Decoding Your Paystub in 2022
It’s important to understand your pay stub, and as we enter each new year, some elements are subject to change. To help production workers interpret these changes, we’re here to clarify what may look different on paychecks starting January 1 and why. In this article, we’ll talk through some payroll basics, share an example of a 2022 pay stub, explain what information you can expect to see, and discuss tax changes that may impact your pay in 2022.
Please note, this post is written for hourly and salaried employees only and is not applicable for independent contractors.
Before we get into our sample pay stub, let’s go over some payroll basics.
Frequency of Pay
Some companies process payroll weekly, while others process payroll bi-weekly (every two weeks) or twice a month (on the 1st and the 15th). If you get paid twice per month, you’ll receive 24 paychecks each year. If you get paid bi-weekly, you’ll receive 26 paychecks.
In the entertainment industry, you’ll likely be paid weekly - though frequency can vary. You also may not work a full 52 weeks, as productions often go on hiatus, or you may have a gap between projects. Last but not least, your earnings are likely to vary - both in terms of hourly wage and the amount of overtime pay you receive.
Determining Tax Withholdings
Every salaried and hourly employee must fill out a W-4 before receiving their first paycheck. This form is used to calculate a federal and state tax withholding amount, determined primarily based on household earnings and the number of dependents you can claim. State and federal tax tables assume you’ll receive roughly the same paycheck throughout the year, and it’s important to understand that taxes withheld on each check are calculated with that in mind.
The new form W-4, implemented in 2020, includes a section for multiple jobs and other income, which is useful if you want to account for box rental income or independent contractor payments. Here’s a sample W-4 with notes to help you navigate the form.
Once your W-4 is complete, your employer reports your wage and W-4 election to the IRS. The total amount of federal income tax that will be withheld from your paycheck in a given year is calculated and is divided by the number of paychecks you’ll receive for the year. Your employer deducts this predetermined federal tax withholding amount from every paycheck you’re issued. If you ever want to change your election, you must fill out a new W-4.
Both state and federal taxes are reconciled each year when you file your taxes. Completing and filing your return allows you to determine whether your tax withholding election was too high or too low. If it was too high, you’ll get any money that you overpaid back in the form of a tax refund. If your withholding was too low, you’ll owe money and will have to pay the state or federal government any amount that was underpaid throughout the year.
Now, let’s take a look at what a typical pay stub looks like and discuss what it contains:
Sample 2022 Paystub
Paystub Section 1: Details and Pay
At the top of your pay stub, you'll see some important information; your name, your company's name, and the pay period reflected below. Next, you'll see three key terms relating to wages. Each one provides a different view of how much money you earned.
- Gross Earnings: This is the total amount you’re paid for a specific pay period before any taxes or deductions are taken out.
- YTD Gross: YTD stands for "year to date." This cumulative figure reflects all the money you’ve been paid since the beginning of the year (January 1). This figure, which includes both taxable and nontaxable pay types, will always be the biggest number on your pay stub. Year-to-date earnings are tallied up by each employer. If you work both union and non-union jobs, you may be paid by two separate employers, meaning you would have to add your YTD amounts together to get your true earnings.
- Net Pay: This is the number most people are looking for when they review a pay stub. This figure, also commonly referred to as ‘take-home pay,’ reflects the amount of money you’ll receive after taxes and deductions are taken out.
If your pay structure includes bonuses or commission payouts - your employer may add those wages to your standard payroll or may opt to pay them separately - as they’re taxed differently. If you have questions about how these types of compensation are paid or taxed, contact your production accountant or paymaster.
Paystub Section 2: Taxes
Multiple types of taxes are taken out of each one of your paychecks. These taxes fall into three primary categories; federal, state, and local. You’ll also see tax deductions for two government-run programs; Social Security and Medicare.
Here’s the breakdown of taxes you can expect to see withheld from each paycheck:
- Federal Income Taxes: The government uses federal taxes to pay for national programs that benefit the American people. Funds are used to invest in things like technology, education, healthcare programs, and more. The amount of federal tax withheld from your paycheck is calculated based on your W-4 election and on where your earnings fall on pre-defined federal income brackets.
What is changing in 2022? The federal tax table changes every year, so you may see a slight change in federal withholding.
- State and Local Taxes (SALT): These taxes vary significantly from state to state - and though most states charge income tax, a handful of them don’t. If you work or live in a state that charges income tax, rates are calculated in much the same way as federal income taxes; based on where your earnings fall within pre-defined tax brackets and your W-4 election.
In addition to state income tax, some cities also levy an income tax. If your city or county collects local taxes, you’ll see money withheld from each paycheck labeled as “local” or as the name of your city or county. You’ll generally pay the same amount each pay period for both state and local income taxes, so long as the amount you earn remains the same.
Entertainment Industry Specific Tax Considerations:
When it comes to the entertainment industry, there are a few extra considerations that need to be made regarding SALT. First, it’s common for production crew members to work in more than one state throughout the year. The basic rule is to withhold income tax for the state in which services are performed - but other rules must also be considered. Namely, where you have residency and whether neighboring states have reciprocity.
Determining the correct state of residency is important because it tells your employer which state's laws they need to consider in addition to the state you’re working in. States almost always require non-residents who come into the state for work to pay taxes on wages paid for services performed in that state. A few exceptions can depend on the length of time an employee works in that state or the amount of money they earn. Unfortunately, taxation is retroactive to day one or dollar one, so it’s difficult to proactively apply these rules in our industry.
Working in multiple locations in the same week (or working less than a five-day workweek) presents challenges to the payroll system and the employee. Payroll systems are programmed to calculate a paycheck based on annual tax tables, so if you work one day, the system thinks you earn that same amount every workday of the year, and taxes can be over-calculated.
Employees who work in multiple states throughout the year will receive a W2 for each state where services were performed. However, if you work in two states with reciprocity, things get a little easier. Reciprocity states have an agreement that employees who commute to work across state lines do not have to file multiple state tax returns, lessening their tax burden. For example, Arizona has a reciprocity agreement with California, Indiana, Oregon, and Virginia.
What is changing in 2022? Most state tax tables change every year, so you may see a change in your state tax withholding.
Federal and State Deductions, California
- Medicare and Social Security (via FICA): The Federal Insurance Contributions Act (FICA) mandates every taxpayer in the U.S. must contribute to Social Security and Medicare. When you see “FICA” on your pay stub, you’re looking at the amount of money you’re contributing to these funds. FICA is deducted from your wages to help you pay living expenses later in life. Everybody contributes 6.2% of their gross income directly to the Social Security fund, and their employer pays another 6.2%.
Employees must also contribute a portion of their paycheck to Medicare. Every worker earning $200,000 or less contributes 1.45% of their gross income to Medicare, and every employer pays an additional 1.45%. Employees earning more than $200,000 must pay an additional 0.9% of their gross income. This additional tax was part of the Affordable Care Act legislation, which was signed into law in 2011.
What’s changing in 2022? There’s a cap on how much of your income is subject to social security tax; in 2021, it was the first $142,800 of earnings. Going into 2022, the cap was adjusted to the first $147,000 in earnings. Any money you earn beyond that cap is exempt from FICA taxes.
It’s common to work for more than one employer during the year in the entertainment industry. Each employer is required to withhold and match FICA, regardless of previous employment earlier in the year. Employees claim excess FICA - that is, tax payments on year-to-date wages that exceed the 2022 wage base of $147,000 - on their personal federal income tax return.
- Other Taxes: State Disability Insurance (SDI) provides income for employees when they cannot work because of illness, caring for a family member, maternity or paternity leave, etc. SDI rates are variable and are determined state by state.
What’s changing in 2022? States change the tax rate, wage base, or both on an annual basis. For example, California reduced its SDI tax rate from 1.2% to 1.1% and increased the wage base from $128,298 to $145,600. As a result, California residents will see different SDI paycheck deductions in 2022.
Part 3: Other Deductions
In addition to the taxes defined above, you may also see other deductions reflected on your pay stub. The two most common items you’ll see are 401k contributions deductions and payments toward employer-sponsored healthcare insurance premiums. These both come out of your gross pay and thus are processed pre-tax, as long as the production has a Section 125 pre-tax plan in place.
Employees self-elect what healthcare plan they want to opt into and what 401k contribution percentage they wish to deduct from each paycheck. It’s important to check your paystub to verify that your elections are being managed accurately.
Now that you’ve decoded your paycheck, you can feel confident in knowing what all of the labels and figures mean! And when you understand the information provided on your pay stub, you can ask the right questions if anything ever seems out of the ordinary. Don’t forget to review these elements of your paychecks, and if you ever have questions about your wages, deductions, or withholdings - contact your production accountant or paymaster to clarify.