It is crucial to review your paystub each time you receive it for your financial health. If you have a 401k, HSA, FSA, or Dependent Care FSA, it is especially important that you review your paystub regularly so that you can confirm that these accounts are being funded properly. You should also check your federal withholding percentage year-to-date (YTD) in order to ensure that the correct amount is being deducted from each paycheck.
Reviewing Your Paystub
When reviewing your paystub, there are several key factors to look out for. First and foremost, if you have any kind of retirement account (401k, IRA, etc.), make sure that the contributions are being funded according to what was agreed upon with your employer in order to take full advantage of these tax savings. Additionally, if there is a Health Savings Account (HSA), Flexible Spending Account (FSA), or Dependent Care FSA associated with your job, make sure that these accounts are currently funded and active as well.
Another factor to consider when reviewing your paystub is the federal withholding percentage YTD. This will tell you exactly how much money has been taken out of each paycheck by the IRS as taxes throughout the year so far. This is important because if too little money has been withheld from your paycheck it may result in a massive bill come tax season; too much money withheld means less take-home pay than necessary throughout the year. This could lead to potential lost income and savings opportunities due to not having access to those extra funds.
Finally, check for any errors on your paystub such as incorrect deductions or incorrect summation of wages and taxes owed – this helps ensure accuracy and fairness when it comes time for filing taxes at the end of the year.
Taking a few minutes each month to review your pay stub ensures that all of your financial responsibilities are up-to-date and accurate – this includes making sure retirement accounts have accurate contribution rates, health savings accounts are properly funded, and flexible spending accounts are active and properly funded. Plus, confirm your YTD withholdings for federal taxes accurately reflect the amount owed when filing annual returns in April. By taking just a few moments monthly throughout the year, you can help secure significant financial rewards come tax season!
Lincoln Financial Advisors and its representatives do not offer tax or legal advice. Individuals should consult their tax or legal professionals regarding their specific circumstances.