W-2 Reconciliation: How to Verify Your W-2 Matches Your Pay Stubs

Why Your W-2 Box 1 Doesn't Equal Your Gross Pay

Many people are surprised to find that Box 1 on their W-2 (Wages, Tips, Other Compensation) is significantly lower than their annual gross pay. This is normal — and expected. Box 1 is taxable wages, which excludes several types of pre-tax deductions:

Traditional 401(k)/403(b)/457 contributions (pre-tax)
Health insurance premiums paid pre-tax
FSA/HSA contributions through payroll
Dependent care FSA contributions
Commuter benefit deductions

The reconciliation math: Gross Pay − Pre-tax Deductions = Box 1 Wages

Step-by-Step W-2 Reconciliation

Step 1: Gather Your Documents

You need: your W-2 and your last pay stub of the year (the one with year-to-date totals). If you changed jobs, you need the last pay stub from each employer plus each corresponding W-2.

Step 2: Reconcile Box 1 (Federal Wages)

From your final pay stub YTD column:

Start with YTD Gross Pay
Subtract YTD 401(k)/403(b) contributions
Subtract YTD health/dental/vision premiums (pre-tax)
Subtract YTD FSA/HSA payroll contributions
Subtract YTD commuter benefits
Add any taxable fringe benefits (group life insurance over $50k, company car personal use)
Result should equal W-2 Box 1

Small rounding differences (a few dollars) are normal. Differences of hundreds or thousands are not.

Step 3: Reconcile Box 3 (Social Security Wages)

Box 3 is often higher than Box 1. Social Security wages include 401(k) contributions (not excluded for SS purposes) but exclude other items. The cap is $176,100 (2025) — if your earnings exceeded this, Box 3 will show $176,100.

Step 4: Reconcile Box 4 (Social Security Tax Withheld)

Box 4 should equal exactly 6.2% of Box 3 (capped at $10,918.20). If it doesn't, that's a payroll error worth investigating.

Step 5: Verify Box 5 and Box 6 (Medicare)

Box 6 should equal 1.45% of Box 5, plus 0.9% for any Medicare wages above $200,000. No cap on Medicare wages.

Step 6: Reconcile State Wages (Box 16)

State wages may differ from federal wages if you work in a state with different pre-tax treatment of certain benefits (some states don't recognize 401(k) pre-tax treatment).

Common Discrepancies and What They Mean

Box 1 too high: Pre-tax deductions not applied — payroll error. Contact HR.
Box 1 too low: Deductions applied twice or income not fully reported — payroll error.
Wrong Social Security number: IRS won't match your return to this W-2 — request a corrected W-2c immediately.
Wrong employer EIN: Rare, but creates IRS matching problems.
State not matching where you worked: Wrong state withholding — may require amended state returns.

What to Do If You Find an Error

Contact your employer's payroll or HR department with specific documentation of the discrepancy
Employer has until the original tax filing deadline to issue a corrected W-2c
If employer is unresponsive, file using Form 4852 (substitute W-2) based on your pay stub records
Notify the IRS if the employer refuses to correct a known error

Reconcile W-2s Faster with Automation

Upload your W-2 to parsew2.com to extract all boxes into structured data — making reconciliation and verification faster, especially when dealing with multiple W-2 forms across employers.