The Taxes on a Pay Stub

by Grace Ferguson; Updated September 26, 2017

Though federal law does not mandate an employer to give employees a pay stub, many states do. A pay stub--also called a wage statement, pay advice or pay slip--gives a breakdown of the employee’s gross-to-net earnings for the reporting time frame. It shows her earnings and deductions; the latter includes her taxes withheld.

State Requirement

States that require an employer to give employees a pay stub generally list the information that should be included. The state may require that an employer put the deductions as a total amount or list each one separately. This includes mandatory deductions, such as taxes and wage garnishments, and voluntary deductions, such as retirement and health benefits.

The state may require the employer to give employees a pay stub each time they are paid, or otherwise, such as monthly; or it may require the employer to give pay stubs only to employees who are paid via direct deposit. Many employers give employees a pay stub even if state law does not require it, since it makes it easier for an employee to understand how he was paid.

Standard Taxes

An employee’s taxes withheld for the pay period may show on the pay stub under “current,” and the total withheld for the year may show under “year-to-date.” In most cases, employees pay federal income tax, Social Security tax and Medicare tax. State law varies, but most employees are required to pay state income tax; some pay city and local income tax as well. Depending on the employer, all of these taxes may show individually on the pay stub or as a total amount.

Abbreviations

Employers generally abbreviate the taxes listed on employee pay stubs. Abbreviations vary by employer, but the most common include FIT for federal income tax, SIT for state income tax, SS for Social Security and Med for Medicare. Social Security is sometimes listed as OASDI because it funds the old-age, survivor’s and disability insurance program. Social Security and Medicare are sometimes listed as FICA taxes because the Federal Insurance Contributions Act authorizes their collection. Year-to-date is abbreviated as YTD.

Calculations

The current federal income tax withholding amount listed on a pay stub is based on the employee’s filing status and allowances (as shown on her W-4 form) and the IRS withholding tax tables (as shown in IRS Circular E). In 2011, Social Security withholding is based on 4.2 percent of the employee’s taxable earnings, up to $106,800, and Medicare withholding is based on 1.45 percent of all his taxable wages. The employer uses its state revenue agency’s policies to figure the amounts for state, city and local income tax withholding.

About the Author

Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.