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.
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.
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.
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
This indicates your full salary or hourly wages pre-tax deductions.
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:
- Garbage collection.
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.
- Road maintenance.
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 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.
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:
This is the total income that the employee has earned during the year, before any deductions are made.
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.
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.
This is your total salary or hourly wages before deductions are cleared.
This amount indicates what you’ll take home after taxes and other deductions.
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.
This stands for ‘overtime pay’ and indicates work done past an employee’s regular working hours.
This section indicates ‘additional earnings’. It’s used to report any income received above a regular salary.
Additional Pay often includes:
- Paid time off.
- Wellness bonuses.
- Stipend for expenses
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.
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.
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.
This term reflects compensation received for attending jury duty and will be included when your taxable income is calculated.
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 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.
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.
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.
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.
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
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.
This term stands for ‘dependent care reimbursement.’ It’s used to refund you for any dependent care expenses paid out of pocket.
- Childcare for children under the age of 13.
- Caring for a spouse or relative who is incapable of doing so themselves.
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.
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.
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.
This abbreviation indicates any child support payments that are deducted directly from your paycheck.
This term indicates ‘student loans.’ It represents an amount deducted from your salary by your employer to repay your student debt.
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.
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.
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