What Is an End of Year Paystub & Why Is It Important?

An end-of-year paystub serves as a comprehensive record of an individual’s earnings and deductions for the entire calendar year. This document offers a detailed summary of how much an employee earned, what was withheld for taxes, and what went towards various benefits or other deductions. It provides a final, consolidated snapshot of annual compensation.

Understanding Your End of Year Paystub

An end-of-year paystub presents a detailed breakdown of your compensation, focusing on year-to-date (YTD) totals. Gross pay, your total earnings before any deductions, includes regular wages, overtime, bonuses, or commissions received throughout the year.

Pre-tax deductions are amounts subtracted from your gross pay before taxes are calculated, reducing your taxable income. Common examples include contributions to a 401(k) retirement plan or premiums for health, dental, and vision insurance.

Taxable wages represent the portion of your gross pay remaining after pre-tax deductions, and this is the amount on which income taxes are calculated. Federal, state, and local taxes (if applicable) are deducted from each paycheck and sent to the respective government entities.

FICA taxes, which include Social Security and Medicare taxes, are mandatory federal payroll taxes. For Social Security, 6.2% is withheld from wages up to an annual limit, while Medicare tax is 1.45% of all wages, with no income limit. An additional Medicare tax of 0.9% may apply to wages exceeding certain thresholds.

Post-tax deductions are withheld from your pay after all applicable taxes have been calculated. Examples include Roth 401(k) contributions or wage garnishments for debts. Net pay is the actual amount of money you receive after all pre-tax deductions, taxes, and post-tax deductions have been taken out. The YTD figures for each of these categories provide a running total from the first day of the year.

Why Your End of Year Paystub is Important

The end-of-year paystub holds importance for several financial and administrative reasons. It serves as a detailed record that complements other financial documents, providing a comprehensive overview of your annual compensation. This document is useful for personal financial planning, allowing you to review your total earnings and the impact of various deductions over the entire year.

For tax preparation, the end-of-year paystub is a resource. It contains cumulative figures for gross earnings, taxable wages, and all taxes withheld, which are used for accurately completing income tax returns. It provides data to verify the accuracy of the W-2 and can be used to estimate your tax liability or refund.

The paystub also acts as a verification tool for the accuracy of income and deductions reported by your employer. Reviewing this document helps identify any discrepancies in wages paid, taxes withheld, or benefits deducted.

The end-of-year paystub is a personal financial document for record-keeping. It can serve as proof of income for various purposes, such as applying for a mortgage, a personal loan, or renting an apartment. Maintaining these records provides a historical account of your employment income, which can be beneficial for long-term financial analysis and budgeting.

Reconciling Your Paystub with Your W-2

Reconciling your end-of-year paystub with your Form W-2 is an important step before filing income taxes. This process involves comparing the year-to-date (YTD) figures on your paystub with the amounts reported in specific boxes on your W-2.

Compare your gross wages YTD on your paystub with Box 1 of your W-2, labeled “Wages, tips, other compensation.” The amount in Box 1 will often be lower than your total gross pay due to pre-tax deductions like 401(k) contributions or health insurance premiums, which reduce your federally taxable income. Verify that the federal income tax withheld on your paystub matches the amount in Box 2 of your W-2.

Compare your YTD Social Security wages from your paystub with Box 3 on your W-2, and ensure the YTD Social Security tax withheld aligns with Box 4. Check your YTD Medicare wages against Box 5 and the YTD Medicare tax withheld against Box 6 of your W-2. Social Security and Medicare wages (Boxes 3 and 5) are often higher than Box 1 wages, as certain pre-tax deductions that reduce federal taxable income do not reduce FICA wages.

If applicable, compare your YTD state wages and state income tax withheld on your paystub with Box 16 and Box 17 on your W-2. Discrepancies can arise from non-taxable income items or year-end adjustments made by your employer. If differences are found, address them promptly with your employer.

Addressing Discrepancies and Accessing Your Paystub

If you identify discrepancies between your end-of-year paystub and your W-2 form, or have other concerns, contact your employer’s payroll or human resources department. Explain the specific issue, providing details such as the exact figures from your paystub and W-2 that do not match. The employer is responsible for correcting errors on your W-2 by issuing a corrected form, known as a W-2c.

If your employer does not respond or fails to provide a corrected W-2 by the end of February, contact the Internal Revenue Service (IRS) for assistance. The IRS may then reach out to your employer to request the missing or corrected form. It is advisable to keep detailed records of all communication with your employer regarding the discrepancy.

Accessing your end-of-year paystub is straightforward. Many employers provide access through online employee portals, where you can log in to view and download electronic copies. This method allows access to historical paystubs for several years. If an online portal is not available, contact your payroll department directly to request a physical or electronic copy. Former employers are still required to provide access to past paystubs upon request.