It’s time to give that paycheck a checkup

With the year coming to a close soon, this is a good time to double-check your paycheck to make sure all the information is correct.

I’ll admit I’m not always as careful as I should be in checking the numbers. The one figure I pay particular attention to is the amount going into my checking and savings accounts.

But when was the last time you looked to see whether your federal and state withholdings were correct? Are your deductions for benefits right?

Payroll errors such as underpayments or overpayments happen more often than you might think, according to Sam Kerch, senior tax research analyst for Symmetry Software, which operates a Web site with free paycheck calculators.

“Errors in the payroll process can happen all along the way,” Kerch said. “It’s distressing how many people rip off the stub and then just deposit their check and forget about what’s on it. There can be all kinds of errors.”

That was the case when some veterans of the wars in Iraq and Afghanistan found themselves hounded by collection agencies and their credit damaged because of debt stemming from payroll errors.

In November 2003, the Government Accountability Office first began reporting on significant pay problems experienced by military personnel who have served in Iraq and Afghanistan since the terrorist attacks of Sept. 11, 2001. In several follow-up reports, the most recent released in April, the GAO outlined a broken military pay system.

In one report, the GAO found that 95 percent of deployed reservists experienced pay problems while serving overseas and upon their return.

Specifically, 332 of 348 soldiers the GAO audited from eight case-study units – all mobilized, deployed and demobilized at some time during an 18-month period from August 2002 through January 2004 – had at least one paycheck problem.

Many of the problems were associated with the soldiers’ active-duty pay and allowances. For example, one injured National Guard sergeant had debt problems because he was overpaid when his hostile fire and hardship pay continued six months after it should have stopped.

Of the $375,000 in active-duty pay and allowance problems the GAO identified for the Army Reserve soldiers, the majority were overpayments.

Other soldiers who were rightfully entitled to extra active-duty pay didn’t get their money or were paid late. The GAO found that it took more than a year for many of these soldiers to straighten out their paychecks.

How can this happen? Just look at your own pay stub. Today’s payroll system – although mostly automated – is far from foolproof.

So what should you do? Kerch offers these tips to ensure that your paycheck is accurate:

* Don’t just look at the bottom line. Pay attention to more than just your net pay – you know, that pitiful amount you complain about getting every pay period. If you’re an hourly worker, Kerch said, you should take a careful look at your stub every pay period to be sure the hours you submit have been accurately calculated given your hourly rate. Salaried workers, whose weekly pay doesn’t change often, should look over payroll changes as a result of choices made during open enrollment or when they get a pay raise or bonus. For instance, make sure any deductions that are pre-tax, such as contributions to a 401(k) plan, are actually taken out pre-tax.

* Report a payroll error right away. Most employers will cut an additional check as soon as an underpayment error is revealed, Kerch says.

And woe to you if you don’t report an overpayment. This is not free money.

The GAO referred one soldier for criminal investigation. In that case, the soldier, who was not mobilized with his unit, failed to report the overpayment of more than $36,000 in active-duty pay he received erroneously.

* Don’t tell everybody about the error. If you discover a paycheck mistake, don’t disclose it to your co-workers, Kerch warns. Take the matter up with the payroll department. In many companies, such public disclosure can violate employment policies and lead to discipline or even dismissal, he said.

* Keep your pay information current. Whenever you have a change in your life – a marriage, divorce or birth of a child – you should update your W-4 form. Once you complete the paperwork, check subsequent pay stubs to ensure your employer has correctly updated your tax information. If you don’t check and the information wasn’t properly recorded, you could face a payroll headache, or worse, a tax bill you didn’t expect.

To make it easier, you might want to use Symmetry Software’s free paycheck calculator at www.paycheckcity.com. (And no, your personal and private information is not captured, Kerch assures.)

If, for example, you are getting a year-end bonus or a raise in 2007, you can figure out your net pay after taxes and withholdings and the specific tax rate for your state or county, if there is one. You can determine the impact that various open enrollment choices or participation in your employer’s retirement plan might have on your take-home pay.

There are several advanced calculators – available on paycheckcity.com – but you have to register to access them. Registration is free. For instance, the bonus calculator uses supplemental tax rates to help you determine your withholding on special payments. If you’re going to be cashing in stock options, there’s a calculator to help you determine how much tax will be withheld. You can also find a current stock price when you enter a ticker symbol.

Of all the financial issues you have to deal with, keeping tabs on your pay stub is a relatively easy task. So on your next pay period, spend less time cursing your paycheck and a little more time double-checking it for errors.

Washington Post Writers Group