Why Doesn't My Last Pay Stub Match My W-2?
We know that if you aren’t familiar with payroll taxes that understanding the difference between your last pay stub and your W2 can sometimes feel impossible.
When you receive your W2 form(s) you might notice a difference in the amounts shown on your end of year pay stub and the taxable wages on your W2 form, shown in Boxes 1, 3, 5, and in States with State income tax withholding requirements, box 16.
And honestly, unless you have no deductions taken from your paycheck, your last pay stub and W2 form will almost never match. End-of-the-year check stubs will show the total, or gross, earnings that an employee received, while a W2 form is a summary of taxable earnings received in a calendar year.
Here are a few of the most common reasons why your last pay stub doesn’t match your W2:
Your Earnings Included Non-Taxable Income Items:
Examples of non-taxable income items include reimbursements for mileage or another type of non-taxable expense you incurred that was paid back to you in a payroll run. This results in the gross wages of your pay stub being different from Boxes 1, 3, 5, and 16 wages on your W2 because these non-taxable items will lower gross taxable wages.
Example: John’s gross wages are $30,000 but over the course of the year he received $3,000 towards a non-taxed car allowance. John’s taxable W2 wages will be $27,000 ($30,000 – $3,000 = $27,000)
You Participated in a Company Sponsored Retirement Plan:
Types of retirement plans like a 401(k) will reduce the taxable federal and state wages only, which are reported in
Boxes 1 and 16.
Boxes 1 and 16.
Example: Mary’s gross wages are $30,000 but over the course of the year she contributed $3,000 towards her 401(k) retirement plan. Mary’s federal and state W2 wages will be $27,000 ($30,000 – $3,000 = $27,000).
Your Company Offers Health Insurance that is a Pre-Tax Deduction:
This is the most common reason for your pay stub earnings to be different from your W2. If your company offers pre-tax health insurance and you have participated, then the taxable wages in Boxes 1, 3, 5, and 16 will be lower than the amount of the pre-tax health insurance deduction. Pre-tax deductions will lower the gross wages by the annual amount of the deduction.
Example: Sally’s gross wages are $30,000 but over the course of the year she contributed $2,000 to a pre-tax health insurance deduction. Sally’s taxable W2 wages will be $28,000 ($30,000 – $2,000 = $28,000)
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Written by Gentry DeWinter
Gentry graduated from Grand Valley with a Bachelor’s Degree in multi-media journalism. She is an artist who loves videography, writing, and hopes to one day own multiple dogs.