Paystubs are financial records given to employees each pay period, showing their gross income, tax withholdings, and other relevant deductions and contributions. Thanks to that, employees can clearly see their pay breakdown, as well as the final net income indicated at the end of the document.
Although employers are not required to issue paystubs by federal law, some states’ rules may vary. On top of that, it is simply good accounting practice to provide them to employees since they act as receipts and may serve as proof of payment for mortgage applications and similar purposes.
How Are Paystubs Made?
Generally speaking, employers use a pay stub maker or generator to create paystubs. Such software is easy to come across nowadays, making the process quick and straightforward. However, if you choose to generate a paystub manually, here is how to do that in five steps:
- Begin with the total gross pay for the pay period in question.
- Add tax withholdings and deductions, including federal, state, and local taxes, if applicable.
- Include health insurance deductions and retirement plan contributions.
- Add any other potential deductions, such as insurance coverages or charity donations the employee has elected to pay.
- Calculate net pay and make sure it is the same as the amount on the employee’s paycheck.
In addition to the financial information, you should also include the pay period and the employee’s name, address, and social security number. Once all the details are written down, attach the pay stub to the check or submit it online according to your company’s policy.
Who Should You Make Paystubs for?
Paystubs should be made for anyone who receives a salary – in other words, all employees of a company. In that same vein, you can issue paystubs to yourself even if you are the owner of the company. The only condition is a regular salary.
However, if you own a sole proprietorship, a partnership, or an LLC taxed as one of the two, there is no need to create or issue paystubs. The reason is simple – any income you receive from these business entities is not a salary. Instead, it is considered a profit distribution among owners. But if you hire any employees, they will be receiving a salary, so you can provide them with paystubs.
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Make a Paystub Online
Typically, making a pay stub is a relatively simple but tedious process that may take your attention away from more important aspects of your business. Luckily, as mentioned before, there’s no need to calculate all required amounts manually or generate a pay stub from scratch. There is computer software, as well as online programs and templates, that can do everything for you.
If you use an online pay stub maker, all the calculations will be completed automatically. However, you do need to input current federal and state percentages, as well as other relevant information. So, make sure to gather all the details before turning to the software for assistance.