Your Paycheck & Withholding

• The amount of federal tax withheld from your pay depends on how many allowances you claim on your W-4.
• Social Security withholdings are used to fund Social Security benefits.
• Your paycheck may show deductions for insurance, retirement plan contributions or childcare assistance.

Paycheck stubs contain a lot of information, from federal taxes to Medicare to vacation balance. Regardless of how complicated or simple yours might be, all check stubs will show your gross pay — the total amount you earned before any taxes were withheld for the pay period. It will also show your net pay — the amount of your check after all withholdings.

Following are some common items you'll see on your paycheck stub.

Federal Tax

Federal taxes may be abbreviated Fed Tax, FT or FWT. This covers any expected tax you would owe the federal government when you file a tax return. The amount withheld from your pay depends on how many allowances you claim on your W-4 when you started your job.

State & Local Taxes

State taxes may be abbreviated St Tax, ST or SWT. Your paycheck may also show the abbreviation of the state for which the tax is being withheld (for example, IL tax). Depending on where you live, you may not have state withholding or you might have withholdings for more than 1 state (the state you live in and the state[s] you work in).

Local taxes may be withheld on wages earned inside city, county and school district boundaries. If you live or work in a jurisdiction that levies a tax, wages will be taxed by that jurisdiction.

Social Security & Medicare

Social Security may be abbreviated SS, SSWT or OASDI. Even if you have $0 withheld for federal, state and local income taxes, you generally must have Social Security and Medicare taxes withheld. If you earn at least a specified amount for at least 40 quarters, you'll be able to receive Social Security benefits when you retire. The amount withheld for Social Security is 6.2% of your gross income (up to income of $97,500). Your employer pays an additional 6.2% for you that doesn't come out of your check.

Medicare may be abbreviated MWT or Med. This amount is withheld so you'll be covered by Medicare when you reach age 65. The amount withheld from your pay is 1.45% of your gross income. Your employer pays an extra 1.45% that doesn't come out of your check. There are no base income limits, and all covered wages are subject to Medicare tax.

Year-to-Date

Your paycheck stub may also show year-to-date totals. This information is good to have, especially at the end of the year. Save the last check stub to compare with your W-2. The amounts on the last check stub and the W-2 amounts should match.

Other Withholdings

Your paycheck stub might show deductions for health or life insurance. If it does, your stub will probably show whether the premiums were deducted "before tax" (which will reduce the income that you pay tax on to the federal, state and local government) or "after tax."

Some employers offer their employees the chance to contribute to retirement plans, such as 401(k)s. Others offer childcare or adoption assistance. Whether your stub will show deductions for these items or other items depends on what benefits your employer offers and whether you chose to take advantage of them.

If you have questions about other amounts on your paycheck stub, check with your manager or your human resources department.

Underwithholding is the leading culprit for owing during tax filing season. Just remember, if you don't withhold enough during the year, you will definitely finding yourself owing at tax time. Most tax resolution services find that a great percentage of their clients underwithhold during the year. Non-filing and underwithholding will get you in the hot seat with the IRS.

One key issue to remember is that the IRS has and will use their authority to contact your employer and predetermine the number of exemptions that you withhold during the year.