A paycheck generally includes a bewildering collection of terms, acronyms and numbers that detail your gross earnings as well as numerous adjustments and deductions to arrive at your take-home pay. Adding to the confusion, employers are not required to use consistent terminology on earnings statements, meaning you could receive paychecks from two different employers and each one will refer to the same thing in different ways. An example of this is the FIT deduction. Some employers use the acronym FIT to indicate deductions for federal income tax.
Employees generally receive a paycheck along with additional information – an earnings statement – explaining how the amount on the check was calculated. The information can be printed on a pay stub attached to the check or can be provided as a separate document. The earnings statement also includes information on accrued sick leave, annual leave and other benefits such as contributions that were made to a retirement plan.
Gross Pay and Net Pay
Your earnings statement indicates your gross pay, which is the total amount of money earned for the pay period prior to any deductions. The statement also has an entry for net pay, which is the actual amount of money you have left, known as take-home pay, after reductions are made for federal and state taxes as well as Medicare and Social Security contributions and other deductions.
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FIT represents the deduction from your gross salary to pay federal withholding, also known as income taxes. FIT deductions are typically one of the largest deductions on an earnings statement. How much you can expect to come out of your paycheck in federal income taxes depends on your age, filing status and level of income you earn.
The federal government also requires deductions from gross earnings for Social Security and Medicare. The current tax rate for Social Security is 6.2%, paid for by the employer and 6.2% paid for by the employee, for a total of 12.4%. The current rate for Medicare is 1.45% paid for by the employer and 1.45% paid for by the employee, for 2.9% total. There are generally deductions for state or local taxes as well. Deductions for other categories may also be listed, such as union dues or employee contributions to retirement plans.
Earnings statements typically contain information beyond an accounting of gross earnings, deductions and net pay for the pay period. The details vary from employer to employer, but earnings statements often include cumulative earnings and deductions for the year, the amount of annual leave accrued and used, summary of sick leave accrued and used, details of hours worked and the types of hours, such as straight time or overtime.