Sometimes, when pay stubs fill up a drawer or file cabinet, you have to wonder why you’re keeping so many of these around. For employers, this is multiplied many times! What is a pay stub used for?
Keeping these records, whether in physical form or digital, is important for both businesses and employees. Let’s take a look at the basics of the pay stub!
What Is a Pay Stub
The pay stub tells you a lot of information about an employee’s pay. It lists the wages earned for the current pay period and the overall year-to-date payroll. The pay stub shows things like taxes and other deductions removed from an employee’s paycheck, as well as the net pay an employee receives.
What does a pay stub look like? Use this paystub generator to generate a stub and take a look at all the information it has! All of it is important information for both employee and employer to know.
What Is a Pay Stub Used For
Both the employer and the employee can use the details listed on a pay stub. The stubs act as records of the employee’s wages. They can use that info to make sure they got the right pay, and understand what, if any, deductions were made.
The employer can use an employee’s stub to help settle any issues with an employee’s pay. Pay stubs are also needed to fill out the employee’s Form W-2 at tax time. This is all-important information, especially for employees working on a budget.
Importance of Pay Stubs
Depending on what state the business resides in, keeping copies of an employee’s pay stub may be required by law. In fact, payroll records are a very important thing for employers to hold onto, and keep them very well organized, in case of emergencies such as an audit by the IRS. Not only that but when tax season is upon us, the collected information from all the employee pay stubs will be a great help.
For employees, taxes are, of course, the main reason to hold onto them, but the information on them can help with other things, too. For instance, it can be used to prove stable employment for loans or leases. It can also be used to prove the place of residence, as well, if your home address is listed on it.
What to Do With a Pay Stub
For employers, you need to make sure you are following the law when holding onto an employee’s financial records. The Fair Labor Standards Act requires at least three years. The easiest way to keep a large volume of records like this is to do it digitally.
As for employees, they should hold onto them for about a year. Once they have their Form W-2, you can use your old stubs for their taxes, then they can get rid of them. But it is a personal choice, they aren’t really needed, but can be kept for some peace of mind.
Pay Stubs Are Important
What is a pay stub? It is an important tool for both employers and employees. They help with record-keeping and financial security.
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