By Greta Nickerson
Before I became a Payroll Specialist, I must confess I never paid much attention to the upper half of my pay stub (you know, the part above the fold that lists out a bunch of information in small print). My hours and taxes always seemed correct, and I didn’t have the time to research what the rest of it meant. After learning the ins and outs of the payroll system, I now understand the fine print, and have the opportunity to help employees understand their checks every day. Here are a few of the things that I’ve learned….
- If you work in Oregon, you may notice a small tax coming out of your check (usually under $2.00). It is the Workers’ Compensation Assessment, and is calculated based on the number of hours an employee works. Employees and employers pay equal portions of the tax, and the funds collected are used to help workers who have been injured on the job.
- There are two other types of taxes that both employees and employers pay – FICA Social Security and FICA Medicare. FICA stands for Federal Insurance Contributions Act. These taxes are indirectly tied to the benefits that we receive when we become eligible for these benefits. FICA Social Security is calculated on the first $106,800.00 an employee makes each year, and is a flat 6.2%. (Dec 2010 Update: new legislation has recently passed for the 2011 year that will drop the FICA Social Security tax rate to 4.2% from 6.2%, a 2% cut in employee-paid payroll taxes. This tax cut is meant to be temporary and only for the 2011 tax year.)
- FICA Medicare is calculated on all wages during the year, and is a flat 1.45%.
- Post-Tax vs. Pre-Tax: when anything is deducted from your check (besides taxes), there are two types of deductions. Post-tax means the amount is taken from your check after taxes are calculated. Pre-tax means the amount is taken before taxes are calculated. Some deductions, like flexible spending, are pre-tax from all taxes. Others, like 401(k) deductions, are only pretax from Federal and State taxes.
- The name printed on your paycheck must exactly match your name as it appears on your Social Security card. For example, if your SSC reads James, your check cannot say “Jim”. This requirement relates to tax reporting. If there is a discrepancy, your taxes may not be credited to your social security number. Help your payroll department by taking a look at your check to make sure your name exactly matches your social security card.