How Long Should You Keep Your Pay Stubs?
Whether you are an employer, formal employee, or independent contractor, there are many important reasons why you should hold on to your pay stubs.
Not only can pay stubs streamline tax filing, but they also help businesses to avoid legal trouble in the event of an audit.
Individuals can use pay stubs to open bank accounts, get loans, and ensure that their wages and deductibles are accurate.
In this article, we outline everything you need to know about how long you should keep pay stubs and why.
We also share the best ways to create and store your pay stubs to ensure you have access to them when you need them.
Key Takeaways
- Pay stubs are documents detailing an employee or independent contractor’s earnings and deductions during a specific period.
- Pay stubs should be kept for at least 12 months or until your W2 or annual Social Security tax forms have been filed.
- Employers should hold on to important financial documents like pay stubs for at least three years to cover themselves in the event of investigations and audits.
- Storing your pay stubs digitally is one of the best ways to ensure that you have everything you need in one place when tax season rolls around.
What Are Pay Stubs?
Pay stubs document an employee’s earnings and total deductions during a specific pay period.
These documents also indicate how much income taxes, Social Security contributions, and other benefits are deducted from an employee’s salary or wages.
What information is documented on a pay stub?
A pay stub typically contains the following information about an employee:
- Their personal details, including their full name, postal address, and Social Security number.
- Their employer’s address.
- Their number of hours worked.
- Gross pay, before deductions.
- Any taxable deductions and benefits.
- Net pay, after deductions.
Do Employers Have to Provide Pay Stubs?
The Fair Labor Standards Act (FLSA) states that employers must keep a record of:
- Each employee’s personal information, including their full name, address, and sex.
- Any information relating to an employee’s compensation. This includes hours worked, weekly or hourly rates, overtime, and deductions.
Although employers are required to record employees’ compensation, they aren’t necessarily required to provide them with digital or paper pay stubs.
Depending on state laws, employers might not have to provide pay stubs at all. Below we outline which states require employers to issue pay stubs, and which don’t.
States where employers are required to issue pay stubs
- Alaska.
- Arizona.
- Idaho.
- Illinois.
- Indiana.
- Kansas.
- Kentucky.
- Maryland.
- Michigan.
- Missouri.
- Montana.
- Nebraska.
- Nevada.
- New Hampshire.
- New Jersey.
- New York.
- North Dakota.
- Oklahoma.
- Pennsylvania.
- Rhode Island.
- South Carolina.
- Utah.
- Virginia.
- West Virginia.
- Wisconsin.
- Wyoming.
States where employers aren’t required to issue pay stubs
- Alabama.
- Arkansas.
- Florida.
- Georgia.
- Louisiana.
- Mississippi.
- Ohio.
- South Dakota.
- Tennessee.
While some states don’t require pay stubs to be issued to employees, many formal institutions, like banks, need them as proof of income and employment.
This means that employees may need to create their own pay stubs. If this is the case, employees can use their contracts to find how much they earn.
Online platforms can help employees and independent contractors calculate the deductibles they need to include in their pay stubs.
For example, tools like Form Pros make it easy to create customizable pay stubs in a matter of minutes.
You can also include the details of your salary, add deductions, and calculate accurate total earnings.
How to Get a Pay Stub as an Independent Contractor
Independent contractors are self-employed individuals that provide services to different companies and clients.
Some examples of independent contractors are writers, florists, painters, and graphic designers.
Since independent contractors aren’t classified as formal employees, independent contractors often don’t receive pay stubs.
They would have to use invoices and other wage agreements they receive from their clients to create their own pay stubs.
Why Do You Have to Keep Your Pay Stubs?
Employers, employees, and independent contractors have to keep their old pay stubs for a number of reasons. Let’s take a look at what those are.
Employers
Business owners are required by law to keep an accurate record of their employees’ information, including details that relate to compensation.
If businesses don’t have financial statements like pay stubs on hand, they may find themselves on the wrong side of the law in the event of an audit or investigation.
Let’s say an employee files a complaint about their wages with their employer.
If the business owner has sufficient documentation that details the employee’s earnings and deductions, they can avoid legal action and settle the complaint more easily.
An employer can also use pay stub records when filing an employee’s income tax returns.
These documents can help the employer ensure that the employee’s deductible amounts and earnings are correct. This makes reporting employee income tax on a W-2 form much easier.
Employees and independent contractors
Although there is no law that requires employees or independent contractors to keep their paycheck stubs, doing so has a few advantages.
It helps to make sure that you are paid correctly
When you receive your pay stubs, you can check and keep track of your earnings and deductions.
This helps you ensure that the right taxable deductions are subtracted from your wages and that you are being paid in line with your employment agreement.
You can use pay stubs as proof of income
Many formal institutions need proof that you have a stable income or form of employment before you can use their financial services.
Banks, for example, won’t allow you to take out a loan or apply for a credit card without proof of income.
You can use pay stubs as proof of income since they show that you will be able to repay debts.
Pay stubs can also be used as proof of income to apply for insurance, home loans, and rental agreements.
Pay stubs can make filing taxes easier
You need to use your pay stubs when you file your taxes to calculate wages and deductions on your W-2.
Your annual income will indicate how much tax you’ll need to pay, your health and other insurance premiums, and the Social Security benefits you are eligible for.
It’s important to ensure that these amounts are accurate to ensure that you don’t pay too much or too little.
Since pay stubs indicate your tax deductible amounts, keeping your pay stubs can help you keep track of these payments.
How Long Should You Keep Your Pay Stubs?
Employers
Record-keeping requirements differ from state to state. Generally, employers are encouraged to keep their financial records for at least three years.
This helps the business keep track of their spending and ensures that financial records are accurate.
Employees and independent contractors
It’s recommended that you keep your pay stubs for at least 12 months or until you file your annual taxes.
You’ll need your pay stubs to accurately fill in your W-2 forms and Social Security contributions to ensure you’re paying the right amount of tax.
Once the year’s tax season has ended, you can discard your pay stubs for that financial year.
What Are the Best Ways to Store Pay Stubs?
Trying to store and organize physical copies of your pay stubs for a number of months or years can be difficult.
Not only does this take up a lot of space, but it can also be frustrating to find the documents you need if everything isn’t organized.
Using cloud-based or other digital solutions where you can store documents online makes this much more manageable.
You can scan and upload physical pay stub copies to your computer to store digital records.
Effortlessly Create and Organize Pay Stubs with Form Pros
If you are looking for an easy and affordable way to create and download pay stubs, Form Pros is the right tool for you.
Our user-friendly online platform is fully automated and allows you to create pay stubs in just a few easy steps.
It also calculates deductions and income tax withholdings for you, ensuring accurate totals every time.
You can create these forms without any hidden fees and with the peace of mind that they are private and secure.
Start streamlining your payroll process with Form Pros, today.