A paycheck is more than just a piece of scrap paper. It’s a record-keeping document that helps you track your earnings and deductions, to plan ahead for taxes and savings and to stay on top of your other benefits. Take a few minutes to learn the parts of a paycheck and how to review it each month for errors. You work hard, so you need to make sure you’re getting paid correctly.

What is a paycheck?

A paycheck is a document your employer uses to deliver your pay and information about your pay. A paycheck typically includes an actual check you deposit and a pay stub. The pay stub is a record-keeping document that you might need to use when applying for a rental home or mortgage or when working with a tax or financial professional. It tells you how much you earned that pay cycle and tallies how much you earned year-to-date. You can refer to your pay stubs throughout the year for things like retirement savings planning or tax planning.

What is an electronic paycheck?

It’s more common for many people these days to get paid electronically through direct deposit to their banks. If your employer uses a direct deposit system, you might never see a paper paycheck unless there is something wrong with the electronic system.

If your employer offers direct deposit, we recommend taking it. You won’t have to worry about getting to the bank in time or losing the physical check and needing to replace it. You can set up direct deposit to go into checking, savings or a combination of both — letting you automate deposits and make reaching your budget goals easier.

Even when employers offer direct deposit, sometimes first and final paychecks are given to you in person. When you start or leave a job, make sure to ask how you’ll be receiving your first and last paycheck and how long it will take to receive it.

Why should I review my paycheck?

It’s a good idea to review your paycheck and pay stub every pay period, just to make sure there aren’t any errors. You’ll be looking at your actual pay, any taxes you paid and any contributions you’ve made to things like health insurance, retirement savings and flexible spending accounts (FSAs).

If your employer pays you through direct deposit and does not give you a paper statement, you should have access to a website where you can go to review your pay and download pay stubs if you need to. With everything handled electronically, it’s easy to forget about checking in. We recommend reviewing your documents at least once a month, to make sure there aren’t any errors.

Your paycheck should not be a mystery. If you see something that might look wrong, ask your payroll or human resources manager.

What should I look for on my paycheck?

There are basic information pieces to look for on paychecks and pay stubs when reviewing them for errors:

Personal Information

Your personal information usually includes your name, address and Social Security number. When reviewing your paycheck and pay stub, make sure this information is correct.

Pay period

The pay period is the length of time during which your pay is calculated — usually weekly, bi-weekly or monthly.

Check date

This is the date that you’ll be able to cash or deposit your paycheck or, if your employer uses direct deposit, when the funds will be available in your bank account. This is important to know because it helps you plan ahead to make sure there’s enough money in your account to cover any payments or transfers.

Gross pay

This is the total income you’ve earned during the pay period before any taxes, withholdings, payments or contributions have been taken out. When you negotiate a salary before you start a job, typically you are negotiating your amount of gross pay.

Check amount

Your check amount is your net pay. Net pay is the total amount that your check is written for after all taxes and other relevant deductions have been taken out.

Direct deposit

This is the amount of money subtracted from your gross pay to cover things like taxes, Social Security and Medicare, any health insurance-related payments, any retirement contributions and any pre-tax payments for things like commuting, FSAs or childcare benefits. All your deductions will be listed on your pay stub. Many employers offer pre-tax contribution programs for retirement, FSAs, childcare and commuting. If you signed up for these programs, you’ll see them listed in the deductions area of your pay stub.

Current earnings

Your current earnings show the amount of pay you earned during the most recent pay cycle. It may include things such as overtime worked, bonuses, paid-time off sick leave or other types of compensation.

Year-to-date earnings (YTD)

Your year-to-date earnings show the pay you have earned so far for the year. It may include things such as overtime worked, bonuses, paid time off, sick leave or other types of compensation. The last year-to-date statement you receive will come in the form of a W-2 form or 1099-MISC form (if you are freelance or an independent contractor and did not pay taxes). You will use these forms to file taxes for that year.

Social Security and Medicare

Social Security is sometimes abbreviated on your pay stub as SST, SS or FICA (Federal Insurance Contribution Act). Medicare is abbreviated as MWT, MT or Med. The government requires that a certain percentage of your pay be withheld for these programs. Your employer matches this amount, though you don’t see that on your pay check.

Social Security and Medicare are programs set up by the government to assist you in retirement or if you become disabled. They are the biggest retirement asset that most Americans receive. When you retire, Medicare will be your basic health insurance, provided by the government. Social security is an automatic retirement benefit you receive, also provided by the government.

Federal, state and city income taxes

If you are an employee of a company or organization, income taxes are automatically deducted from your pay. Taxes are what federal, state and local governments use to fund important social programs like education, transportation and safety. When you are first hired, you fill out a W-4 form.

The number of exemptions you claim on this form determines how much will be withheld, or taken out, in federal taxes from each paycheck. If you overpay or underpay federal taxes through your withholding, you’ll either receive a refund or owe when you file your tax returns. Federal tax is abbreviated as FWT, FT or Fed Tax. State tax is abbreviated as SWT, ST, ST Tax.

Where should I keep my paychecks?

Paychecks and pay stubs contain a lot of personal information — from your name and address, to your Social Security number, to your pay amount, your retirement contributions and more. If someone were to get their hands on your documents and use them for identity theft or fraud, it could mean financial trouble for you.

Keep your pay stubs filed away someplace safe. You only need to keep your pay stubs until you receive your W-2 or 1099-MISC tax forms at the end of the year. If you check and the numbers match, you can get rid of your stubs. Never simply put them in the trash or recycling — and always shred or destroy them before throwing them away.

Words to know

Unsure about something you read? Many of the financial terms you came across in this article are defined in our financial glossary. A-Z Glossary

Links we like

Here are a few online features you might find useful:

• IRS Withholding Calculator: www.irs.gov/individuals/article/0,,id=96196,00.html
• IRS Payroll Service Providers list: www.irs.gov/efile/lists/0,,id=101120,00.html
• BankRate Payroll Deductions Calculator: www.bankrate.com/calculators/tax-planning/payroll-tax-deductions-calculator.aspx
• U.S. Social Security Administration: www.ssa.gov
• Medicare: www.medicare.gov/default.aspx