After earning your paycheck, you will come across detailed information which gives an analysis of the earnings and any deductions that have been made. Sometimes it can be challenging to understand the codes used in the pay stub and the following are some of the top details you should know about it.
Everyone must pay for the Medicare program which is instituted in the Federal Insurance Contribution Act. When you see the FICA Med Tax abbreviations, then you should know that you are paying for the Medicare program insurance, which facilitates those who are above 65 years and people that qualify for Medicare insurance.
The FICA SS Tax in your pay stub is meant for the Social Security tax that you pay, which is also instituted in the Federal Insurance Contribution Act. When you pay for the FICA SS tax, you should know that you are supporting those who are disabled and retirees and appropriate time to get the benefits of this program is when you have attained the retirement age of 67 years.
If your state levies income tax, then your pay stubs will have a detailed section which dictates the amount you are required to pay for the state tax. When you live in the states such as Nevada, Alaska, Texas, Washington or Florida, you will not be required to pay state taxes, and when you check your pay stub you will realize that it will have a blank space where you are supposed to pay the state tax.
You will also be required to pay federal tax which does not entail Medicare or Social Security and the amount vary significantly for every citizen depending on the number of their allowances and tax rate. The reason why federal tax varies is because of various other factors such as the retirement contributions you make, the amounts of pre-tax expenses, additional health insurance costs, and employee benefits you get.
Pay stubs for people who live in California are slightly different because they contain State Disability Insurance popularly referred to as SDI. Whether you are taking a disability leave or family leave, your employer is responsible for paying you like a certain percentage of your salary which takes care of the Paid Family Leave or the Disability Insurance Leave.
When you check your pay stub, you will also notice the section which covers all different types of covers that you may have such as health insurance, cafeteria plan, or retirement plan among others. Signing for most of these plans can ensure that you reduce the amount that you will be taxed. The pay stub will vary from one state to the other, but having this necessary information will ensure that you are prepared for the deductions.