If you have decided to pay employees or contractors through electronic funds transfers (EFT), you may have some questions, like “How do I create a pay stub for an EFT transfer?” and “Do I really need to create a pay stub for an EFT transfer?” Keep reading to learn why you need to create pay stubs regardless of the payment method and how you can easily create one for an EFT transfer.
EFT transfers are currently used by almost every firm to pay its staff. It’s a quick and inexpensive method to pay your staff. However, with these payments, pay stubs are sometimes overlooked.
Pay stubs provide several advantages to a company. They are also less difficult to generate than you would imagine, thanks to tools like our pay stub Generator. This post will lead you through the straightforward procedure.
What Exactly Is an EFT Payment?
A business, institution, or government will use an electronic funds transfer (EFT) to collect or send money online. An EFT can be used by either an employer or a client to pay a business.
Direct deposit has essentially replaced paper checks. Payments using EFT transfers can be conducted between the same or separate banks.
Paying employees electronically is more secure, efficient, and cost-effective than using a paper check. It is also more environmentally friendly.
Aside from direct deposit, there are several more forms of EFT transfers to consider. Using your debit or credit card, for example, is an example of EFT payment.
What Exactly Is Peer-to-Peer Electronic Payment?
Apps like Cash App, PayPal, and Venmo make it quick and easy to transfer money from one person to another. To transfer funds, these peer-to-peer (P2P) payment systems employ EFT transfer technology.
When you sign up for one of these apps, you may connect your debit card, bank account, or both. You may connect your credit card to some apps (usually for a charge per transaction). When you wish to send a payment, simply launch the app, enter the recipient’s details, confirm your transaction, and send money.
P2P platforms can serve as storage facilities for monies received. Some consumers do not transfer funds to their banks using these applications. They leave money in the app and use the P2P platform as a makeshift bank account to pay suppliers and people directly. Some peer-to-peer payment programs, such as PayPal, provide its users with debit cards, making it easier to access movies stored on the payment platform.
The Importance of Creating Pay Stubs for EFT Transfers
When you initiate an EFT transfer, the money goes directly from your bank account to your employee’s or contractor’s bank account. Most people refer to this type of payment method as a direct deposit. By paying people through EFT transfers, you create a backup record of the payment. However, that doesn’t mean you shouldn’t still provide a pay stub. There are several reasons why you should always provide a pay stub to both employees and contractors.
Because pay stubs include an itemized list, they provide a thorough overview of all costs. One important advantage of pay stubs is that they help you to keep track of your spending.
If you forget that you awarded someone a bonus and your costs suddenly rise, you’ll be able to simply recall yourself thanks to the thorough pay stubs you retain.
Nowadays, for most everything, people need to provide proof of income. Whether it be for renting a house or apartment, buying a car, or getting a loan, this is why you need to provide both employees and contractors with a pay stub. It is also a legal requirement in most states.
Backup Records & Tax Compliance
While you may have a record of the payment through your bank statement, it is essential to always have backup records. Especially when it comes to payroll. By keeping a copy of all pay stubs you issue, you will have backup records to turn to if something was to happen to your accounting software.
Providing and keeping a copy of all pay stubs also benefits you in the case of an audit. Having pay stubs is the perfect way to show that your business is compliant with both state and federal tax laws. Using our pay stub generator, your taxes will be automatically and accurately calculated. This is a big help for small businesses, especially those that are just starting out as taxes can be confusing. We take the work and worry out of the equation.
You must give a W-2 form to all of your workers as an employer. These pay stubs will make filling them out and distributing them to employees much easier.
If you still need assistance making W-2 forms for your employees, pay stub makers can help.
Are EFT Payments Dangerous?
Sharing your bank account details with a business and allowing it to debit your account each month may be intimidating at first. The good news is that EFT transfers are protected by the Electronic Fund Transfer Act, which gives you legal redress if something goes wrong with a specific transaction.
The following are some of the EFTA consumer protections:
- Unapproved transactions Consumers have 60 days from the date of the unlawful transaction to report it to their banking institution for inquiry. If you miss the 60-day deadline, your financial institution is not required to investigate the occurrence.
- Debit cards that have been misplaced or stolen. The EFTA restricts your liability for unlawful transactions to $50 if you notify your lost or stolen debit card within two days. If you fail to report the loss or theft within 60 days, you may be held accountable for any unlawful transactions.
- Punishment for infractions If your bank violates the EFTA criteria, you may be able to recover damages from them in court.
- Limits on withdrawals To protect you against excessive and potentially unlawful withdrawals, your bank is obligated to set daily withdrawal restrictions on your debit card.
It is critical to understand that speed is a critical component in minimizing your exposure for unlawful transactions. It is critical to analyze your bank statements on a frequent basis to look for transactions that you do not recognize. You may also set up notifications with your bank (through SMS and email) to assist call notice to unauthorized transactions.
How to Create a Pay Stub for EFT Payments
Creating a pay stub for EFT payments is almost identical to creating a regular pay stub. Use these steps for using our software to easily generate pay stubs for EFT payments.
- Fill out the company information section. You will need to provide your company name, phone number, social security number (SSN) or employer identification number (EIN), and your address. It is important to triple check this information for accuracy.
- Fill in all employee information. You will need to include your employee’s name, address, SSN, state, employment status (employee or contractor), marital status, number of dependents, and number of tax exemptions. This information should have been provided by your employee when they filled out a W2. If they don’t have one, they can use a W2 generator. Some of this information will not apply to a contractor, since you typically won’t be withholding taxes or them.
- Input Salary Information. Next, you will need to fill out the employee’s or contractor’s salary information. You will first need to choose whether they are paid a salary or hourly. Fill out the hourly or annual salary wage as applicable, including overtime, any holiday and vacation pay, and bonuses. Then, pick the dates for the pay period, the pay date, and check the circle indicating this was a direct deposit. Once you check this circle, a new box will appear where you will input the last four digits of the recipient’s bank account number. Deductions will automatically be calculated once you provide all this information.
- Preview your stub for accuracy. The last thing you need to do is preview the paystub and ensure that all information you have provided is accurate. Once you are satisfied, simply click the check out button to make your purchase!