Paystub Guides

There is no single federal template for a pay stub. What exists instead is a federal recordkeeping duty under the Fair Labor Standards Act - employers must keep accurate records of hours and wages - layered with state rules that decide whether the employee actually receives an itemized statement, how detailed it must be, and whether it can be electronic only.

In practice a defensible stub carries five blocks: employer identity, employee identity, the pay period and pay date, current-period earnings broken out by type (regular, overtime, bonus, tips), and deductions separated into taxes and everything else. Year-to-date columns sit beside the current-period figures. Net pay is what remains, and it should equal gross minus the sum of every deduction listed - if it does not, the stub is wrong, and anyone verifying it will notice.

FICA is the usual source of confusion. It is not one tax but two: Social Security at 6.2% of wages up to an annual wage base that is adjusted each year, and Medicare at 1.45% with no cap at all. Employers match both. High earners also pay an Additional Medicare Tax of 0.9% on wages above $200,000, which the employer withholds but does not match.

Federal income tax withholding is not a flat rate. It is an estimate driven by the employee's Form W-4, which since its 2020 redesign no longer uses allowances. Two people earning identical wages can have very different federal withholding purely because of what they entered on their W-4. State and local taxes then vary enormously - several states impose no income tax at all, while others add disability or family-leave contributions that appear as separate lines.

Pre-tax deductions matter more than their size suggests. A 401(k) contribution or a Section 125 health premium reduces the wages that income tax is calculated on, which is why taxable wages in Box 1 of a W-2 are often lower than gross pay on the final stub of the year. That gap is normal and expected - it is not an error.

For tax years 2026 and later, employers are required to separately report qualified overtime compensation and cash tips. Form W-2 gained Box 12 code TT for qualified overtime compensation and code TP for cash tips reported to the employer, and Box 14 was split so that Box 14b carries the Treasury Tipped Occupation Code.

This flows from the deductions created by the One, Big, Beautiful Bill: for tax years after 2024 and before 2029, workers may deduct up to $12,500 of qualified overtime compensation ($25,000 for married filing jointly), and up to $25,000 of qualified tips in occupations the IRS lists as customarily tipped. Qualified overtime is only the premium portion - the 'and-a-half' of time-and-a-half required under FLSA section 7 - not the whole overtime paycheque. Stubs that track those amounts through the year make the December reconciliation straightforward instead of forensic.

Landlords typically ask for the two or three most recent stubs and apply a rent-to-income rule, commonly requiring monthly gross of roughly three times the rent. Mortgage underwriters go further, matching stub year-to-date figures against W-2s and tax transcripts, so a stub whose YTD column does not agree with the annual form invites questions.

Self-employed and contract workers have no employer issuing stubs, which is precisely why generating accurate ones from real income records matters. The document has to reflect money that actually moved - inflating it to clear an approval threshold is fraud, and the reconciliation against bank deposits or 1099s is exactly where it surfaces.