay stub by adding custom deductions like 401k and health insurance with Form Pros. 

Simply select the ‘add deductions’ option when creating a paycheck, then add in a description and rate. 

FICA – Med –

The Federal Insurance Contributions Act (FICA) deducts 1.45% from an employee’s gross salary to put towards Medicare.

Your employer will typically match your contribution.

FICA – SS –

This indicates FICA’s deductions for the Social Security tax programs. Similar to Medicare, your employer will equal your contribution.

The current deduction rate is 6.2% of your gross pay. 

FED/FWT/FIT/FITW

This abbreviation indicates ‘federal taxes’ or ‘federal tax withholding.’

Federal taxes are calculated based on a percentage of your hourly or monthly wages and the number of deductions you have.

When an employer hires you, you are required to complete a W-2 form that indicates your tax deductions.

St Tax/SWT/SIT/SITW

This term is used to indicate ‘state tax.’ 

As we’ve mentioned before, not all states require this tax. The ones that do use the income to fill state budgets.

Before Tax Deductions

401k/Ret

This is a common abbreviation that indicates a retirement plan offered by your employers.

Your employer will likely make a contribution that equals your deduction.

DCR

This term stands for ‘dependent care reimbursement.’ It’s used to refund you for any dependent care expenses paid out of pocket.

These include:

• Childcare for children under the age of 13.
• Caring for a spouse or relative who is incapable of doing so themselves.

INS/MED

This indicates deductions made towards a health insurance plan offered by your employer.

This abbreviation means ‘health savings account’ and is used to indicate the amount deducted from the employee’s paycheck to cover medical expenses.

The savings account will usually cover medical costs that health insurance doesn’t pay for.

LTD

This term is used to indicate ‘long-term disability insurance

Employees use this life insurance plan to supplement their income if they cannot work due to illness or injury. 

STD

This is the abbreviation used to indicate ‘short-term disability’ insurance and works similarly to LTD.

However, it can only be used for a temporary disability or as interim coverage until longer-term insurance kicks in.

Create Your Pay Stub

After-Tax Deductions

CHD SU

This abbreviation indicates any child support payments that are deducted directly from your paycheck.

StdnLoan

This term indicates ‘student loans.’ It represents an amount deducted from your salary by your employer to repay your student debt.

Garn/Garn %

This is an abbreviation for ‘garnishment flat rate’ or ‘garnishment percentage.’ These are additional deductions against your income.

The federal government and IRS do this to collect any outstanding debts.

A garnishment is normally delivered to collect: 

• Child support payments.
• Student loans.
• Tax defaults.

UD

This term stands for ‘union dues.’ 

It indicates membership fees for unions that employees join and covers the activities that the group participates in during the year.

Read, Create, and Understand Pay Stubs with Ease

Create Your Pay Stub

The Ultimate Guide To The IRS Filing Deadlines For 2023

If you’re not prepared, tax filing deadlines can catch you off guard. Missing important tax dates can be frustrating and even lead to late penalties.

The easiest way to avoid this is to take some time and save each relevant tax filing deadline to your calendar.

We’ve put this article together to make it easier for you to find and remember the right filing dates for common IRS forms.

It also contains a few helpful tips to ensure a successful tax season—whether you’re an individual taxpayer or business.

Important Things to Remember for Tax Season

In addition to remembering to file your tax returns on the right dates, there are a few other things to consider when the tax season rolls around.

Taking note of the key points below will help you to avoid unnecessary mistakes and admin.

Date Extensions

Every American has the right to apply for filing date extensions if they have missed the submission deadline.

Your application for the extension must be submitted to the Internal Revenue Service (IRS) by April 18, 2023 due to April 15th falling on a Saturday and Emancipation Day on Sunday (the federal holiday being Monday.)

If your filing extension has been granted, you will have to submit your tax returns by October 17.

Late Penalties

There are different penalties for paying your taxes late and for filing them after the submission date without an approved extension.

The penalty for making late tax payments is 0.5% of the taxes owed to the IRS each month. 

Filing for taxes after the deadline and without an approved extension can result in fines of 5% of the amount you owe the IRS for each month that a tax return is late but will not exceed 25% of your unpaid taxes.

If you mail physical copies of your tax documents to the IRS on the paper filing deadline, they may not receive them on the same day.

However, as long as they are postmarked on or before the submission date, the IRS still considers your taxes as filed on time.

You could also receive a penalty if the information on your tax documents is inaccurate.

The penalty may be up to 20% more than the amount you still owe to the IRS. For further information on tax-related penalties, you can visit the IRS website.

‘Tax Day’

While January to April is typically known as ‘tax season,’ the big ‘tax day’ falls on April 15.

In 2023, ‘tax day’ is on April 18 since the 15th falls on a Saturday.

This is the last day of the fiscal tax year for individual taxpayers, sole proprietors, and C corporations to file all of their tax documents.

Deadlines for Different IRS Forms

1099 Forms

The 1099-NEC tax form is used to report non-employee compensation and other business expenses to the IRS.

Nonemployees are independent contractors or freelancers who aren’t formally employed by a company.

Businesses will often hire nonemployees for one-off jobs or services.

Form 1099-NEC

The 1099-NEC form is used to report non-employee compensation over $600. This amount includes any fees, commissions, or other sources of income.

This form is also used to track how much an independent contractor has earned from each company they have provided services to.

Independent contractors can attach Form 1099-NEC to their 1040 income tax return to replace the W-2.

A contractor should also be sure to send their W-9 tax forms to the people they provided services to before the 1099 deadline so that the contractor can receive their 1099 forms on time.

If this isn’t done, the relevant parties may face late filing fines.

Deadline:

Mail and E-filing: January 31, 2023.

Create Your 1099-Nec Form

Form 1099-MISC

This IRS form is used to report payments for miscellaneous services not subject to self-employment tax that the 1099-NEC doesn’t cover.

These payments may include:

• Monetary prizes or awards.
• Rent
• Legal settlements
• Reimbursements.

Deadlines:

Mail Filing: February 28, 2023.

E-filing: March 3, 2023.

Create Your 1099-MISC Form

Form 1099-INT

The Form 1099-INT form is used to report any interest that a taxpayer receives of more than $10.

Taxpayers generally receive this interest from banks or other financial institutions. This form will be sent to them by January 31.

To be eligible to receive this income, the taxpayer must file a Form 1099-INT with their other tax documents on the correct  filing due date.

Deadlines:

Mail Filing: February 28, 2023.

E-filing: March 31, 2023.

Form 1099-DIV

The Form 1099-DIV reports any income non-employees earned from dividends during the tax year.

Brokerages that pay the dividends to the independent contractor will send this form by January 31.

To receive the dividends, the non-employee must file the 1099-DIV form with their other tax documents on the correct date.

Deadlines:

Mail Filing: February 28, 2023.

E-filing: March 31, 2023.

Form 1099-B, 1099-S, and 1099-R

Nonemployees use these 1099 forms to report any additional forms of income they have earned outside of their full-time jobs.

Let’s take a closer look at some examples of this below.

Form 1099-B is used to report brokerage transactions, like selling stocks.

Form 1099-S is used to track income from real estate transactions, such as selling property.

Form 1099-R reports income received from retirement plans or pension funds.

The relevant institutions will send the necessary 1099 form to the independent contractor by January 31. 

For independent contractors to receive this income in time, they must submit these forms with their other tax returns on the correct date.

Deadlines:

Mail Filing: February 28, 2023.

E-filing: March 31, 2023.

W-2 Forms

Full-time employees use the W-2 forms to track and report the income they earn from their employer.

Employees also use a W-2 form to report their taxable deductions and other benefits to the IRS when filing their federal and state taxes. They must also submit a W-4 to their employers before the deadline so that employers can issue their W-2.

Create Your W-2 Form

W-2 SSA Copy A

This is a copy of the W-2 form that is sent to the Social Security Administration (SSA) every year.

Employers usually send this copy to the SSA on behalf of the employee. The SSA uses this copy to track employees’ Social Security earnings and Medicare benefits.

Copy A is for informational purposes only; it cannot be printed and mailed to the SSA since the paper alignment varies between printers and mailed copies must be formatted to fit the scanning machines. 

Users can also fill out Copy A on the SSA website in order to securely send the information to them directly. 
If you need help, Form Pros offers a free tax consultation from our partner.

Deadline:

Mail and E-filing: January 31, 2023.

W-2 Copies B, C, and 2

These copies of the W-2 form are mainly used for record-keeping and filing individual taxes.

Copy B is used by employees to file their federal income tax returns.

Copy C is for the employee’s record-keeping purposes.
Copy 2 is used by employees when they file their state or local income tax returns.

Deadline:

Mail and E-filing: January 31, 2023.

Form 940

Form 940 is what businesses use to report their contributions to the Federal Unemployment Tax Act (FUTA).

FUTA tax provides unemployment compensation for employees who lose their jobs.

This amount is covered by employers and won’t be deducted from an employee’s wages.

Deadline:

Mail and E-filing: January 31, 2023.

Form 941

Employers use Form 941 to report how much their business spends on employee wages and payroll taxes.

Unlike other forms that can either be filed monthly or annually, this form must be filed every three months or every quarter. 

Employers also can’t choose to pay the full amount they owe the IRS once a year like with other tax forms.

Instead, the Form 941 tax amount must be paid every three months when it’s filed.

Form 941 can also be used to report or calculate:

• Social Security and Medicare taxes.
• Tips.
• Income taxes withheld.
• Additional withheld taxes.
• Refundable or nonrefundable portions of sick and family leave.

Deadlines:

Quarter 1 (January, February, March): May 1, 2023.

Quarter 2 (April, May, June): August 1, 2023.

Quarter 3 (July, August, September): October 31, 2023.

Quarter 4 (October, November, December): January 31, 2024.

Form 1095-B

Form 1095-B is typically filed by small businesses with less than 50 employees who provide sponsored health care plans.

Self-employed individuals also use this form to report their basic health care contributions.

Basic health care plans can include:

• Government-sponsored health insurance programs.
• Selected employee-sponsored insurance plans.
• Individual market plans.
• Other designated minimum coverage that has been approved by the Department of Health and Human Services.

Deadlines:

Mail and E-filing: March 2, 2023.

Form 1095-C

Similar to Form 1095-B, this document reports basic health care insurance offered to employees. 

However, Form 1095-C is used by larger businesses with more than 50 employees. Form 1095-C can also be used to:

• Determine the employer’s liability for carrying the cost of additional health care benefits.
• See if an employee qualifies for a premium tax credit.
• Create self-insured health plans that offer more coverage.

Employees must receive this form from their employers by March 2.

Deadlines:

Mail Filing: February 28, 2023.
E-filing: March 31, 2023.

Deadlines for Estimated Tax Payments

Estimated tax is a way for certain groups of taxpayers to make the necessary payments on income that isn’t subject to withholding.

These groups are usually self-employed or earn income from other areas like interest, dividends, or investments.

Making quarterly estimated tax payments helps these taxpayers to stay on top of their taxes and ensure that they aren’t liable for a large amount of money when tax season ends.

Once tax season ends and you file your tax return, the IRS will calculate how much you’ve paid to see if it was more or less than was required. If you paid too much, you are eligible for a refund.

However, if you’ve paid too little, you will need to pay the outstanding amount. 

You can estimate how much you would need to pay by using the IRS tax withholding estimator.

Who must make estimated tax payments?

The IRS’s estimated taxpayer rule generally applies to the following groups of people:

• U.S. citizens who are self-employed, including sole proprietors, partners, and S corporation shareholders.
• People who earn an income from investments, interest, dividends, and similar areas.
• Corporations that expect to owe more than $500 when filing their returns.

For more information and special cases, you can refer to the official IRS document on estimated taxes.

What are the quarterly deadlines?

If you are eligible for tax withholding and can pay your taxes in quarterly amounts, these are the dates to look out for:

• 1st installment (for earnings from January 1 to March 15): April 18, 2023.
• 2nd installment (for earnings from April 1 to May 31): June 15, 2023.
• 3rd installment (for earnings from June 1 to August 31): September 15, 2023.
• 4th installment (for earnings from September 1 to December 31): January 16, 2024.

Any outstanding taxes for earnings made in 2022 must be paid by January 17, 2023.

Effortlessly Create Your Tax Documents with FormPros

Now that you are familiar with common tax deadlines, you can avoid late penalties and do your taxes with ease.

If you are looking for an easy and cost-effective way to create various tax forms that adhere to filing requirements, you’re in the right place.

Form Pros’ online, user-friendly tools can help you create customizable tax forms in just a few easy steps.

Not only are our forms 100% legally binding, but our upfront pricing allows you to quickly create a document without any hidden costs.

Make this tax season the most successful one yet with Form Pros.

Create Your 1099-NEC Form

How to Deal With the Payroll Process On Your Own

If you’re a small business owner with only a few employees, it may be worth processing payroll on your own instead of hiring a payroll company or an accountant. However, processing your own payroll can be challenging if you don’t know every component of the process and errors to watch for. If you ensure that you are comfortable with the payroll process before you begin, you are less likely to make mistakes and save some costs. 

By following a few simple steps, dealing with the payroll process on your own becomes easier over time. 

How to Deal With Payroll 

What you Need 

• Employer Identification Number 
• State Tax Information  
• Employee Information (including pay rate) 
• Records Keeping System (reliable storage) 

Step 1: Sign up for Employer Identification Numbers 

Make sure that you have set up an employer identification number (EIN) with the IRS so that they may identify your business, much like an SSN. If you don’t have an EIN, you can easily apply for one on the IRS website. You cannot process payroll yourself without it.  

Step 2: Collect the Necessary Information from Your Employees 

The second step in dealing with payroll is to collect all of the relevant information from your employees. Each employee will need to fill out a W-4 form to confirm their filing status and personal allowances. Every new employee that you hire should receive this form to fill out as soon as possible. This form is important. You cannot process payroll without the details that it provides. 

Create Your W-4 Form

Step 3: Choose a Payroll Schedule 

Once you’ve collected the relevant information from your employees and set up tax information for your business, you will want to decide when and how you want to pay your employees. The four different types of pay schedules are: 

• Weekly 
• Bi-weekly 
• Semiweekly 
• Monthly 

Most companies pay their employees bi-weekly, but the payroll period that you choose will largely depend on how you want to approach your business’s yearly schedule. 

Step 4: Calculate Gross Wages and Withhold Income Taxes 

It is important to track your employee’s hours to calculate their pay, and the easiest way to do that is to keep them in a spreadsheet. To calculate an employee’s gross wages, multiply the number of hours the employee has worked during that pay period by their hourly rate.  

From there, you will have to calculate payroll deductions and allowances (or exemptions). Your employees’ allowances are specified on their W-4. A deduction is what can be deducted on your income when you do your taxes, and you will have to pay close attention to your employees’ tax-related forms to make proper withholdings.  

Step 5: Pay Taxes and Benefits 

You must also factor in other aspects of payroll processing on top of deductions and allowances, such as federal tax and employee benefits. This step can be time-consuming, so it is important to have all of the information organized on a spreadsheet. 

You may have to consider:  

• Federal taxes 
• Local taxes 
• Social Security 
• Medicare 
• Workers’ compensation contribution  
• 401(k) contribution.  

Step 6: Calculate Net Pay 

To calculate net pay, you must subtract withholdings from the employee’s gross pay. Net pay is the amount that each employee receives at the end of each pay period, based on the payment schedule you had chosen. 

Step 7: Pay Your Employees 

Once you calculate everything and the numbers look right, proceed to pay your employees by the payment schedule and use their preferred payment method, if applicable. Make pay stubs for each employee to track payments and have both you and the employee keep records.  

A situation may arise when there is an employee believes their paycheck is incorrect based on their hours worked. You will want to correct these mistakes immediately, and keeping records makes this even easier to do.  

Tax Season Payroll Forms 

Come tax season in January, you will have to provide some additional forms for workers detailing how much you paid them the previous year. 

You must issue all employees a W-2 form, which details their gross pay and all of their tax withholdings for the year.  

Create Your W-2 Form

If you paid any contractors or freelancers for your business throughout the year but did add them to payroll, you will need to use a 1099-NEC form to report any payments made to such workers. There will be three copies of this form: one that you send to the IRS, one that you send to the respective contractor so that they may use it for their tax calculations, and one copy to keep for your records. 

Create 1099-NEC Form

Your business can generate a W-2 form and 1099-NEC form using Form Pros to make processing these documents a simple annual task. 

Tips for Processing Payroll 

• Don’t forget that you must file your federal business taxes on a quarterly and annual basis. 
• Calculating payroll without automation (by hand) can be a tedious task and, unfortunately, take hours. Even if you do payroll yourself, it may be beneficial to invest in payroll software to help speed up the process. Some online calculators can help you crunch your tax numbers.  
• Excel is a simple but excellent tool to use to keep track and process payroll. 

• If you are still struggling to get payroll right, consider hiring an expert. Hiring an accountant may be expensive, but the payroll process can be complicated, and it is better to have an expert handle it than to mess up an employee’s pay or face penalties from the IRS.  

Saving Time Processing Payroll 

Processing payroll on your own can save you a lot of money in the long run. The process may be complex and present challenges from time to time, but having the proper documentation, understanding taxes, and neatly keeping your payroll records organized makes it easier. If you find that you are having trouble dealing with payroll on your own, consider hiring a payroll service of a reliable accountant to help ensure that your employees are always paid accurately and on time.  

Using FormPros can save you ample time and money when it comes to processing payroll for your small business. Form Pros can help you create pay stubs, W-4 forms for new employees, and tax forms such as W-2 forms in a matter of minutes. 

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The Ultimate Guide to Pay Stub Requirements by State

It’s difficult for employers to know what their pay stub obligations are, as there are different state and federal laws.

Knowing your pay stub requirements by state will help your business comply with Department of Labor requirements and avoid costly penalties. 

This guide will outline everything you need to know about pay stubs, including how to create one, why employers should provide pay stubs and the potential consequences of non-compliance.

Understanding pay stubs 

Before we unpack what the requirements are by state, let’s first define what a pay stub is. 

A pay stub is a written, itemized statement that documents the details of an employee’s total wages earned during a specific pay period. 

The first step in creating a pay stub is to have each employee complete a Form W-4. 

Create W-4 Form

Once this process is completed, employers will be required to provide the following basic information: 

• The employee’s number of hours worked during the pay period 
• The total wages paid before the employee’s deductions
• Federal, state and local taxes withheld from the employee’s gross earnings
• Other withholdings, including the employee’s share of insurance premiums 
• Net pay 

Pay stubs are important because they can be used as proof of income when employees apply for a loan, buy a home or need a record to query their deductions or gross pay.

Employers need to ensure that the information on the pay stub matches the data on each employee’s W-2 form, which is used to file personal tax returns. 

Create Your Pay Stub

There are many different ways employers can create pay stubs. 

If your business uses accounting or payroll software, it’s likely that these programs have built-in pay stub makers. 

Spreadsheet programs like Excel also allow business owners to create their own pay stub templates. 

Alternatively, employers can use Form Pros’ online, user-friendly pay stub generator. We’ll go into more detail about how to create electronic pay stubs later in the article. 

Are employers required to provide pay stubs?

There is no federal law that requires employers to provide pay stubs to their employees, or one that all states must follow. 

However, employers should keep the Fair Labor Standards Act in mind. 

This is a federal law which “establishes minimum wage, overtime pay eligibility, recordkeeping and child labor standards affecting full-time and part-time workers in the private sector and in federal, state and local governments.”

Although pay stubs are not required under federal law, the Fair Labor Standards Act states that employers must “keep employee time and pay records”.

Therefore, business owners should consult their state’s Department of Labor to determine what the pay stub requirements are in their area.  

Pay stub requirements by state

Each state has different pay stub requirements, which means employers need to familiarize themselves with what these rules are. 

There are three different types of states: 

• Access states 
• Access print/states 
• No requirement states 

Let’s take a closer look at what each of these means and which states fall underneath them. 

Access states 

These states require employers to provide their employees with access to a pay stub that includes all of their pay information. 

It’s not specified that the pay stub has to be a physical copy, which means that employers can provide the pay stub electronically and still comply with these requirements. 

These states include: 

• Alaska
• Arizona
• Idaho
• Illinois
• Indiana
• Kansas
• Kentucky
• Maryland
• Michigan
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New York
• North Dakota
• Oklahoma
• Pennsylvania
• Rhode Island
• South Carolina
• Utah
• Virginia
• West Virginia
• Wisconsin
• Wyoming

Access/print states

States that fall under this category require employers to provide a physical copy (either written or printed) of the pay stub that outlines the employee’s pay information. 

Although employers can provide electronic pay stubs, they must first ensure that their employees are able to print their pay statement. 

These states include: 

• California
• Colorado
• Connecticut
• Iowa
• Maine
• Massachusetts
• New Mexico
• North Carolina
• Texas
• Vermont
• Washington

No requirement states

As the name suggests, these states do not require employers to provide pay stubs to their employees. 

An employer can choose to provide electronic pay stubs but it is not required by state law. These states include: 

• Alabama
• Arkansas
• Florida
• Georgia
• Louisiana
• Mississippi
• Ohio
• South Dakota
• Tennessee

Employers also need to determine whether they are in an opt-out or an opt-in state. 

Opt-out states

Employers must first get the employee’s consent before changing the way it delivers pay stubs.

Within opt-out states, if the employee does not agree to the change the employer must adhere to the original pay stub delivery method. 

Opt-in states

Employers are required to provide a physical copy of the pay stub. If the employee chooses to receive electronic pay stubs the physical copy is not needed.

As it stands, Hawaii is the only state that requires employee consent before implementing an electronic pay stub system.  

What are the consequences of pay stub non-compliance? 

The penalties for not providing employees with pay stubs vary according to state and will depend on the state’s law. 

For example, in California employers can be fined $50 for an initial pay stub violation and $100 per employee for each violation in a pay period. 

Employees in California are entitled to recover damages of up to $4,000 in the event that pay stub requirements are violated. 

Form Pros Pay Stub Generator 

Our pay stub generator provides a fast and easy solution to creating pay stubs online. The process is fully automated and user friendly. 

Not only are all calculations of deductions and income tax withholdings based on current tax laws, but we also keep up to date with new requirements every tax year. 

Better yet, our intuitive pay stub generator allows employers to instantly and efficiently create pay stubs for a fraction of the cost that they would pay accounts or payroll companies. Click here to find out how to create pay stubs in three easy steps with Form Pros.

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What should a pay stub look like?

Most people who have received a paycheck know what a paycheck stub looks like; however, not everyone knows the details that should be included on a pay stub. When you become an employer, it becomes more important to understand what a pay stub should look like.  

Keep reading to discover what a payslip should look like and how to properly read one. 

What exactly is a pay stub? 

A pay stub is part of a paycheck that lists details about an employee’s pay, such as taxes and other deduction options taken out of the employee’s earnings. How often you administer pay stubs to your employees depends on your pay cycle.  

For example, if you choose to pay your employees bi-weekly, you will be administering pay stubs every two weeks, which would be 26 a year. Employees should receive a pay stub with each paycheck.  

Create Your Pay Stub

There is no one way that pay stubs should look. Pay stubs from different companies often have different looks. In terms of the physical aspect of pay stubs, there are generally two types: 

Physical Pay Stubs 

Although many companies are turning to software for their payroll needs, there is still some value in creating physical paper pay stubs. Not everyone has access to a home computer, meaning not everyone would be able to access their pay stubs in a time of need, such as for proof of income when completing a rental application.  

Electronic Pay Stubs 

Electronic or paperless pay stubs are becoming the standard, and they provide a variety of benefits to both small businesses and their employees. Unlike paper pay stubs, electronic pay stubs are an environmentally friendly option. Plus, depending on the number of employees you have, electronic check stubs may cost you less to produce per pay period.  

There are multiple payroll services and software that you can choose from to help create electronic pay stubs.  

There is no federal regulation on pay stubs, but each state has its own laws about providing pay stubs for employees, so you will want to review state laws to ensure that your business complies by issuing pay stubs. However, it is important to note that some states require employers to offer paper checks as a payment option or that employees can opt-out of online pay stub delivery.  

It is a good idea to give your employees the option of paper or electronic pay stubs, regardless of whether your state requires it or not. Although most employees may prefer to receive their pay stubs electronically, you want to ensure that pay stubs are accessible to all of your employees. 

Some pay stubs might be smaller, and some may have their information arranged differently than others. Regardless, as long as they are easy to read, the physical look is not the most important aspect of pay stubs. The priority should be the information that they include. 

What Information Should a Pay Stub Contain? 

Pay stubs usually contain the following information: 

• Payroll cycle 
• Wages for all employees 
• Tax withholdings (can be found on an employee’s W-4) 
• Benefit withholding for each employee. 

Generally, pay stubs should include the following information: 

• Name of employer and contact information 
• Employee information (name, address, social security number) 
• Pay period covered (start and end dates) 
• Gross wages 
• Other earnings (vacation pay, bonuses) 
• List of payroll deductions 
• Tax withholding (state and federal) 
• Total deductions 
• Net earnings 
• Total paycheck amount 
• Total year-to-date (YTD) amounts (gross, net, federal tax, and voluntary deductions) 

As you can see, pay stubs show a large amount of important information. Employees should always keep their most recent pay stubs as proof of income, as it confirms their gross income and how often that they get paid. 

Pay stubs should always match the information contained in an employee’s W-2 form, used to file personal tax returns.  

A pay stub shows wages earned for that specific pay period (current pay period), as well as year-to-date amounts (YTD). Deductions also appear on an employee’s pay stub. In the end, the pay stub reveals the employee’s actual take-home pay (net pay) and the amount that will be deposited into their account.  

To calculate net pay, you must subtract withholdings from the employee’s gross pay. Net pay is the amount that each employee receives at the end of each pay period, based on the payment schedule. 

Deductions 

Tax deductions are a crucial part of an employee’s pay stub and may make up the most lines. Deductions found on pay stubs include: 

• Employee tax deductions: These are taxes mandated by government agencies, such as federal income tax, state and local taxes (if applicable), and the employee’s portion of FICA tax. 
• Benefits and other voluntary deductions: These deductions depend on the extra benefits that the employer provides and what the employee wants to be deducted, such as insurance premiums, retirement plans, or charitable donations.  
• Employer contributions: Items that employers contribute to may also appear on an employee’s pay stub, including the employer’s contribution to the employee’s benefits or the employer’s portion of FICA tax. 

Deductions and allowances may include: 

• Federal taxes 
• Local taxes 
• Social Security 
• Medicare 
• Workers’ compensation contribution  
• 401(k) contribution 

Creating Pay Stubs 

Employers need to know how to properly create a paystub to accurately pay their employees on time and avoid any discrepancies in pay. You can use Excel to create spreadsheets for your pay stubs, but this process is often tedious and prone to errors.  

Inaccurate pay stubs may hurt your employees, and continuously incorrect pay stubs may cause them to lose trust in you as an employer. If prolonged, it may cause trouble when tax season comes along. 

FormPros can help you easily create pay stubs that are accurate and easy for your employees to read. FromPros will not only help your business generate pay stubs, but you can also create W-4 forms, W-2 forms, 1099-NEC for contractors, and more. Using FormPros saves you time and helps you grow your business. 

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Ways Paystubs Can Improve Your Business

Good bookkeeping involves keeping records of every employee’s pay and providing each of your employees a breakdown of their paychecks. You can accomplish both of these tasks by generating pay stubs.  

Although there is no federal regulation on pay stubs, generating pay stubs for your employees can still help your business. Read on to learn how pay stubs can improve your business, provide insight on your payroll, and keep both you and your employees in the loop. 

Pay stubs: The basics 

A pay stub is a form that lists key details about an employee’s pay, such as taxes and other deductions taken out of the employee’s earnings.  

Some key information a pay stub shows includes: 

• Wages earned for that specific pay period (current pay period) 
• Year-to-date amounts (YTD) 
• Deductions 
• Gross pay 
• Net pay 
• Numbers of hours worked 
• Pay period dates 

Deductions are especially important  to keep track of when it comes to pay stubs. Common deductions include: 

• Employee tax deductions: Federal income tax, state and local taxes (if applicable), and FICA tax. 
• Benefits and other deductions: Insurance premiums, retirement plans, or charitable donations.  
• Employer contributions: Employer’s contribution to employee benefits or the portion of FICA tax. 

Why you need pay stubs 

There are no federal regulations on pay stubs, so you may not be legally obliged to provide pay stubs for your employees. However, each state has its own laws about providing pay stubs for employees, so you will want to review state laws to ensure that your business complies by issuing pay stubs.  

Even if you are not legally obligated to provide pay stubs for your employees, there are many reasons that you should.  

Record-keeping 

Pay stubs are a great way to keep records of each employee’s pay as they provide all the important details you need.  

If you generate pay stubs every pay period, it makes completing W-2 forms much easier. W-2 forms detail the income from your employee’s previous year’s employment, and you are legally obligated to provide a W-2 to each of your employees. Keeping pay stubs will make that process much smoother. 

Transparency 

Pay stubs give an employee a clear picture of their earnings throughout their year. Pay stubs allow your employees to keep track of their hours, wages, deductions, and vacation pay. 

Pay stubs hold you more accountable for paying your employees on time and accurately.   Inaccurate pay stubs may hurt your employees, and continuously incorrect pay stubs may cause them to lose trust in you as an employer.  

Pay stubs allow employees to ensure that they get the correct paycheck amount and employers a way to settle discrepancies in an employee’s pay. 

Proof of income 

Your employees may have to show proof of income for loan applications or leases, meaning that they may approach you to provide that proof of income. You can provide them with an employment letter, but generating one can be time-consuming.  

If you provide an employee with pay stubs for each paycheck, then they already have proof of income, and no further action would be required from you.  

Create Your Pay Stub

Types of pay stubs 

If you decide that pay stubs can help improve your business, you will want to make sure that you are providing the right type of pay stubs that will benefit you and your employees. 

There are two main types of pay stubs: physical pay stubs and electronic pay stubs.  

Physical pay stubs 

Many companies are turning to software for their payroll needs, but there may still be some value in creating physical paper pay stubs. 

Not everyone has access to a home computer, meaning not everyone would be able to access an electronic pay stub in a time of need, such as for proof of income when completing a rental application. Paper copies make it that everyone can access their pay stubs. Having paper pay stubs available is also a great backup for times when technology may fail.  

Unfortunately, paper pay stubs are not an environmentally friendly option. Likewise, if you choose not to use payroll software, the payroll process may end up being long and tedious.  

Electronic pay stubs 

Electronic or paperless pay stubs provide a variety of benefits to both small businesses and their employees.  

Unlike paper stubs, electronic pay stubs are an environmentally friendly option. Plus, depending on the number of employees you have, electronic pay stubs may cost you less to produce per pay period than paper would.  

Electronic pay stubs allow you to keep all payroll records electronically, avoiding paper clutter, as well as providing the ability to use electronic funds transfer (EFT) to quickly pay your employees.  

There are many payroll services and software that you can choose from to help create electronic pay stubs. With Form Pros, you can quickly generate paper pay stubs for your employees by answering a few questions. 

In all, electronic pay stubs can help you save time and effort, as well as paper costs. The main downside is that electronic pay stubs prove limited accessibility; an employee without a home computer may not be able to access their electronic pay stubs when needed. For this reason, even if you do primarily provide electronic pay stubs, you should still be prepared to provide your employees with paper stubs upon request.  

It is also important to note that some states require employers to offer paper pay stubs as a payment option or that employees may opt-out of online pay stub delivery. Employees must also consent to receive their W-2 form online, and if they do not, then they must receive a paper copy. 

Pay stubs improve your business 

Generating pay stubs may seem like a little more work, but it will prove to be beneficial in the long run. Not only do pay stubs provide you and your employees with payment records, but they also ensure transparency for your business. Your employees will thank you for providing pay stubs.  

Form Pros can help you easily create pay stubs that are both accurate and easy for your employees to read using our easy-to-use pay stub generator. Form Pros can also help you create W-4 forms, W-2 forms, 1099-NEC for contractors, and more.  

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