Why Does My W-2 Not Match My Salary? Box 1, Timing, and Errors

Your W-2 doesn’t match your salary because Box 1 isn’t your salary. It’s your federally taxable wages, which the payroll system builds by taking your gross pay, subtracting anything you contributed pre-tax, and adding the value of certain benefits and non-cash compensation. Some of those adjustments pull the number down, others push it up, and most workers see both in the same year.

What Pulls Box 1 Below Your Salary

The biggest downward adjustment is usually a traditional retirement contribution. Money you defer into a traditional 401(k), 403(b), or governmental 457 plan comes out of your pay before federal income tax is calculated, so it never lands in Box 1. Someone earning $80,000 who defers $10,000 into a traditional 401(k) will see $70,000 in Box 1.¹

Roth deferrals work differently. A designated Roth 401(k) or Roth 403(b) is funded with after-tax dollars, so the contribution stays in Box 1. Your employer still reports the amount in Box 12, but your taxable wages don’t drop.² If you assumed a Roth contribution would shrink your W-2 wages, it won’t.

Health, dental, and vision premiums paid through a cafeteria plan also come out pre-tax. Pay $300 a month for family coverage through payroll and Box 1 drops by $3,600 for the year.³ Health Savings Account contributions run through payroll are treated the same way: excluded from Box 1 and shown separately in Box 12 with code W.⁴

Flexible spending accounts do the same job. Health care FSA contributions reduce Box 1. Dependent care FSA contributions are excluded up to $5,000 per year and reported in Box 10; anything above $5,000 comes back into Box 1 as taxable wages.⁵

What Pushes Box 1 Above Your Salary

Certain benefits go the other direction. The IRS calls it imputed income: the taxable value of something your employer gave you that wasn’t cash but counts as compensation.

Group-term life insurance is the most common one. If your employer provides coverage above $50,000, the IRS-calculated cost of the excess coverage is added to your wages. Coverage of $200,000 means the imputed cost of the extra $150,000 shows up in Box 1, even though no additional money hit your bank account.⁶

Personal use of a company car is taxable too. Your employer determines the value of your personal driving using the standard mileage rate, a lease-value table, or a commuting-only rule, and adds that value to your wages.⁷

Other items that raise Box 1 above your base salary:

Employer-paid education above $5,250 per year. The first $5,250 is tax-free; anything above that is added to Box 1.⁸
Gift cards, gift certificates, and prepaid cards. Cash-equivalent gifts are never excludable as minor fringe benefits, no matter how small the amount.⁷
Off-site gym memberships. An employer-run on-premises athletic facility can be excluded, but a paid outside membership counts as taxable compensation at fair market value.⁷

Stock compensation can be the largest upward swing. When restricted stock units vest, the fair market value of the shares on the vesting date is treated as ordinary wages and added to Box 1. A $100,000 salary combined with $25,000 of RSU vesting produces $125,000 in Box 1. Nonqualified stock options work similarly: when you exercise, the spread between the market price and your exercise price is treated as wages and reported in Box 1, with the same amount flagged in Box 12 under code V.⁹

Bonuses, commissions, and overtime are fully taxable and added to your regular wages in Box 1. A $65,000 base salary with $8,000 of overtime and a $5,000 year-end bonus produces $78,000 in Box 1.⁹

Two more items to check. Employer-paid moving expenses are now taxable wages and added to Box 1, so a $7,000 relocation package raises your reported income by $7,000. Active-duty armed forces members moving under a permanent change-of-station order are the only exception.¹⁰ And flat allowances your employer pays without requiring receipts (a monthly cell phone or car allowance, for instance) fall under a non-accountable plan and are treated as taxable wages in Box 1.¹¹ Reimbursements paid under an accountable plan (business purpose, receipts, excess returned) stay off your W-2 entirely.¹²

Timing Reasons the Number Looks Wrong

If you started or left a job partway through the year, your W-2 only reflects the wages you actually earned while on the payroll. A $90,000 salary starting in August produces roughly $37,500 on that employer’s W-2. Nothing is missing; you simply weren’t there for the rest of the year.

Year-end payments follow the constructive receipt rule. Income belongs to the tax year in which it was credited to your account or made available to you without significant restriction.¹³ A bonus check dated January 3 for work you finished in December belongs on the new year’s W-2, not the prior year’s, even though the work was done in December.

Why Boxes 3 and 5 Don’t Match Box 1 Either

Once you start comparing boxes, another gap shows up. Traditional 401(k) and 403(b) deferrals reduce Box 1 but not Box 3 (Social Security wages) or Box 5 (Medicare wages), because retirement contributions still get hit with Social Security and Medicare taxes.² The $80,000 earner who deferred $10,000 sees $70,000 in Box 1 and $80,000 in Boxes 3 and 5.

Box 3 is also capped at the Social Security wage base, which is $184,500 for 2026.¹⁴ Earn more than that and Box 3 stops there while Box 5 keeps going. Medicare has no wage cap, and your employer withholds an extra 0.9 percent Additional Medicare Tax once your year-to-date wages pass $200,000.¹⁵

When It Really Is An Error

If the adjustments above don’t account for the difference, work through your final pay stub of the year box by box against the W-2 to find where they diverge, then contact your employer or payroll department and ask for a corrected form (W-2c).

If your employer hasn’t issued a correction by the end of February, call the IRS at 800-829-1040 or visit a Taxpayer Assistance Center. The IRS will send your employer a letter requesting a corrected W-2 within 10 days.¹⁶

If a corrected form still hasn’t arrived by the time you need to file, use Form 4852 as a substitute W-2. Estimate your wages and withholding from your pay stubs, explain how you arrived at those numbers, and attach the form to your return. If the corrected W-2 shows up later with different figures, file an amended return on Form 1040-X.¹⁷

1
Office of the Law Revision Counsel. 26 U.S.C. 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans
2
Internal Revenue Service. Retirement Plan FAQs Regarding Contributions
3
Office of the Law Revision Counsel. 26 U.S.C. 125 – Cafeteria Plans
4
Internal Revenue Service. Revenue Procedure 2025-19
5
Internal Revenue Service. Child and Dependent Care Credit and Flexible Benefit Plans
6
Office of the Law Revision Counsel. 26 U.S.C. 79 – Group-Term Life Insurance Purchased for Employees
7
Internal Revenue Service. Publication 15-B (2026), Employer’s Tax Guide to Fringe Benefits
8
Office of the Law Revision Counsel. 26 U.S. Code 127 – Educational Assistance Programs
9
Internal Revenue Service. Publication 525 (2025), Taxable and Nontaxable Income
10
Internal Revenue Service. Tax Cuts and Jobs Act: A Comparison for Businesses
11
Internal Revenue Service. Taxable Fringe Benefit Guide
12
Internal Revenue Service. Publication 463 (2024), Travel, Gift, and Car Expenses
13
eCFR. 26 CFR 1.451-2 – Constructive Receipt of Income
14
Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet
15
Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
16
Internal Revenue Service. If You Don’t Get a W-2 or Your W-2 Is Wrong
17
Internal Revenue Service. Form 4852, Substitute for Form W-2