As the end of the year approaches, you may have employees coming to you with a common payroll question. Why are the numbers listed on my final paystub for the year different from my W-2 form? Understanding the intricacies of payroll and taxes can be tricky even for seasoned professionals, so it makes sense that employees may be confused. 

The difference between W-2 and final pay stub  

A W-2 is not the same as a pay stub. Form W-2 is a tax document that is required to be sent by all employers to all employees typically by the end of January for the previous calendar year. This document contains important information needed for employs to file income taxes such as taxable wages and taxes withheld from pay for the year. The final pay stub displays the total or gross dollar amount earned prior to deductions and taxes, along with the net pay, which is the actual amount received by the employee. Often the gross amount shown on your final pay stub will be higher than the amount shown on your W-2 because the final pay stub amount may not take into account pre-tax deductions. 

Why the gross amount on your final pay stub may differ from the amount on your W-2 

Pre-tax deductions 

A final pay stub reflects the gross amount earned before pre-tax deductions, such as retirement plans or health insurance premiums. However, a W-2 has taxable wages after accounting for the pre-tax deductions.  

Bonuses and overtime 

If an employee has received bonuses or worked overtime, the additional earnings may be included in the end of year pay stub but categorized differently on a W-2 form.  

Non-taxable benefits 

Non-taxable benefits such as health savings accounts (HSAs) or other fringe benefits may be part of the end of year pay stub but are excluded from sections of the W-2 because they are not considered taxable income.  

Tax withholdings  

The gross amount on an end of year pay stub does not account for tax withholdings. However, a W-2 provides a view of the taxable income after federal and state tax withholdings.  

It is important for employees to understand the difference between W-2 and final pay stub and recognize that the W-2 is what should be used to file taxes for the year. If you have any questions regarding W-2 forms or final pay stubs, reach out to us at service@helpside.com.