Category: Tax Forms

Are Pay Stubs Better Than Excel Spreadsheets?

You need to work efficiently to grow your business. Successful companies expand by completing more work in less time. One of the most complex tasks you must complete is payroll, and that begs the question. Are pay stubs better than excel spreadsheets at completing that task?

This article defines pay stubs, and the information needed to make pay stubs. You’ll read about common mistakes, why using Excel spreadsheets is a bad idea, and how FormPros makes the pay stub process easy.

Let’s start with the definition…..

What is a Pay Stub?

A pay stub lists all of the key information related to an employee’s pay. The pay stub provides information on wages, tax withholdings, and benefit withholdings.

The rules regarding pay stubs vary by state. Some states require employers to provide pay information to workers, while other states do not. Businesses should confirm the requirements in each state where they employ workers.

Employees should keep their most recent pay stubs as proof of income. If an individual applies for a loan, the pay stub confirms the borrower’s gross income.

Employers should keep a record of all generated paystubs. The pay stub information should match the data on each employee’s W-2 form, which individuals used to file their personal tax returns.

Create Your Pay Stub

Information Needed to Create a Pay Stub

Determine this information for each employee:

• Payroll cycle: The number of pay periods determines how much salary the employer pays on each payroll date. It also determines the start and ending days for computing hourly payroll.
• Wages: Gross pay and net pay. Wages may be based on a salary, or calculated using an hourly rate of pay.
• Tax withholdings: Federal, state, and possibly local amounts withheld for taxes.
• Benefit withholdings: Withhold amounts for the employee’s share of insurance premiums or contributions to a retirement plan.

Here are some common mistakes that businesses make when generating pay stubs.

Common Pay Stub Mistakes

Review your pay stubs carefully, to avoid these mistakes:

#1: Current Period vs. Year-to-Date Data

Your workers must clearly understand the differences between current period and year-to-date information. If you fail to label each dollar amount correctly, your staff may misunderstand the information.

Workers use year-to-date data to confirm that their gross wages, tax withholdings, and benefit contributions are on track.

#2: Outdated W-4 Information

Your employees may change their tax withholdings after a pay raise, the birth of a child, or marriage. You need the current W-4 to process payroll correctly. Ask each worker for updated W-4 information periodically, and use the updated forms on the next payroll run.

Create Your W-4 From

#3: Incorrect Pay Cycle

Workers need to plan their finances based on your company’s pay cycles. List the pay date on each stub, and explain the pay frequency to your workers (weekly, bi-weekly, or monthly).

#4: Incorrect Tax Data

The federal and state tax laws change constantly, and your pay stub must include withholdings based on current tax law. If the withholdings are not correct, the worker may have an unexpected tax liability at the end of the year, and possible owe penalties for underpayment of taxes.

Using spreadsheets can make the pay stub process more time consuming.

Why Excel Spreadsheets Are a Bad Idea

Here are some reasons to move away from spreadsheets, and to use technology:

• Tabs: You may forget to properly link the tabs on a spreadsheet.
• Version: Are you using the current version of the spreadsheet? Are you saving the data using the same file name?
• Integration: You can’t integrate spreadsheets with software tools, including accounting software. If you have to manually enter data into software, the risk of error is higher.
• Training employees: More difficult, because using spreadsheets requires more steps and input work. You’ll spend more time on training, and the risk of error is higher when you delegate work on someone new.

As your business grows, the number of transactions increases, and so does the number of pay stubs you must produce. If you’re posting more transactions, spreadsheet data entry makes accounting more difficult.

Employers need to generate accurate pay stubs, and using technology can help.

Minimize Pay Stub Errors With FormPros

FormPros provides a pay stub generator that is user friendly, and helps you produce accurate pay stubs in less time. Our software automatically calculates earnings and deductions, based on the data you input. The system securely processes your information online.

Use FormPros to take charge of the pay stub process.

Create Your Pay Stub

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Are Pay Stubs Better Than Excel Spreadsheets? FAQs

• Can digital paystubs be used as legal proof of income when applying for government benefits?
  Yes, most government programs like SNAP or Medicaid accept digital paystubs as proof of income. Make sure your stubs include key details such as employer information, pay period, and deductions. Some agencies may require multiple stubs or extra documentation for verification.
• How can small businesses keep paystub data secure when moving away from spreadsheets?
  Choose online tools that provide SSL encryption, secure storage, and follow privacy laws. Enable features like multi-factor authentication and audit logs. Send stubs through secure channels and store them in protected locations instead of shared folders.
• What if there's a mistake on a paystub after it’s been given to an employee?
  Send a corrected paystub right away and inform the employee. Record the correction in your files. If the mistake affects taxes, file amended payroll tax forms with the IRS or your state agency.
• Do independent contractors need paystubs?
  No, contractors usually get Form 1099-NEC instead of pay stubs. However, they can create their own pay stubs to show income when applying for a rental or loan.
• Can paystubs be automated for regular payroll?
  Yes, many tools support recurring pay stub generation. After you enter employee details and set the payment schedule, the system automatically creates stubs each pay period, minimizing manual work and errors.

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How to Avoid 4 Common Mistakes While Making Paystubs

Well-managed businesses work hard to minimize errors—especially when it comes to payroll. However, common mistakes while making paystubs can still happen, even with the best intentions. These errors often require time and effort to correct, taking your focus away from growing your business.

Creating pay stubs is a vital part of the payroll process, and having the right systems in place is key to producing accurate, compliant documents. In this article, we’ll define what pay stubs are, explain the role of the Form W-4, and outline the essential information every pay stub should include. You’ll also learn about four of the most frequent paystub mistakes—and how the FormPros paystub generator can help you avoid them.

What is a Pay Stub?

A pay stub lists all of the key information related to an employee’s pay.

When you review a pay stub, it’s important to note the difference between current (current pay period) and year-to-date (YTD) amounts. Both are important, and the YTD balances help the employer and the worker understand if the amounts are correct.

The pay stub provides information on wages, tax withholdings, and benefit withholdings.

The rules regarding pay stubs vary by state. Some states require employers to provide pay information to workers, while other states do not. Businesses should confirm the requirements in each state where they employ workers.

Employees should keep their most recent pay stubs as proof of income. If an individual applies for a loan, the pay stub confirms the borrower’s gross income. Employers should keep pay stubs on file, if they are generated.

The pay stub information should match the data on each employee’s W-2 form, which individuals used to file their personal tax returns.

To create a pay stub, the first step is to have each employee complete a Form W-4.

*Learn the differences between a W-2 and W-4 here.*

Working with Form W-4

The Employee’s Withholding Allowance Certificate (Form W-4) is a form that the federal government requires employees to fill out when they are newly hired. Information submitted on the form (allowances) lets employers know how much salary to withhold from a paycheck for tax purposes.

Keep these points in mind:

• As an employer, you should keep an employee’s most current W-4 form in his or her payroll file. The IRS may request a copy of the form.
• You need to make sure that you add the correct number of allowances into your payroll processing system.

The W-4 collects the worker’s basic information (name, address, filing status) and provides guidance for employees who have multiple jobs, or who have working spouses. There are extra resources provided to calculate withholdings for these situations.

Once you have a completed W-4, you’ll need to collect additional information for the pay stub.

Create Your W-4 Form

Information Needed to Create a Pay Stub

Keeping this information accurate is crucial—especially since common mistakes while making paystubs often happen when employers rush through these details or rely on outdated records. A single oversight in data entry or calculation can lead to confusion, rework, or even compliance issues down the road. Determine this information for each employee:

• Payroll cycle: The number of pay periods determines how much salary is paid on each payroll date. It also determines the start and ending days for computing hourly payroll.
• Wages: Gross pay and net pay. Wages may be based on a salary, or calculated using an hourly rate of pay.
• Tax withholdings: Federal, state, and possibly local amounts withheld for taxes.
• Benefit withholdings: Amounts withheld for the employee’s share of insurance premiums, or funds to be invested in a retirement plan.

Here are four common mistakes that businesses make when generating pay stubs….

4 Common Paystub Mistakes

Here are four common mistakes while making paystubs that every business should be aware of. By understanding these pitfalls, you can take simple steps to improve payroll accuracy and avoid unnecessary complications. Review your pay stubs carefully, to avoid these mistakes:

#1: Current Period vs. Year-to-Date Data

One of the most common—and often overlooked—paystub mistakes is failing to clearly differentiate between current period amounts and year-to-date (YTD) totals.

Your employees rely on both of these figures for different reasons. Current period data shows the earnings, deductions, and taxes applied during that specific pay cycle—whether that’s weekly, biweekly, or monthly. YTD data, on the other hand, accumulates those figures over the course of the calendar year. It helps workers track their total gross income, federal and state tax withholdings, Social Security and Medicare contributions, and benefit deductions like health insurance or retirement contributions.

If you don’t label these figures correctly—or worse, if you omit one entirely—employees may become confused or concerned about their finances. They might think they’ve been underpaid, overtaxed, or that their benefits haven’t been deducted properly. This can lead to unnecessary HR headaches and even compliance issues if errors go unchecked.

*Pro Tip: Use clear labels like “Current” and “YTD” next to each amount, and double-check that all columns are consistently formatted. It’s a small detail that makes a big difference in clarity and trust.*

#2: Outdated W-4 Information

Another common error in paystub generation is relying on outdated W-4 forms—and it can lead to serious tax discrepancies for your employees.

Life changes fast. A pay raise, the birth of a child, marriage, or even a second job can all affect how much tax an employee wants withheld from their paycheck. That’s exactly what the W-4 form is designed for—it tells you how much federal income tax to withhold based on the employee’s current personal and financial situation.

If you’re using an old W-4, you might withhold too much or too little tax. That can result in frustration come tax season—either because the employee owes money or because their refund is smaller than expected. Worse yet, if the IRS flags withholding errors, you could find your business facing compliance issues.

*Best practice? Put a system in place to regularly remind employees to review and update their W-4 forms—especially after major life changes. And make sure your payroll team is using the most current version of each form when processing paychecks. Even a quick update between pay periods can save everyone a lot of trouble.*

#3: Incorrect or Unclear Pay Cycle Information

Your employees rely on consistent, predictable pay—not just in terms of amount, but also timing. That’s why failing to clearly communicate your company’s pay cycle on the paystub is a mistake that can cause unnecessary stress and confusion.

Every organization has its own payroll rhythm—weekly, biweekly, semimonthly, or monthly—and your employees structure their financial lives around it. Whether it’s paying rent, budgeting for groceries, or managing childcare costs, knowing exactly when the next paycheck is coming is critical.

If your paystubs don’t clearly state the pay period start and end dates, as well as the pay date itself, employees might find it difficult to reconcile hours worked with the wages they received. Worse, if the cycle is listed incorrectly or changes without notice, it can disrupt financial planning and erode trust in your payroll process.

*What to do: Always include clear labels like “Pay Period: April 1–April 15” and “Pay Date: April 16” on every paystub. If your pay cycle ever changes—such as moving from biweekly to monthly—communicate this proactively and in multiple formats (email, meeting, HR portal, etc.). Transparency builds confidence.*

#4: Incorrect Tax Data

Tax laws don’t stand still—and neither should your payroll system. One of the costliest mistakes you can make on a paystub is displaying outdated or incorrect tax withholding data.

Both federal and state tax regulations are subject to change. These changes may include adjustments to tax brackets, withholding tables, Social Security wage caps, or local tax rates. If your payroll system doesn’t reflect the most current rates and rules, employees could be over- or under-withheld without even realizing it.

This can lead to serious consequences at tax time. An employee who’s under-withheld may face an unexpected tax bill—or worse, penalties and interest for underpayment. On the other hand, over-withholding means the employee is unnecessarily reducing their take-home pay throughout the year, essentially giving the government an interest-free loan.

*How to avoid it: Make sure your payroll software or provider is regularly updated with the latest tax code changes. It’s also a good idea to periodically audit your system to ensure that all withholdings—federal, state, and local—are being calculated correctly. Including a breakdown of each tax withheld on the paystub gives employees transparency and peace of mind.*

We Can Help You Minimize Errors

Accurate pay stubs aren’t just a luxury—they’re a necessity for compliance, employee trust, and preventing expensive payroll errors. But here’s the best part: you don’t have to do the math yourself.

FormPros makes it easy. Creating professional pay stubs is simple, fast, and secure. Our intuitive paystub generator automatically calculates earnings, deductions, and taxes based on your input—eliminating guesswork and reducing risk. Plus, by generating pay stubs through a trusted provider like FormPros, you avoid the dangers of a fake paystub, which can lead to serious financial and legal trouble. Choose accuracy and peace of mind with every stub you create.

Create Your Pay Stub Now

FormPros Has You Covered

Simplify your paperwork with FormPros! From creating employment verification letters, W-2s, and 1099-NEC forms to generating LLC Operating Agreements and even voided checks, our easy-to-use platform has you covered. Save time, reduce errors, and handle your business documents with confidence. Start now and see how FormPros makes professional form generation fast, affordable, and hassle-free!

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How to Avoid 4 Common Mistakes While Making Paystubs FAQs

• Can employees request corrections on their paystub if they notice an error?
  Yes. Employees should report any mistakes—like incorrect hours, pay, or tax withholdings—to HR or payroll right away. Employers are responsible for making corrections and issuing an updated stub. Prompt fixes help avoid tax issues and maintain employee trust.
• How long should employers keep paystub records on file?
  Employers should keep paystub records for at least three years, per FLSA guidelines. Some states require longer retention, often four or more years. Keeping accurate records helps with audits, disputes, and compliance.
• Do gig workers or independent contractors receive paystubs?
  No. Independent contractors usually don’t receive paystubs from clients. However, they can create their own using online tools. This helps avoid common mistakes while making paystubs, such as missing income details—especially when applying for loans, housing, or filing taxes.
• What’s the difference between gross pay and taxable income on a paystub?
  Gross pay is total earnings before deductions. Taxable income is what's left after pre-tax deductions (like insurance or retirement) and is used to calculate tax withholdings. They are not the same.
• Are employers required to provide digital pay stubs, or can they still use paper copies?
  Both are allowed, depending on state law. Many states permit digital stubs if employees can access and print them. Some states require employee consent before switching from paper to digital.

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Differences Between Payday, Pay Period And Pay Cycle

Employers, workers, and independent contractors must understand three important payroll terms: payday, pay period, and pay cycle. In order to manage payroll effectively, business owners must be able to set up payroll systems that accurately calculate and pay workers. Moreover, the employer should clearly explain the pay process to all staff members.

In this article, we define key payroll terms, explain what appears on a paystub, and provide a real-world payroll calculation example.

Understanding the Definitions Associated with Pay Period

Understanding how your pay stub displays income and tax withholdings starts with learning three key terms: payday, pay period, and pay cycle. These terms define when and how you receive your wages and clarify what timeframe your paycheck covers.

– Payday –

A payday is the specific date on which employees or independent contractors receive their wages. It is the day an employer issues payments, either through direct deposit, paper check, or payroll card.

For instance, if a company uses a biweekly pay schedule and pays employees every two weeks, April paydays might fall on April 5th and April 19th. On the other hand, if the company follows a semimonthly schedule (twice a month), paydays could be on April 15th and April 30th.

Ultimately, payday is crucial for budgeting because it determines when employees receive their earnings and when employers process tax deductions.

– Pay Period –

The pay period refers to the timeframe when employees receive compensation for their work. It starts on a specific date and ends on another, covering the work performed or hours logged during that time. Depending on the employer’s pay cycle, the length of a pay period can vary.

For example, using the biweekly pay schedule mentioned earlier, a company paying employees on April 5th would have a pay period covering March 22nd to April 4th. Then, the next pay period would be April 5th to April 18th, with payday falling on April 19th.

For semimonthly pay, the two pay periods for April could be April 1st to April 15th and April 16th to April 30th. Although both biweekly and semimonthly schedules typically result in two paychecks per month, their pay periods don’t always align because the structure of each month varies.

Therefore, understanding the pay period is important because your paycheck’s earnings, tax deductions, and benefits contributions apply specifically to this timeframe.

– Pay Cycle –

A pay cycle outlines the company’s payroll structure—how often the company pays employees and processes payroll calculations. Company policy sets this structure, which may vary based on industry standards, employee classification (hourly vs salaried), and regulatory requirements. Common pay cycles include:

• Weekly – Employees receive wages every seven days (e.g., every Friday). This is especially common in construction, retail, and gig work.
• Biweekly – Employees receive paychecks every two weeks (e.g., every other Friday). Many corporate and healthcare organizations use this schedule.
• Semimonthly – Employees receive two paychecks per month (e.g., on the 15th and last day of the month). Many companies choose this option for salaried workers.
• Monthly – Employees receive one paycheck per month (e.g., on the last business day). Although less common, some industries use this pay schedule, especially for executive positions.

Understanding your pay cycle helps you plan your finances more effectively, since it shows how often you receive wages and how taxes and deductions apply throughout the year.

Why These Terms Matter

A pay stub breaks down an employee’s earnings, tax withholdings, and deductions based on these terms. When reviewing a pay stub, it’s especially important to distinguish between:

• Current Amounts – Earnings and deductions for the most recent pay period.
• Year-to-Date (YTD) Amounts – Cumulative earnings and deductions from the beginning of the year up to the current paycheck.

By having a clear understanding of the differences between payday, pay period, and pay cycle, employees and independent contractors can better manage their finances, anticipate deductions, and ensure they are paid correctly.

Specific Information on a Pay Stub

Employers provide this information to each employee and contractor:

— Payroll Cycle: The number of pay periods determines how much salary is paid on each payroll date. Additionally, it determines the start and ending days for computing hourly payroll.

— Wages: Gross pay and net pay. Wages may be based on a salary, or calculated using an hourly rate of pay.

— Tax Withholdings: Federal, state, and possibly local amounts withheld for taxes.

— Benefit Withholdings: Amounts withheld for the employee’s share of insurance premiums, or funds to be invested in a retirement plan.

As a result, every business must collect data to calculate gross wages and net pay. However, if you employ independent contractors, you don’t need to withhold taxes from pay.

Calculating Net Pay

Here are the details you need to calculate net pay:

1) Gross Wages

Wages earned before any withholdings or deductions are subtracted. Gross wages for a pay period amount are calculated in one of two ways:

• Salaried Employees: (Annual salary / number of pay periods in a year)
• Hourly Employees: (Hours worked X pay rate per hour)

Gross wages may include additional compensation, including sick pay, holiday pay, or bonuses.

2) Hours Worked and Pay Rate

The hours worked total is especially important for non-exempt (hourly) workers. The pay stub should include regular hours (up to 40 hours per week) as well as overtime hours.

The paystub must detail all hours worked, and the rate of pay earned for each hour. Some workers, including those covered by union contracts, must be paid a specific rate of pay for overtime or double-time hours.

*Salaried workers may also see hours listed on their pay stubs.*

3) Tax Deductions

Workers determine their federal income tax withholdings amounts by completing Form W-4, and each state has a tax withholding form.

Social Security Tax:

• Employee Contribution: 6.2% of earnings, up to a wage base limit of $176,100. This means the maximum Social Security tax an employee will pay in 2025 is $10,918.20.
• Employer Contribution: Employers match this 6.2% rate, contributing an equal amount for each employee.

Medicare Tax:

• Employee Contribution: 1.45% of all wages, with no wage base limit.
• Employer Contribution: Employers also contribute 1.45% of all employee wages.
• Additional Medicare Tax: Employees earning over $200,000 annually are subject to an additional 0.9% Medicare tax on earnings above this threshold. Employers are required to withhold this additional tax but do not match it.

In total, for employees earning up to $176,100, the combined FICA tax rate is 7.65% (6.2% for Social Security and 1.45% for Medicare). Employers also pay a combined rate of 7.65%, which is deductible as a business expense.

Here’s an example that you can review to understand the payroll process.

Example Payroll Calculation

Sally’s annual income is $60,000, and her firm processes payroll 26 times a year. Sally’s gross wages each pay period total ($60,000 / 26), or $2,308 per pay period.

Based on the allowances on her W-4, her company withholds 20% of her gross pay ($462) for federal taxes, and 5% ($115) for state taxes. Sally also pays $50 each pay period for her share of the company health insurance plan.

Sally’s net pay is $2,308, less a total of $577 for taxes, and $50 for her health insurance premiums. Her net pay is $1,681.

The pay stub must include all of this information for the current payroll period and year-to-date. The pay stubs you generate may also include unemployment tax payments. Hourly workers need details about their total hours worked, and any hours that are paid as overtime wages.

Employers need to generate accurate pay stubs, and thankfully, using technology can help.

Take Charge of the Process

FormPros provides a pay stub generator that is not only user-friendly but also helps you produce accurate pay stubs in less time. Use FormPros to take charge of the pay stub process.

Create Your Pay Stub Now

FormPros Has You Covered

Simplify your paperwork with FormPros! From creating paystubs, W-2s, and 1099-NEC forms to generating LLC Operating Agreements and even voided checks, our easy-to-use platform has you covered. Save time, reduce errors, and handle your business documents with confidence. Start now and see how FormPros makes professional form generation fast, affordable, and hassle-free!

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Differences Between Payday, Pay Period And Pay Cycle FAQs

• Can employers offer different pay cycles to different employees?
  Yes, employers can offer different pay cycles to employees based on factors like job classification (salaried vs. hourly), department, or location—as long as it complies with state labor laws and employment agreements. However, consistency within the same job type is generally encouraged to avoid confusion and payroll errors.
• Do independent contractors ever receive paystubs?
  Although not legally required, some businesses voluntarily provide pay stubs to independent contractors for record-keeping. These stubs can help contractors track their income, especially when filing taxes or applying for loans. Tools like FormPros make it easy for contractors to create their own.
• What happens if a payday falls on a weekend or holiday?
  If a scheduled payday falls on a weekend or federal holiday, employers typically process payroll one business day earlier. This ensures employees receive their wages on time. Always consult your state’s labor laws, as some require early disbursement in such cases.
• How does switching from biweekly to semimonthly affect employee pay?
  Switching pay cycles doesn't change an employee’s annual salary, but it alters the paycheck amounts and timing. Semimonthly pay results in slightly higher paychecks compared to biweekly, but they occur less frequently. Such transitions require clear communication and planning to avoid confusion.
• Are digital pay stubs legally valid?
  Yes, digital or electronic paystubs are legally valid in most states, provided employees can access and print them. Some states require employees to opt in or be given the option to receive paper copies, so employers should verify local regulations before going paperless.
• What payroll records must employers keep, and for how long?
  Employers are generally required to retain payroll records such as employee hours, wages, tax withholdings, and pay stub details for at least three years (under the Fair Labor Standards Act). Some states or regulatory bodies may require longer retention periods.
• Can employees request corrections to their pay stubs?
  Absolutely. If an employee notices errors—like incorrect hours, deductions, or tax information—they should report it immediately. Employers are legally obligated to investigate and correct any discrepancies. Providing documented proof (like timesheets) can help speed up the process.
• How are bonuses and commissions reflected on pay stubs?
  Bonuses and commissions typically appear as separate line items on the pay stub, often labeled “supplemental income.” These amounts are subject to withholding, though sometimes at a flat supplemental rate. Clear labeling helps employees understand the origin of additional earnings.
• What happens to payroll if an employee is on unpaid leave?
  If an employee is on approved unpaid leave, they won’t receive a paycheck for that period. However, employers still need to generate a record or notation in their payroll system to reflect the leave. Any benefits impacted during the leave should also be documented on the next paystub.
• How can businesses automate payroll without hiring a full-time specialist?
  Small businesses can automate payroll using online tools that calculate wages, taxes, and generate pay stubs. Platforms like FormPros streamline this process by offering templates and tax logic without the need for accounting expertise. This is especially helpful for startups and solopreneurs.

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How to File Taxes as a 1099 Worker: What You Need to Know

As a 1099 worker, managing your taxes can feel overwhelming, but understanding the basics can help you stay on track. Unlike W-2 employees, 1099 workers operate as independent contractors and must report their own income. Filing as a 1099 worker takes extra effort, but you can keep it simple.

In this guide, we’ll walk you through the essential steps to file your taxes as a 1099 worker, including how to use Form 1099-NEC. With the right tools and knowledge, like those available at FormPros, you can easily complete and file your tax forms with confidence.

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Understanding Form 1099-NEC:

Businesses use Form 1099-NEC to report payments to independent contractors. If you’re a 1099 worker, this form is crucial for reporting the income you earned throughout the year.

The form typically reports payments of $600 or more from a client or business. Use 1099-NEC to report nonemployee compensation—income from freelance work, consulting, or gig jobs. Use 1099-MISC for other income, like rents or royalties.

By January 31st, businesses must send you a 1099-NEC for the prior year. If one doesn’t arrive, report the income anyway and keep your own payment records.

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Filing Your Taxes:

Filing your taxes as a 1099 worker may seem complicated, but breaking it down into steps can make it manageable. To start, you’ll need to gather your 1099-NEC form(s) and any other income documentation, such as paystubs. Once you have your forms, follow these steps:

• Report Your Income: On your tax return, use the information from your 1099-NEC to report your total earnings. You’ll include this on Schedule C (Profit or Loss from Business), seen above, as part of your tax return.

• Double-Check Your Numbers: If you didn’t receive a 1099-NEC or received an incorrect one, you’re still required to report all income. Be sure to track your earnings independently, whether through invoices, bank statements, or other records.

• File on Time: Be mindful of the tax deadlines, and avoid common mistakes like failing to report all income or filing late.

Using tools like FormPros can simplify the process by allowing you to easily generate and file your 1099-NEC forms. This ensures you’re on track with your filing and helps prevent costly mistakes.

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Self-Employment Taxes and Deductions:

As a 1099 worker, you’re responsible for paying self-employment taxes, which cover Social Security and Medicare. These taxes are calculated based on your net earnings, and the rate is typically 15.3%. However, you may be able to reduce your taxable income by claiming various business-related deductions.

Common deductions for 1099 workers include:

1. Home Office: If you work from home, you can deduct a portion of your rent or mortgage, utilities, and internet costs.
2. Business Expenses: Supplies, software, and equipment used for work can often be deducted.
3. Vehicle Expenses: If you use your car for business purposes, you can deduct mileage and related costs.

Additionally, be aware that as a 1099 worker, you may need to make estimated quarterly tax payments to avoid penalties at the end of the year. Setting aside a portion of your income throughout the year can help you manage these payments effectively.

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1099 Filing Checklist

Ready to make this actionable? Run through this short 1099 checklist to ensure nothing slips through the cracks before you file.

1) Provide clients a completed Form W-9.

2) Keep income records all year (invoices, bank deposits, platform payouts).

3) Track expenses by category (software, supplies, phone/internet, travel, education).

4) Maintain a mileage log or track actual vehicle costs—plan to use whichever gives the bigger deduction.

5) Document home office details (square footage, utilities, internet) if used regularly & exclusively.

6) Reconcile books monthly (bank/credit statements → bookkeeping).

7) Make quarterly estimated tax payments (Form 1040-ES).

8) In January, collect all 1099-NEC forms (due to you by Jan 31st); if one’s missing or wrong, rely on your records and request a correction.

9) Total gross income (1099-NEC + any income without forms).

10) Summarize deductible expenses (keep receipts).

11) Complete Schedule C (profit/loss) and Schedule SE (self-employment tax ≈ 15.3% on net earnings).

12) File and pay by the deadline; save confirmations and keep records 3–7 years.

Stay on Track with Your Tax Filing

Filing taxes as a 1099 worker doesn’t have to be overwhelming. By understanding the importance of Form 1099-NEC, keeping accurate records of your income, and claiming all eligible deductions, you can stay on top of your tax obligations. Don’t forget to calculate and pay your self-employment taxes to avoid any surprises.

To make the process even easier, FormPros offers an intuitive platform to help you complete and file your 1099-NEC forms with ease. Get started today to ensure your tax filing is smooth and stress-free.

Create Form 1099-NEC

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FormPros Has You Covered

Simplify your paperwork with FormPros! From creating paystubs, W-2s, and employment verification letters to generating LLC Operating Agreements and even voided checks, our easy-to-use platform has you covered. Save time, reduce errors, and handle your business documents with confidence. Start now and see how FormPros makes professional form generation fast, affordable, and hassle-free!

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How to File Taxes as a 1099 Worker: What You Need to Know FAQs

• Do I need an EIN, or can I use my SSN on a W9?
  Generally, sole proprietors can use an SSN. That said, consider an EIN when you want more privacy, when you hire employees, or when a bank or platform requires it.
• I get paid through apps—will I receive a 1099-K?
  Maybe. Platforms issue Form 1099-K based on annual thresholds that can change by year. Regardless of whether you receive the form, you must report all income from goods/services on your return. Check the IRS’s current 1099-K guidance for the latest thresholds.
• What if a client sends a wrong or missing 1099-NEC?
  To begin, report the right income using your records; next, contact the payer for a corrected 1099-NEC. Moreover, the IRS outlines how to correct 1099-NEC/1099-MISC forms.
• My client withheld money from a payment—what is that?
  In most cases, that’s likely backup withholding (often triggered by a missing or incorrect TIN on your W-9). Nevertheless, you must still report the gross income and, in addition, claim the withheld amount as federal tax paid on your return.
• Can I claim the 20% Qualified Business Income (QBI) deduction?
  Generally, many sole proprietors can deduct up to 20% of qualified business income, though limits and phaseouts may apply. Additionally, you claim the deduction on Form 8995/8995-A; under current law, eligibility extends through tax years beginning before January 1st, 2026.
• I have both W2 and 1099 income—how do I file?
  You file one tax return: report W2 wages as usual, and report 1099 work on Schedule C and Schedule SE. Use withholding from your W2 and/or quarterly estimates to cover the self-employment tax from your 1099 income.
• Do I need to collect or pay sales tax as a contractor?
  It depends on your state and what you sell. Many services aren’t taxable in some states; others are. If you sell taxable goods or certain services, you may need a sales tax permit and to collect/remit sales tax. Check your state’s department of revenue for your exact rules.

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How to Create a Pay Stub and Calculate Wages

Creating a pay stub is an essential part of managing payroll, but the real challenge lies in knowing how to calculate wages accurately. Whether you’re an employer preparing paychecks or a contractor verifying income, understanding the math behind gross pay, deductions, and net income is critical. A pay stub is more than just a summary—it breaks down exactly how you calculate earnings and apply withholdings.

In this guide, we’ll cover the basics of what a pay stub includes, then walk through how to calculate wages step by step. We’ll show you how to calculate gross wages, identify the taxes and deductions that impact take-home pay, and use tools to automate the process accurately.

Paystub Basics

A paystub is a document that shows how an employee’s wages are calculated for a specific pay period. It typically includes key details like employee information, hours worked, gross earnings, taxes withheld, deductions, and net pay (the amount the employee actually takes home).

Paystubs can be issued digitally or in print, depending on the employer’s system. Both formats serve the same purpose—keeping a clear record of how wages are earned and adjusted.

Need a deeper breakdown? This is an in-depth explanation of everything that goes into a paystub.

How to Calculate Wages (The Core of It)

Knowing how to calculate wages accurately is the most important part of making a paystub. Let’s break down each component of the wage calculation process.

1) Gross Wages: The Starting Point

Gross wages are the total earnings before any deductions or taxes.

Hourly employees: Multiply the number of hours worked by the hourly rate.
Example: 40 hours × $20/hour = $800

Salaried employees: Divide the annual salary by the number of pay periods in a year.
Example: $52,000 ÷ 26 biweekly pay periods = $2,000

Overtime pay: Typically calculated at 1.5× the regular hourly rate for hours worked over 40 per week.
Example: 5 OT hours × ($20 × 1.5) = $150

2) Common Add-Ons to Gross Pay

Additional earnings can boost gross wages and must be included in the paystub.

• Commissions based on performance or sales.
• Bonuses for meeting goals or milestones.
• Tips, where applicable.
• Reimbursements for work-related expenses (if paid through payroll).

3) Deductions: Pre-Tax vs Post-Tax

Deductions reduce taxable income and/or net pay.

• Pre-tax deductions: Lower the taxable income before taxes are calculated. Examples include health insurance premiums, 401(k) contributions, and HSA payments.
• Post-tax deductions: Come out after taxes are applied. These might include union dues, wage garnishments, or charitable contributions.

4) Paystub Deduction Codes: Making Sense of Abbreviations

When reviewing a paystub, you may notice short codes or abbreviations next to deductions. These are deduction codes, and they serve as quick labels to identify the type of withholding applied. Understanding them helps employees (and employers) verify that the correct amounts are being withheld. Some common paystub deduction codes include:

• FED – Federal income tax
• FICA-MED – Medicare tax
• FICA-SS – Social Security tax
• 401K – Retirement contributions
• INS – Health, dental, or vision insurance premiums
• HSA/FSA – Health Savings Account or Flexible Spending Account contributions
• GARN – Court-ordered wage garnishments

5) Taxes Withheld

Employers are required to withhold several types of taxes from employee wages.

• Federal income tax: Based on the employee’s W-4 information
• FICA taxes: Social Security and Medicare
• State and local taxes: Vary depending on location

6) Net Pay: The Bottom Line

Once you subtract all deductions and taxes from gross pay, you’re left with net pay—what the employee actually takes home.

Formula:
Gross Pay – Deductions – Taxes = Net Pay

Example Wage Calculations

Let’s bring it all together with two examples—one for an hourly employee and one for a salaried employee. These will show how gross pay, deductions, and taxes all lead to the final net pay.

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– Example 1: Hourly Employee –

• Name: Alex
• Hourly rate: $18
• Hours worked: 42
• Overtime: 2 hours × ($18 × 1.5) = $54
• Gross pay: (40 × $18) + $54 = $774

Deductions and Taxes

• Pre-tax health insurance: $50
• Federal income tax: $70
• Social Security & Medicare (FICA): $59.23
• State tax: $25

Net pay calculation:
$774 – $50 – $70 – $59.23 – $25 = $569.77

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– Example 2: Salaried Employee –

• Name: Taylor
• Annual salary: $60,000
• Pay schedule: Biweekly (26 pay periods)
• Gross pay: $60,000 ÷ 26 = $2,307.69

Deductions and Taxes

• 401(k) contribution (pre-tax): $150
• Federal income tax: $230
• FICA: $176.54
• State tax: $90

Net pay calculation:
$2,307.69 – $150 – $230 – $176.54 – $90 = $1,661.15

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Take Charge of the Process

While it’s important to understand how to manually calculate wages, most businesses and freelancers use digital tools like FormPros to streamline the process. The FormPros paystub generator takes care of the heavy lifting—automatically calculating gross pay, deductions, and taxes while formatting everything professionally for your records.

Still, accuracy is key. Even when using a tool, make sure to double-check:

• That hours worked, pay rates, and pay periods are correct
• Employee or contractor details are accurate
• Deductions and tax settings reflect your current local and federal requirements

Using a tool like FormPros doesn’t replace due diligence—it enhances it, helping you save time while keeping your payroll accurate and compliant.

Create Your Paystub Now

FormPros Has You Covered

Simplify your paperwork with FormPros! From creating paystubs, W-2s, and 1099-NEC forms to generating LLC Operating Agreements and even voided checks, our easy-to-use platform has you covered. Save time, reduce errors, and handle your business documents with confidence. Start now and see how FormPros makes professional form generation fast, affordable, and hassle-free!

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How to Create a Pay Stub and Calculate Wages FAQs

• What’s the difference between a paystub and a paycheck?
  A paycheck represents the actual payment an employee receives—either as a physical check or through direct deposit. A pay stub, on the other hand, shows how the employer calculated that payment, including wages, deductions, and taxes. The stub explains the “why” behind the paycheck amount.
• How long should employers keep paystub records?
  Employers should keep paystub records for at least three years, though some states or industries may require a longer period. Detailed records support audits, resolve disputes, and ensure compliance with labor laws. Many employers use digital storage, as long as they keep records accessible and secure.
• Do freelancers or 1099 workers get paystubs?
  Typically, clients don’t issue paystubs to freelancers, but freelancers can create their own to track income. Tools like FormPros let 1099 workers generate paystubs for proof of income, loan applications, or recordkeeping—even without formal documentation from an employer.
• Can paystubs be used to prove employment?
  Yes, pay stubs can help verify employment, especially when they include the employer’s name, the employee’s name, pay period, and earnings. However, for official purposes, employers may also need to provide an employment verification letter alongside the pay stubs.
• What happens if a mistake is found on a pay stub?
  If you spot an error on a paystub—like a miscalculated deduction or incorrect hours—report it immediately to payroll or HR. Employers typically must correct the issue promptly and may provide an amended paystub or back pay when necessary.

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What Information Do You Need Before Creating a Paystub?

Managing payroll takes careful planning. To ensure accuracy, you need the right information, including the data necessary to create pay stubs. A paystub information list outlines all the key details related to an employee’s pay.

Both employers and workers must understand the pay stub information on a check stub. Employers should generate accurate pay stubs that align with gross pay, tax withholdings, and other payroll amounts. Meanwhile, workers must review their paystubs to confirm they received the correct wages.

The process begins with each employee completing a Form W-4.

Working with Form W-4

Form W-4 (Employee’s Withholding Allowance Certificate) plays a crucial role in payroll processing. The federal government requires newly hired employees to complete this form, as it informs employers how much salary to withhold from each paycheck for tax purposes.

Keep these key points in mind:

• As an employer, always keep the employee’s most current W-4 form in their payroll file.
• Ensure that you enter the correct number of allowances into your payroll processing system.
• If an employee does not complete or sign the W-4 before their first payroll date, you must withhold federal income taxes as if they selected single filer status with zero allowances.
• After completion, store a signed copy of the W-4 form in your records since the IRS may request it.

Here is the W-4 form:

• Step 1: Collect the worker’s basic information (name, address, filing status).
• Step 2: Addresses employees who have multiple jobs, or who have working spouses. There are extra resources listed to calculate withholdings for these situations.

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• Step 3: Compute the number of dependents.
• Step 4: Adjust your withholding amount.
• Step 5: Taxpayer signs the form.

Create a W-4 Form Now

Once you have a completed W-4, you’ll need to collect additional information for the pay stub.

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Information Needed to Create a Pay Stub

Before processing payroll, ensure you gather the following details for each employee:

• Payroll cycle: The number of pay periods determines how much salary is paid on each payroll date. It also sets the start and end dates for calculating hourly wages.
• Wages: Employees may earn wages through a set salary or an hourly rate. Be sure to calculate both gross and net pay accurately.
• Tax withholdings: Federal, state, and possibly local taxes must be deducted based on the employee’s W-4 selections.
• Benefit withholdings: These deductions cover the employee’s share of insurance premiums or contributions to a retirement plan.

Since pay stub regulations differ by state, employers must verify whether they are required to provide pay stubs to workers in each state where they operate.

Employees should retain their most recent pay stubs as proof of income. Lenders often request this documentation when evaluating loan applications, and the paystub information confirms the borrower’s gross earnings.

Additionally, the pay stub information should align with each employee’s year-end W-2 form, ensuring consistency for tax filing purposes.

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Specific Information on a Pay Stub

Paystub information should display the following key details:

1) Gross Wages

Gross wages represent an employee’s total earnings before any withholdings or deductions. These amounts are calculated differently based on the employee’s pay structure:

• Salaried employees: Divide the annual salary by the number of pay periods in a year.
• Hourly employees: Multiply hours worked by the hourly pay rate.

In addition to base wages, gross earnings may also include extra compensation such as sick pay, holiday pay, or bonuses.

2) Hours Worked and Pay Rate

Tracking hours worked is especially important for non-exempt (hourly) employees. Paystub information should clearly display both regular hours (up to 40 per week) and overtime hours when applicable.

Additionally, the paystub information must specify all hours worked along with the corresponding pay rate for each. Some employees, such as those covered by union contracts, may receive a predetermined overtime or double-time rate.

Even though salaried employees receive a fixed wage, their pay stubs may still list hours worked for record-keeping purposes.

3) Tax Deductions

Employees determine their federal income tax withholdings by completing Form W-4. Additionally, each state has its own tax withholding form that may require separate documentation.

The Federal Insurance Contributions Act (FICA) tax helps fund Social Security and Medicare. In 2024, employees must contribute 6.2% of their income to Social Security, up to a wage limit of $168,600. Medicare tax applies to all wages at a rate of 1.45%, with an additional 0.9% tax for high-income earners. Combined, the total employee FICA tax rate stands at 7.65% in 2024.

Employers also contribute 7.65% toward FICA taxes, and they can deduct this cost as a business expense.

4) Benefit Deductions

Workers often pay a share of the insurance premiums for company-provided health insurance, and may contribute into retirement plan, such as a 401(k) plan. 401(k) contributions are made with pre-tax dollars, and the employer may add matching contributions.

5) Unemployment Taxes

Unemployment programs are funded by the FUTA tax (federal) and the SUTA tax (state). These amounts are paid by the employer, but also reported on the pay stub.

6) Net Pay

Net pay is the actual dollars paid to the worker, after all deductions.

*Additionally, the employee id on paystub is often listed to help verify pay records accurately. Employers must ensure that the employee id on paystub matches official HR records.*

Understanding Pay Stubs: Key Details and Why They Matter

For those unfamiliar with payroll documentation, what does a pay stub look like? A pay stub includes an employee’s wages, deductions, and net pay, structured in a clear format. Understanding what does a pay stub look like ensures accuracy when reviewing pay records.

But what important information is available on a pay stub? It includes gross pay, taxes, deductions, benefits, and net pay—all essential for financial documentation.

To ensure compliance and accurate record-keeping, employers should ask, what information is on a pay stub? A properly formatted pay stub provides a breakdown of wages, withholdings, and other payroll details. Workers should review what information is on a pay stub to ensure that their earnings and deductions are correct. For financial planning, knowing what information is on a pay stub can help track income over time.

Let FormPros Help!

Managing your finances doesn’t have to be overwhelming. Creating accurate paystubs is an essential part of maintaining organized records, staying prepared for tax season, and building financial security. With the right resources, this task can be straightforward and stress-free.

At FormPros, we simplify paystub creation with a platform that’s secure, user-friendly, and tailored to your specific needs. Beyond paystubs, we offer solutions for generating tax forms like W-2s and 1099-NECs, forming LLCs, acquiring a Registered Agent, and even creating voided checks. Whether you’re a freelancer, small business owner, or entrepreneur, we have the tools to support your success.

Don’t let paperwork slow you down. Visit FormPros today to explore how our comprehensive services can save you time, simplify your financial documentation, and empower you to focus on growing your business with confidence. Get started now and take charge of your financial management!

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Understanding Your Pay Stub: Earnings & Deductions Explained

Both employers and workers need to understand the information on a pay stub.

Employers must generate accurate pay stubs that match gross pay, tax withholdings, and other payroll amounts. Workers should review their pay stubs to ensure they received the correct wages, especially when confirming annual income on paystub documents for loans or financial planning.

But first….

What is a Pay Stub?

A paystub lists all of the key information related to an employee’s pay.

When you review a pay stub, it’s important to note the difference between current (current pay period) and year-to-date (YTD) amounts. Both are important, and the YTD balances help the employer and the worker understand if the amounts are correct.

The pay stub provides several types of information:

• Wages: Gross pay and net pay. Wages may be based on a salary, or calculated using an
  hourly rate of pay.
• Tax withholdings: Federal, state, and possibly local amounts withheld for taxes, including FICA on paycheck deductions.
• Benefit withholdings: Amounts cover the employee’s share of insurance premiums or go toward retirement plan investments.

The rules regarding pay stubs vary by state. Some states require employers to provide pay information to workers, while other states do not. Businesses should confirm the requirements in each state where they employ workers.

Employees should keep their most recent pay stubs as proof of income. If an individual applies for a loan, the pay stub confirms the borrower’s annual income on paystub records. Employers should keep pay stubs on file, if they are generated.

What does a pay stub look like?

A pay stub includes detailed breakdowns of gross wages, tax withholdings, deductions, and net pay. It helps employees track earnings, verify withholdings, and understand their total compensation.

The pay stub information should match the data on each employee’s W-2 form, which individuals use to file their personal tax returns. FormPros can help you with that as well.

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Specific Information on a Pay Stub

This information should be posted to each pay stub:

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Gross Wages

Wages earned before any withholdings or deductions are subtracted. Gross wages for a pay period amount are calculated in one of two ways:

• Salaried employees: (annual salary / number of pay periods in a year)
• Hourly employees: (hours worked X pay rate per hour)

*Gross wages may include additional compensation, including sick pay, holiday pay, or bonuses.*

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Hours Worked & Pay Rate

The hours worked total is particularly important for non-exempt (hourly) workers. The salary pay stub should include regular hours (up to 40 hours per week) and overtime hours.

The pay stub must detail all hours worked, and the rate of pay earned for each hour. Some workers, including those covered by union contracts, must be paid a specific rate of pay for overtime or double-time hours.

Salaried workers may also see hours listed on their salary pay stub.

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Tax Deductions

Workers determine their federal income tax withholdings amounts by completing Form W-4, and each state has a tax withholding form.

FICA (Federal Insurance Contributions Act) tax is collected to fund Social Security and Medicare programs. For 2025, the employee tax rate for Social Security remains at 6.2%, applied to income earned up to $176,100. The Medicare tax rate is 1.45% on all wages, with an additional 0.9% tax for high-income taxpayers. This brings the total employee FICA on paycheck rate to 7.65% in 2025.

Employers also contribute 7.65% for each employee, which they can deduct as a business expense. These employer contributions are typically detailed on employee pay stubs.

*FICA on a paycheck refers to the mandatory payroll taxes that fund Social Security and Medicare. Employees and employers both contribute, ensuring these essential programs remain funded. Workers should review their FICA on paycheck deductions to ensure they align with the correct rates.*

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Benefit Deductions

Employees typically share the cost of employer-sponsored health insurance by paying a portion of the premiums. Additionally, many contribute to retirement plans like a 401(k), which allows pre-tax contributions, reducing taxable income. Some employers also offer matching contributions, providing an added financial benefit to employees’ retirement savings.

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Unemployment Taxes

Unemployment programs are funded by the FUTA tax (federal) and the SUTA tax (state). These amounts are paid by the employer, but can also be reported on the pay stub.

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Net Pay

Net pay is the actual dollars paid to the worker, after all deductions.

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Take Charge of the Process

Creating accurate paystubs is essential, and technology can make the process easier and more efficient.

FormPros offers a user-friendly pay stub generator that simplifies the task, saving you time while ensuring accuracy. With FormPros, you can confidently manage your pay stub creation with ease.

Create Your Pay Stub Now

FormPros Has You Covered

Simplify your paperwork with FormPros! From creating paystubs, W-2s, and 1099-NEC forms to generating LLC Operating Agreements and even voided checks, our easy-to-use platform has you covered. Save time, reduce errors, and handle your business documents with confidence. Start now and see how FormPros makes professional form generation fast, affordable, and hassle-free!

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