Why don’t my gross earnings on my last paystub match the compensation on my W-2?

Your Form W-2 provides the amount of your taxable wages not gross wages.  Any pretax deductions (medical, dental, vision, and so on) will affect the wages listed on your Form W-2.  To calculate your taxable wages, you will need to subtract your annual pretax deductions.

Three examples are provided below to help illustrate how you can calculate your W-2 based on your final paystub of the year.

Example 1: An employee earns $50,000 and does not have any pretax deductions.  In this case, the amounts reported in Boxes 1, 3, and 5 will each be $50,000.

Example 2: An employee earns $50,000 and has pretax medical, dental, and vision deductions totaling $5,000 for the year.  In this case, the amounts reported in Boxes 1, 3, and 5 will each be $45,000.

Example 3: Like Example 2, an employee earns $50,000 and has pretax medical, dental, and vision deductions totaling $5,000 for the year.  However, this employee also contributed a total of $3,000 to a 401(k), which is another common complicating factor because the 401(k) deduction is only pretax for federal income tax but not for FICA taxes (Social Security and Medicare). For this reason, this employee's Form W-2 would show the following:

Box 1—Wages, tips, other compensation: $42,000
Box 2—Social security wages: $45,000
Box 3—Medicare wages and tips: $45,000

Remember, not all deductions from your pay check are pretax, so the more deductions, the more complicated the calculations. Other complicating factors are reimbursements for mileage, which generally appear in the earning section but are not counted toward taxable wages, and taxable fringe benefits, such as the personal use of a company vehicle or other company-paid benefits that may not be listed on your pay check but are included in your taxable wages on your Form W-2.  It is always a good idea to get help from a tax professional to ensure you are filing your taxes properly.