Why Does My W-2 Show Less Than My Salary?

If your W-2 shows less than your salary, the wage figure in Box 1 has been reduced by pre-tax deductions your employer took out before reporting your income to the IRS. Traditional 401(k) or 403(b) contributions, health insurance premiums, flexible spending elections, HSA contributions, and commuter benefits all shrink taxable wages without shrinking what you earned. In some cases payroll timing accounts for part of the gap, and occasionally the number really is wrong. Each cause has a different fix, so it helps to know which one applies to you.

Traditional 401(k) and 403(b) Contributions

The single biggest reason Box 1 falls short of your salary is usually a traditional 401(k) or 403(b) deferral. When you elect to send part of your paycheck into one of these plans, the money comes out before federal income tax is calculated, and it never shows up as taxable wages on your W-2.1eCFR. 26 CFR 1.401(k)-1 – Certain Cash or Deferred Arrangements Earn $70,000, defer $10,000 into a traditional 401(k), and Box 1 will show roughly $60,000 before any other pre-tax deductions.

Those deferrals are still subject to Social Security and Medicare taxes, so your employer includes them in Box 3 (Social Security wages) and Box 5 (Medicare wages). That is why those two boxes are often higher than Box 1.2Internal Revenue Service. Retirement Plan FAQs Regarding Contributions

For 2026, the standard elective deferral limit is $24,500. Workers age 50 and older can contribute an additional $8,000 in catch-up contributions, and those aged 60 through 63 qualify for a higher catch-up limit of $11,250 under a provision added by the SECURE 2.0 Act.3Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 Every dollar you defer up to these limits comes off Box 1 by the same amount.

Roth Contributions Do Not Create the Gap

Not every retirement plan contribution lowers Box 1. Designated Roth contributions to a 401(k) or 403(b) are taxed up front and stay in your reported wages, so Roth deferrals are already included in Box 1.4Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts Your employer reports Roth 401(k) contributions in Box 12 with code AA, and Roth 403(b) contributions with code BB.5Internal Revenue Service. Common Errors on Form W-2 Codes for Retirement Plans If you recently switched from traditional to Roth deferrals and Box 1 jumped closer to your gross pay, that change is the reason.

Health, Dental, and Vision Premiums

Employer-sponsored health, dental, and vision coverage is usually paid through a cafeteria plan under Section 125 of the Internal Revenue Code. When your share of the premium is deducted this way, it comes out before both income tax and payroll taxes, and the money disappears entirely from Box 1, Box 3, and Box 5.6Office of the Law Revision Counsel. 26 USC 125 – Cafeteria Plans Pay $500 a month toward a family health plan, and the $6,000 annual cost is subtracted from every wage box.

Some deductions do not go through a cafeteria plan. After-tax life insurance and voluntary disability policies, for example, are taken from your paycheck after taxes are calculated, and they do not reduce your W-2 wages. Your pay stub usually labels each item as pre-tax or after-tax, so a recent stub is the fastest way to tell the difference.

Your W-2 also includes an informational figure in Box 12 with code DD, showing the total cost of your employer-sponsored health coverage, both the employer’s share and yours. That number is not included in your taxable wages; it is reported for transparency only.7Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3

FSAs, HSAs, and Dependent Care

Contributions to a health care flexible spending account, a dependent care FSA, or a health savings account through payroll deduction are all pre-tax, and each one chips away at Box 1. FSA contributions flow through a Section 125 cafeteria plan, so they reduce income tax, Social Security tax, and Medicare tax at the same time.8Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans HSA contributions handled through payroll work the same way; your employer treats them as an exclusion from gross income.

The 2026 limits are:

An employee who maxes out a health care FSA and an individual HSA could see nearly $7,800 vanish from Box 1 through those accounts alone, on top of retirement deferrals and insurance premiums.

Commuter and Transit Benefits

If your employer offers a qualified transportation fringe benefit, such as a pre-tax transit pass, vanpool subsidy, or parking benefit, those amounts are also excluded from your taxable wages. For 2026, employers can exclude up to $340 per month for transit and vanpool costs and another $340 per month for qualified parking, for a combined annual exclusion of up to $8,160.10Internal Revenue Service. Employer’s Tax Guide to Fringe Benefits (2026 Publication 15-B) These deductions are easy to overlook when you reconcile your salary against Box 1, especially if your employer enrolled you automatically.

Payroll Timing and Midyear Starts

Your W-2 is built on a cash-basis rule: income lands in whatever tax year the paycheck is actually issued, not the year you performed the work. A pay period that closes on December 28 but pays out on January 2 belongs on next year’s W-2.7Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3 That timing shift can shave a pay period or two off your expected annual total.

The same logic applies to a midyear start. A $90,000 salary with a July start date will produce a W-2 showing roughly $45,000, since only half the year’s paychecks fell within the calendar year. Year-end bonuses follow a related rule called constructive receipt: a bonus is taxable in the year it was made available to you, not the year it was announced. If your employer credited a bonus in December but restricted access until January, it generally belongs on the following year’s W-2.11eCFR. 26 CFR 1.451-2 – Constructive Receipt of Income

How to Reconcile Your W-2

The fastest way to check whether Box 1 is right is to compare it against your final pay stub. Most stubs show a year-to-date breakdown of gross pay, each pre-tax deduction, and the resulting taxable wages. Start with your gross pay and subtract every pre-tax item: traditional 401(k) or 403(b) deferrals, health insurance premiums paid through a cafeteria plan, FSA and HSA contributions, and any commuter benefits. The result should land close to Box 1.

Then check Box 12 for the lettered codes that identify specific deductions and additions:

If the numbers still do not line up after accounting for every pre-tax item, ask your employer’s payroll department for a written reconciliation before filing season.

When the W-2 Really Is Wrong

If you find a genuine mistake, a Box 1 total that does not match your records even after accounting for every pre-tax deduction, ask your employer to issue a corrected Form W-2c. When your employer will not cooperate, contact the IRS at 800-829-1040 or visit a Taxpayer Assistance Center to file a formal W-2 complaint. The IRS will send your employer a letter requesting a corrected form within ten days.12Internal Revenue Service. W-2 – Additional, Incorrect, Lost, Non-Receipt, Omitted

If the corrected W-2 has not arrived by the time you need to file, you can use Form 4852 as a substitute. You will estimate your wages and withholdings based on your final pay stub and attach Form 4852 to your return.13Internal Revenue Service. If You Don’t Get a W-2 or Your W-2 Is Wrong If a corrected W-2 shows up later with different figures, file an amended return using Form 1040-X.