Your W-2 does not match your last pay stub because the two documents measure different things. Your pay stub shows gross earnings for the year, while Box 1 of the W-2 reports only the portion of your wages that is subject to federal income tax. Pre-tax retirement contributions, health premiums, and other benefit deductions pull Box 1 below your gross pay, and taxable fringe benefits you never saw as cash can push it higher. Once you know where each adjustment lives, the gap almost always turns out to be legitimate.
Pre-Tax Deductions Shrink Box 1
Most of the difference sits here. Contributions to a traditional 401(k) or 403(b) come out of your paycheck before federal income tax is calculated. Your pay stub still counts those dollars in its year-to-date gross, but the W-2 leaves them out of Box 1. For 2026, the deferral limit is $24,500, with an $8,000 catch-up if you’re 50 or older and up to $11,250 if you’re between 60 and 63.1Internal Revenue Service. Retirement Topics – 401(k) and Profit-Sharing Plan Contribution Limits Every dollar deferred trims Box 1 by the same dollar.
Section 125 cafeteria plans do the same for health-related deductions. Premiums for health, dental, and vision insurance paid through your employer’s plan come out pre-tax, so they never appear in Box 1. Flexible spending account contributions work the same way, and a health FSA can go up to $3,400 in 2026.2Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3 The IRS treats salary reduction contributions under these plans as if you never received the money, so they aren’t wages for federal income tax purposes.3Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
Health savings account contributions run through payroll follow the same rule. Pre-tax HSA amounts are excluded from Box 1 and reported in Box 12 under Code W. The 2026 HSA contribution limit is $4,400 for self-only coverage and $8,750 for family coverage.4Internal Revenue Service. IRS Notice 2026-05 Between a traditional retirement plan, insurance premiums, an FSA, and an HSA, it’s completely normal for Box 1 to trail gross pay by tens of thousands of dollars.
Roth Contributions Do Not Shrink Box 1
This is where people get tripped up. Contributions to a Roth 401(k) or Roth 403(b) do not reduce Box 1. Designated Roth contributions are after-tax, so they show up in Boxes 1, 3, and 5.2Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3 Your employer reports the amount in Box 12 under Code AA (Roth 401(k)) or Code BB (Roth 403(b)), but that number is already baked into Box 1, unlike traditional deferrals reported under Codes D and E.
If you switched from traditional to Roth contributions this year and Box 1 jumped compared to last year, that’s likely the reason. Both types appear as deductions on your pay stub’s year-to-date detail, which makes them look interchangeable. They aren’t.
Taxable Fringe Benefits Can Push Box 1 Higher
Sometimes Box 1 exceeds your final pay stub’s gross. Taxable fringe benefits that never hit your paycheck as cash still get added to your reported wages.
Employer-provided group-term life insurance is the most common example. The IRS lets you exclude the cost of the first $50,000 of coverage from income, but coverage above that threshold creates taxable income.5Internal Revenue Service. Group-Term Life Insurance Your employer calculates the taxable portion from IRS premium tables and rolls it into Box 1, with the same figure appearing in Box 12 under Code C.6Internal Revenue Service. Group Term Life Insurance The amount is often just a few hundred dollars, but it’s enough to prevent an exact match.
Personal use of a company vehicle works the same way. Your employer must value your personal driving and add it to taxable wages using one of several approved methods.7Internal Revenue Service. Employers Tax Guide to Fringe Benefits, Publication 15-B Because these amounts don’t show up as regular earnings on your pay stub, they can blindside you at W-2 time.
Employer-reimbursed moving expenses are another source of unexpected income. The exclusion for qualified moving expense reimbursements was permanently eliminated starting in 2026 for everyone except active-duty military members and certain intelligence community employees.7Internal Revenue Service. Employers Tax Guide to Fringe Benefits, Publication 15-B If your employer paid for a relocation this year, that money is taxable and appears in Box 1.
Why Boxes 3 and 5 Don’t Match Box 1 Either
You may notice Box 3 (Social Security wages) and Box 5 (Medicare wages) show yet another number. Traditional 401(k) and 403(b) contributions reduce Box 1 but not Boxes 3 and 5. Social Security and Medicare taxes apply to those deferrals even though federal income tax does not.2Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3 So Boxes 3 and 5 will usually be higher than Box 1 by roughly the amount of your traditional retirement deferrals.
Box 3 also caps at the Social Security wage base, which is $184,500 for 2026.8Social Security Administration. Contribution and Benefit Base If you earned more than that, Box 3 stops at the cap while Box 5 keeps climbing, because Medicare tax has no ceiling. Higher earners can easily see three different numbers across Boxes 1, 3, and 5, none of them matching the pay stub. All of it is normal.
Ignore Box 12 Code DD When Reconciling
Box 12 Code DD reports the total cost of your employer-sponsored health coverage, including both the employer’s share and yours. The number can be surprisingly large, sometimes $15,000 to $25,000 or more. It is purely informational and does not increase your taxable income.9Internal Revenue Service. Form W-2 Reporting of Employer-Sponsored Health Coverage If you try to tie every Box 12 code back to your pay stub, Code DD will throw the math off. Leave it out of your reconciliation.
Paycheck Timing Creates Gaps
Even with identical deductions and no fringe benefits, the two documents can disagree because of when paychecks land on the calendar. Under the constructive receipt doctrine, the IRS counts income in the year it becomes available to you, not when you earned it.10eCFR. 26 CFR 1.451-2 – Constructive Receipt of Income If you worked the last week of December but the check for those hours wasn’t issued until January, those wages belong on next year’s W-2.
Your pay stub may show a year-to-date total that includes hours worked through December 31, regardless of when you were actually paid. The reverse can happen at the start of the year: late-December wages from the prior year that were paid in early January may show up on this year’s W-2 even though they weren’t in your January pay stub’s year-to-date balance at the time. Check the pay dates on your first and last paychecks of the year, not just the pay periods they cover.
How to Reconcile the Numbers
Before assuming there’s an error, do the math. Pull your final pay stub of the year and your W-2, then work through this calculation:
- Start with year-to-date gross earnings from your final pay stub.
- Subtract pre-tax retirement contributions. In Box 12, that’s Code D (traditional 401(k)), Code E (403(b)), Code S (SIMPLE IRA), and Code G (457(b)).2Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3
- Subtract your year-to-date health, dental, and vision premiums, FSA contributions, and HSA contributions (Code W in Box 12).
- Add taxable fringe benefits, including Box 12 Code C for group-term life insurance over $50,000 and any other non-cash taxable compensation.
The result should match Box 1 or come very close. If you’re off by a few dollars, rounding or a mid-year benefits change probably explains it. If you’re off by hundreds or thousands, look for a specific cause: a switch between traditional and Roth contributions mid-year, a timing issue that moved wages between calendar years, or a fringe benefit amount that looks wrong.
Don’t subtract Roth amounts. Box 12 Code AA (Roth 401(k)) and Code BB (Roth 403(b)) are already in Box 1.
What to Do If It’s a Real Error
If your reconciliation turns up a genuine mistake, start with your payroll department. Your employer is responsible for investigating and, if warranted, issuing a Form W-2c (Corrected Wage and Tax Statement) to both you and the Social Security Administration.11Internal Revenue Service. About Form W-2 C, Corrected Wage and Tax Statements Corrections can take several weeks depending on your company’s payroll cycle and whether a third-party processor is involved.
If your employer won’t correct the error or hasn’t provided a W-2c by the end of February, the IRS can step in. Call 800-829-1040 or visit a Taxpayer Assistance Center, and the IRS will send your employer a letter requesting the corrected form within 10 days.12Internal Revenue Service. If You Dont Get a W-2 or Your W-2 Is Wrong Keep copies of every email and note the dates of every call.
If the filing deadline is closing in and the correction hasn’t arrived, file using Form 4852 as a substitute for the W-2. You’ll estimate your wages and withholding from your pay stubs and other records, and the form asks how you arrived at your figures.13Internal Revenue Service. Form 4852 – Substitute for Form W-2, Wage and Tax Statement Hold onto those supporting records indefinitely and keep a copy of Form 4852 itself at least until you start receiving Social Security benefits.14Internal Revenue Service. W-2 – Additional, Incorrect, Lost, Non-Receipt, Omitted
If you already filed and later realize the W-2 was wrong, file Form 1040-X with a copy of the corrected W-2c (or the Form 4852 you used).15Internal Revenue Service. Instructions for Form 1040-X16Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 202617Internal Revenue Service. Accuracy-Related Penalty Most mismatches turn out to be perfectly legitimate. When one isn’t, catching it before you file keeps you out of amendment territory.