When you start your first job, the promise of payday is so exciting! But often, that first check comes with a little disappointment when you realize that you are actually getting less money than you may have thought. Let’s talk about why.

A: Your paystub will have your personal and check information. This will include your name, address, social security number and your employee ID number. It should also include a pay period (the range of dates you worked that should be accounted for with this check), a check date (the date on which you were paid), and a check number.

B: There should also be a section called Net Pay Allocations, which should tell you if you are getting a physical check or if your money is being deposited directly into your bank account. This will include the total Net Pay, also known as Take-Home Pay, for this paycheck and the total net pay for the entire year so far (Year to Date or YTD). 

C: What you earn from your wage or salary is called your Gross Income. In this example, Darcy worked 12 hours at a rate of $11/hour for a total Gross Earnings of $132. YTD stands for Year To Date, which shows the total amount of hours worked and the total amount of money earned so far in the calendar year. Darcy worked a total of 209.75 hours so far this year, which means she earned $2,307.25 so far this year.

D: The Withholdings section tells you how much money is taken out of your paycheck for Social Security, Medicare and taxes. Social Security deducts 6.2% of your gross income. In Darcy’s case, that is $8.19 for this pay period and $143.05 for the YTD.  Medicare deducts 1.45% of your gross income. Darcy had $1.91 taken out of this check and $33.46 taken out over the year. How much money the Arkansas state income tax removes from your paycheck depends on your filing status and how much you make per year. Because Darcy makes less than $4,499 per year, she pays less than 1% in state income taxes. Only $8.06 of state income taxes was taken out of Darcy’s earnings for the YTD.

E: Now that we know Darcy’s Gross Income and what will be withheld from her paycheck, we can determine her Net Pay. For this paycheck, Darcy’s gross income was $132. There was $10.10 withheld because of Social Security and Medicare taxes. Therefore, Darcy was able to take home $121.90. For the YTD, Darcy’s gross income was $2,307.25 and $184.57 was withheld because of SS, Medicare and AR state income taxes. Therefore, Darcy’s YTD take-home pay was $2,122.68.