Looking at Your Spending and Debt

Figuring Out Your Paycheck

If you are company-employed, your paycheck is a valuable source of financial information. It shows gross pay, a detailed list of deductions, and net pay. Part of understanding where all the money goes is knowing what these amounts are for. Below is a sample paycheck, complete with explanations.

Below is a sample paycheck for someone who is paid twice a month. The date of the check is the end of May, so it is the tenth pay period of the year. Your check might have different abbreviations or different deductions. If you are unsure of what something on your own check means, call your payroll office for an explanation.

XYZ Corporation

Juniper, Jennifer J.

Pay period ending 5/31/20xx

Earnings

Current

YTD

Tax/Deductions

Current

YTD

Regular Earnings (1)

$1,250.00

$12,500.00

Federal Tax (3)

$128.45

$1,284.50

Overtime (1)

 

 

OASDI Tax (4)

 77.50 775.00

Vacation (2)

5.00

50.00

Medicare Tax (4)

18.12

181.25

Personal Days (2)

2.50

25.00

State Tax (5)

50.00

500.00

     

401(k) Contribution (6)

125.00

1,250.00

     

Medical Insurance (7)

50.00

500.00

     

Life Insurance (7)

10.00

100.00

     

Total Taxes

274.07

2,740.70

     

Total Deductions

185.00

1,850.00

     

Total Taxes and Deductions

459.07

4,590.70

 

Earnings

Minus Taxes

Minus Deductions

 Equals Net Pay  

Current

1,250.00

274.07

185.00

790.93

 

Year to Date

12,500.00

2,740.70

1,850.00

7,909.30

 

(1) Regular Earnings and Overtime. The "gross" (total) amounts you are paid for your work.

(2) Vacation and Personal Days. The amount (usually in hours) you have "banked."

(3) The amount of federal income tax you had withheld. This is based on the W-4 form you filed with your payroll department. It may be too much or too little. If you owed a lot of money with your tax return or received a big refund, you should think about changing your W-4.

(4) These are the two components of the Social Security tax. OASDI (Old Age, Survivors, and Disability Insurance) used to be known as FICA (Federal Insurance Contributions Act) and is still called that at some companies. The Medicare portion has now been split off, and is shown as a separate amount.

(5) The amount of state tax you had withheld. It may be split up into several parts (there might be a separate state unemployment tax amount, for example.)

(6) This shows the amount that is withheld from your paycheck and deposited into your 401(k) account. Contribute the maximum you can on a pre-tax basis so you won't have to pay income taxes on that amount. If your employer matches your contribution, that amount may also be shown.

(7) These are the amounts you are paying for insurance. How much you pay will depend on what your employer contributes and the type of plan you have chosen.

IMPORTANT NOTE: Make sure that the income tax you have taken out of your pay is just enough to cover your liability. Having too much taken out can mean "lending" the government money at no interest, and having too little deducted might lead to underpayment penalties.

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