W-2 vs Last Pay Stub: Why the Numbers Differ
Your W-2 and final pay stub often show different totals because the W-2 reflects year-end adjustments, pre-tax deduction reconciliations, and group-term life insurance over $50,000 (reported in Box 1 but not on pay stubs). This article explains why those differences exist, which number to use when filing, and how the new OBBBA codes show up on each document.
Common reasons for the difference
Several factors cause the W-2 and last pay stub to disagree. Understanding each one will help you determine whether the discrepancy is normal or a genuine error.
Pre-tax retirement contributions
If you contribute to a traditional 401(k), 403(b), or 457(b) plan, those contributions are subtracted from Box 1 on your W-2 but may appear in your pay stub gross pay. Your pay stub might show year-to-date gross wages of $60,000, but if you contributed $5,000 to a 401(k), your W-2 Box 1 would show $55,000. The $5,000 still appears in Box 12 under Code D (for 401(k)) or the applicable code for your plan type.
Health insurance premiums
Pre-tax health insurance premiums paid through a Section 125 cafeteria plan reduce your Box 1 wages. If you pay $200 per paycheck for health insurance (26 pay periods), that is $5,200 excluded from Box 1 but included in your pay stub gross.
Group-term life insurance over $50,000
If your employer provides group-term life insurance coverage exceeding $50,000, the cost of the excess coverage is taxable. This "imputed income" is added to Box 1 and also reported in Box 12 under Code C. It does not appear as cash on your pay stub, so your W-2 Box 1 may be higher than your last pay stub's gross. This is one of the most common causes of confusion when the W-2 exceeds the pay stub total.
Third-party sick pay
If you received short-term disability or sick pay from a third-party insurance carrier, the taxable portion is included in your W-2 Box 1. However, these payments often bypass your employer's normal payroll, so they will not appear on your regular pay stubs.
Timing of final payroll
Your last pay stub of the year may not reflect the final payroll run. Year-end bonus payments, commission adjustments, or payroll corrections processed after your last regular paycheck are included on the W-2 but not on the last pay stub you received.
HSA contributions
Employer contributions and pre-tax employee contributions to a Health Savings Account reduce Box 1 wages and are reported in Box 12 under Code W. Your pay stub may show these as deductions but still include the full gross amount in its year-to-date total.
Social Security wages (Box 3)
Box 3 on your W-2 reports Social Security wages, which are capped at $184,500 for 2026. If you earned more than this cap, Box 3 will be lower than your pay stub gross. Additionally, pre-tax retirement contributions (unlike pre-tax health insurance) are included in Social Security wages, so Box 3 is often different from both Box 1 and your pay stub total.
Which number is correct for filing
Always use your W-2 when filing your tax return. The IRS receives a copy of your W-2 directly from your employer (via the SSA) and will match the figures against what you report on your 1040. If you use pay stub numbers that differ from your W-2, you may receive an IRS notice requesting an explanation or additional payment.
Your pay stub is useful for verifying that your W-2 is accurate. If the difference between the two cannot be explained by the factors listed above, that is a sign of a potential error on the W-2 that you should resolve with your employer before filing.
How OBBBA codes appear
For 2026, your W-2 may include Code TP (qualified tips) and Code TT (qualified overtime premium) in Box 12. Here is an important point: these codes do not change your Box 1 wages. The tips and overtime pay reported under these codes are already part of Box 1. The codes simply break out the amounts that qualify for OBBBA deductions on Schedule 1-A.
On your pay stubs, you may or may not see these amounts broken out separately. Some payroll systems show a line item for "qualified tips" or "OT premium" on each pay stub. Others do not. Regardless of what your pay stubs show, the official figures for your return come from the Code TP and Code TT amounts on your W-2.
If your pay stubs show overtime earnings but your W-2 does not include Code TT, it could mean that your employer classified you as exempt (in which case the deduction does not apply) or that their payroll system needs updating. Contact your payroll department to clarify.
When the difference is an error
After accounting for all the factors above, if the numbers still do not reconcile, you may have an actual W-2 error. Common signs include:
- Box 2 (federal tax withheld) does not match your pay stub year-to-date withholding. This should be an exact match unless your employer processed a year-end correction.
- Box 1 differs by more than the sum of pre-tax deductions and imputed income. Add up your 401(k), health insurance, HSA, and other pre-tax amounts. Subtract them from your gross pay. Add back any imputed income (GTL, personal use of company car). The result should closely match Box 1.
- Your name, SSN, or address is wrong. These errors require a corrected W-2C from your employer.
- Code TP or Code TT shows an amount that does not match your records. Compare against your tip reporting forms (Form 4070) or overtime pay history.
If you find an error, request a W-2C from your employer. For a step-by-step guide, see How to Fix W-2 Errors: The W-2C Process.
To estimate your taxes using the correct W-2 figures, try our Paycheck Calculator.