Being self-employed can be a great feeling – freedom to choose when and where to work is something that cannot be matched. However, self-employed individuals often run into significant challenges when attempting to prove earning to interested parties. Lenders, creditor, leasing agents, and other organizations are just a handful of examples of those who may want to verify your income before providing you with their services or resources.
By creating a pay stub, you can provide an outline of your earnings – both those from an employer and those that are attributed to your own self. A pay stub is a recognized document that can be used as a verification of one’s earnings; while creating a pay stub is something that can be done easily and quickly, it should not be used to commit any sort of fraud. It may seem simple to falsify one’s earnings in an attempt at receiving a better rate on a loan, for example, but the legal implications can be incredibly severe. Don’t give in to the temptation of creating a pay stub for mischievous purposes – only make a pay stub to represent earnings that are accurate and legitimate. Your pay stub entries may vary depending on how often you pay yourself and whether you deposit any taxes with the IRS or state Department of Revenue.
Establish the period of your pay. If you pay yourself sporadically, it’s easiest to calculate a monthly amount and then create one paystub per month.
Calculate your wages. This can get complicated if you own different bank accounts for business use and for personal use – be sure to calculate the amount you transfer to yourself from the business account as pay during the pay period you select. Having separate accounts for these uses is usually the easiest way to go about things. If your business and personal activities are intertwined, you’ll have to calculate income you receive from customers and subtract expenses you pay to determine the remaining amount. This is your net income for the pay period.
Always calculate state and federal taxes when you make a pay stub. If you make estimated tax deposits to the IRS, determine the amount you paid, or will pay, for the income you earn during the pay period. For any profits, you should make tax deposits at least once per quarter or every few months. On your pay stub, indicate the percentages you paid for these taxes. As tax rates may change, check the IRS website for current information, or contact them or your local tax office directly. If you deposit more than the IRS-mandated amount to cover your Social Security, Medicare and estimated income taxes, you may need to divide your deductions by the number of pay periods you’re working with and note the amount as federal income tax when you create a pay stub.
Calculate your appropriate state taxes. Any deposits made to the state may vary based on relevant income taxes. Divide the state tax payment by the number of pay periods in your calculation and note the amount as state income tax withholding.
Choose a service that can make a pay stub, such as RockStub. Such companies provide easy ways to create a useful, professional-looking pay stub. Although there will be a small fee, it will make up for the hours it would take to create a pay stub on your own.
Double check your payment information and enter it accurately in the pay stub template. Avoid automatically calculating taxes – do it yourself beforehand to avoid any errors in the final paystub.