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Whether you work in the music industry or hold a job elsewhere, it’s very important that you save your pay stubs after you get your paycheck. While a pay stub can seem like a useless piece of paper that takes up space, they’re necessary during tax time and for ID purposes.
5 Reasons to Not Throw Away Your Pay Stubs
Pay stubs are a payroll document that’s more important than it looks, so you best hold on to them. Here are the top 5 reasons not to throw away your pay stubs after getting paid.
1. Filing Your Taxes Accurately
Pay stubs aren’t just used to keep tabs on your paychecks; they’re also useful for ensuring your taxes are filed correctly. That’s true even if you don’t file your taxes yourself, as pay stubs make it easier for accountants to complete your taxes and file the necessary documents to the IRS.
If you’re self-employed, you can use a pay stub generator for free on websites like PDFSimpli to get a copy for your individual or business use. They’ll come in handy when you’re bookkeeping.
If you’re employed, you may want to ask your employer to increase the amount you pay in taxes because you’ll get a higher return after tax season. You could even use your pay stubs to maximize what you earn in tax credits, including the Earned Income and Educational credits.
2. Identity Verification Purposes
When you open a bank account, apply for an apartment, or have to replace an identification card, you’ll need to prove you are who you say you are. Since every pay stub shows your social security number and other important personal details, you can use it to verify your identity.
With that said, you won’t get what you need without other types of proof. You’ll probably still need to show your actual social security card, birth certificate, or driver’s license to get a government-issued ID, but these extra documents aren’t needed to get a phone contract.
3. Getting Ready for a Potential Audit
Maintaining accurate financial records is necessary to protect yourself during a tax audit. While the odds of being audited by the IRS are only 3.8 out of every 1,000 returns (0.38%), some demographics are more likely to be targeted, like people with incomes below $25,000.
In any case, you won’t want to collect all of your documents when an audit happens. That could take you weeks, possibly months, depending on how many documents you need to file taxes.
If you hold on to your pay stubs, you’ll have what you need to prove your income to the IRS. Once again, it doesn’t matter if you’re employed or self-employed; pay stubs work regardless of your classification. To stay organized, photocopy your pay stubs and put them on a computer.
4. Keeping Track of Hours Worked
Wage theft is unfortunately common in the US. According to studies, employers steal up to $50 billion from workers every year. Low-wage workers are the most affected, but workers in all demographics are routinely cheated out of pay, and the crime often goes unpunished.
To protect yourself and your pay, keep your pay stubs around and always keep track of the hours you worked. While it isn’t easy or even possible for some earners to take action when wage theft occurs, it’s still important to have that evidence available for when they can.
5. Using Pay Stubs as Proof of Income
Whenever you apply for financing or something that requires frequent payments (i.e., a rented apartment), you’ll need to provide a document that shows proof of income. Most places will ask for a recent pay stub, and if you’re employed, you should already have plenty lying around.
Unfortunately, freelancers won’t have access to pay stubs. Fortunately, they can create their own with the help of an accountant. You’ll need to know if the pay stub has all the right info.
On the other hand, freelancers could also print out a copy of their bank statement if a pay stub isn’t available. Either way, having access to proof of income can make it easier to do things like take out a mortgage, apply for insurance, get a credit card, or sign a lease for an apartment.