Many of you have the habit of folding and keeping your pay stubs either in your pockets, wallets, purses, or in your cars. We take these important receipts of our income for granted, not realizing why it is important to know how long to keep pay stubs.
However, these receipts of your income can be very important in the calculation of your income or taxes.
Irrespective of you being an employee or employer, it is not how long to keep pay stubs but how to organize these pay stubs in a way that they can be used to claim tax benefits or other reasons that matter.
What information do these pay stubs contain?
These important periodical documents contain a treasure trove of important information, which includes-
Identification information: These earning statements help verify your presence, the name of your employer, and specific dates and times that may prove useful in the future.
Gross wages: This denotes the total amount of wages earned without the deduction of taxes in a selected pay period.
Deductions/Taxes: These money records help to account for where the wages were spent, how much tax you paid, and the deductions you receive on your paycheck.
Net pay: Finally, you know how much you take home after the tax and other deductions.
Why is it important to retain these pay stubs?
Though you do not need to retain these pay stubs permanently, you do need to keep these important wage receipts carefully filed for proof of income. As a rule of thumb, you should keep these stubs with you for at least a year or so. This is needed for the calculation of your social security contributions and your W2 forms.
These pay slips help to acknowledge that you are paying the right amount of taxes. Once you have paid your taxes, your tax returns will help find out how much money you made in a financial year.
Another reason to retain these pay slips is when you are job hunting. A prospective employer would want to know how much you made in your previous job. If you are applying for a loan or a line of credit, the bank will need to see your pay stubs to authenticate your credentials.
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Why employers should retain the pay stubs
Primarily, employers should keep their pay stubs to comply with legal requirements. In fact, the Equal Employment Opportunity Commission (EEOC) has laid down rules stating how long employers should keep their pay stubs.
Additionally, these retained pay stubs are important in case any employee has a complaint with his salary dues. The company also needs these payslips to complete certain HR or admin-related business tasks. For small businesses, retaining payslips are important as they have to do the payroll accounting themselves if they do not have a person available for it.
Related Article: Payroll Tax vs Income Tax: What’s the Difference?
When to discard these pay stubs
Once you have filed your tax returns, you can then safely discard your pay stubs. Remember, they contain a lot of personal financial information. Do not just throw these in the bin just the way it is. Instead, you should shred it before throwing it away. Failure to do so could become an opportunity for criminals to access your personal records.
Summing it up
Your pay stubs are important documents that have their uses. It is best to keep them filed and organized so that you can refer to them as and when needed. At onlinepaystubgenerator.com , you can keep your pay stubs organized virtually so that it is available when needed.
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