Why Does My W-2 Not Match My Last Pay Stub?

It is a common concern for many individuals when the taxable wages reported on their annual Form W-2 do not align with the year-to-date gross pay shown on their final pay stub. This discrepancy is a frequent occurrence and often has a logical explanation rooted in tax regulations and payroll processing. The Form W-2 serves as the official document for reporting annual wages, tips, and other compensation to the Internal Revenue Service (IRS) and state tax authorities. Conversely, a pay stub provides a periodic record of earnings, deductions, and net pay for a specific payroll period.

Common Reasons for Discrepancies

Several factors contribute to differences between the taxable wages on your W-2 (specifically Box 1) and your final pay stub’s gross earnings. One significant reason involves pre-tax deductions, which reduce your taxable income but are still part of your gross pay. Contributions to retirement plans such as a 401(k) or 403(b), traditional Individual Retirement Accounts (IRAs), and premiums for health insurance plans fall into this category. Similarly, amounts allocated to Flexible Spending Accounts (FSAs) for healthcare or dependent care, and contributions to Health Savings Accounts (HSAs), are deducted from gross wages before taxes are calculated.

Certain taxable fringe benefits also cause a disparity, as they are included in Box 1 wages but may not appear as part of your standard gross pay on a pay stub. Examples include the cost of group term life insurance coverage exceeding $50,000, which is considered a taxable benefit. The imputed value for the personal use of a company car or non-accountable expense reimbursements also increases your taxable wages reported in Box 1. These amounts are added back to your gross pay to arrive at your taxable income.

Timing differences further complicate the comparison at year-end. If your final pay period of the year extends into the next calendar year, the wages earned during the last days of December might not be paid until early January. These wages are reported on the W-2 for the following tax year, even if earned in the prior year. Some reimbursements or benefits, though part of gross pay, are non-taxable under federal guidelines and excluded from Box 1. Finally, human or system errors can lead to incorrect reporting on either the pay stub or the W-2.

How to Compare Your W-2 and Pay Stub

To compare your W-2 and your final pay stub, begin by identifying the key figures on each document. On your W-2, focus on Box 1, labeled “Wages, tips, other compensation,” as this represents your federally taxable income. Also, note Box 3 for “Social Security wages” and Box 5 for “Medicare wages,” as these reflect your total gross wages before most pre-tax deductions. Also, review Box 12 for codes like ‘D’ (401(k) contributions), ‘W’ (HSA contributions), or ‘DD’ (employer-sponsored health coverage cost), which indicate amounts reducing taxable income.

Next, locate the year-to-date (YTD) information on your last pay stub. Identify your YTD gross wages, your total earnings before deductions. Then, find the YTD amounts for all pre-tax deductions, including contributions to retirement plans, health insurance premiums, and flexible spending or health savings account contributions. If applicable, identify any YTD taxable benefits, such as imputed income for group term life insurance, which may be itemized separately.

To reconcile the figures, subtract your total YTD pre-tax deductions from your YTD gross pay as shown on your pay stub. Then, add back any YTD taxable fringe benefits that were included in Box 1 but not initially part of your gross pay calculation on the stub. This calculation should approximately equal the amount in Box 1 of your W-2. Focus this comparison on Box 1, as it directly impacts your federal income tax liability.

Steps to Take When There’s a Discrepancy

If, after reconciliation, you identify a significant discrepancy between your W-2 and your final pay stub, take certain steps to resolve the issue. Start by thoroughly reviewing your own records, including all pay stubs, to ensure accuracy and confirm your calculations. This review helps pinpoint any unusual deductions, adjustments, or special payments that explain the difference.

Next, contact your employer’s payroll or human resources department to discuss the discrepancy. When you reach out, be prepared to provide detailed documentation, including your W-2, your last pay stub for the year, and your reconciliation notes. The employer’s payroll department can review their records and explain the difference or identify if an error occurred in the W-2 reporting.

If an error is confirmed on the W-2, your employer is responsible for issuing a corrected W-2, known as a Form W-2c, “Corrected Wage and Tax Statement.” This corrected form reflects the accurate figures and should be used when filing your income tax return. Ensure you receive this corrected form before submitting your tax filings, as using an incorrect W-2 can lead to issues with tax authorities.

If your employer is unresponsive or uncooperative, you have additional recourse. Contact the IRS directly for assistance, potentially through the IRS Taxpayer Advocate Service, which helps taxpayers resolve issues with the IRS. If you cannot obtain a corrected W-2 or if your employer fails to provide one, you may file Form 4852, “Substitute for Form W-2, Wage and Tax Statement,” with your tax return, estimating your wages and withholdings based on your pay stubs. State labor departments may also offer assistance if employers do not fulfill their reporting obligations.