Should My W2 Match My Last Pay Stub?

Many individuals wonder if the total earnings on their final pay stub should precisely match the wages reported on their annual W-2 form. This frequent question often leads to confusion. Understanding the distinctions between these two financial documents can clarify why they might show different figures. This article explains the purpose of each and common reasons for variations.

Understanding Your W-2 and Final Pay Stub

Your W-2, or Wage and Tax Statement, is an IRS form employers issue annually to report an employee’s wages and taxes withheld. It summarizes earnings from January 1 to December 31, providing information for filing federal, state, and local income tax returns. Key figures on the W-2 include Box 1 for taxable wages, Box 3 for Social Security wages, and Box 5 for Medicare wages. Boxes 2, 4, and 6 show the federal income tax, Social Security tax, and Medicare tax withheld.

In contrast, a pay stub is a record provided with each paycheck, detailing earnings and deductions for a specific pay period. The final pay stub of the year includes year-to-date (YTD) totals, accumulating all earnings and deductions. These YTD figures encompass gross pay, federal and state taxes withheld, and other deductions like retirement contributions or health insurance premiums. While both documents reflect compensation, the W-2 is a comprehensive annual summary for tax reporting, whereas the pay stub provides a running total of financial activity.

Why Differences Between a W-2 and Final Pay Stub Occur

Differences between your W-2 and final pay stub’s year-to-date gross wages are often expected due to pre-tax deductions and certain benefits. Pre-tax deductions, such as 401(k) contributions or employer-sponsored health insurance premiums, reduce your taxable income. These amounts are subtracted from your gross pay before federal income tax is calculated, so they are not included in Box 1 of your W-2. However, many pre-tax deductions, like 401(k) contributions, do not reduce wages subject to Social Security (Box 3) and Medicare (Box 5) taxes, which can lead to different amounts across these boxes on your W-2.

Certain non-taxable benefits and reimbursements also contribute to discrepancies. For example, qualified moving expense reimbursements or employer-provided educational assistance may appear on a pay stub but are excluded from taxable wages on the W-2. These non-taxable amounts are typically not reported in Box 1 of the W-2 because they are not considered taxable income by the IRS. Conversely, some taxable fringe benefits, even if not detailed on every pay stub, are included in your W-2 wages. This can include the value of personal use of a company car or group-term life insurance coverage exceeding $50,000, added to your taxable income in Box 1.

Another reason for variations stems from the reporting period. The W-2 covers wages paid within the calendar year (January 1 to December 31). A final pay stub reflects year-to-date earnings up to the last pay date, which might not align with the calendar year-end if a pay period spans two years. For instance, wages earned in late December but paid in January of the next year appear on the next year’s W-2, not the current one.

Addressing Significant Discrepancies

If, after reviewing your documents and considering common reasons for differences, you find a substantial and unexplainable discrepancy between your W-2 and final pay stub, it is important to take action. Begin by thoroughly reviewing your personal records, including all pay stubs and any benefit statements for the year, to identify the source of the potential error. This detailed review can often pinpoint simple calculation errors or overlooked deductions.

Next, contact your employer’s payroll or human resources department to discuss the issue. Errors can occur, and employers are able to issue a corrected Wage and Tax Statement using Form W-2c. It is advisable to address such discrepancies promptly, especially as the tax filing deadline approaches, to ensure accurate reporting of your income to the IRS.

If your employer is unresponsive or unwilling to correct a verifiable error, you can contact the IRS for assistance. The IRS may instruct you to use Form 4852, a Substitute for Form W-2, Wage and Tax Statement, to report your wages and withholdings based on your own records.