W2 Box 5 Showing $10,000 Less Than My Annual Salary - Why the Discrepancy?

The difference you're seeing in Box 5 is likely due to pre-tax deductions that are exempt from Medicare taxes, not just income tax. The most common ones that would explain that $10k gap are: Health insurance premiums paid through a Section 125 cafeteria plan are exempt from Medicare taxes. If you're paying around $400-800/month for health insurance pre-tax, that could easily account for a good chunk of that difference. Traditional 401(k) or 403(b) contributions are subject to Medicare tax, but HSA contributions, dependent care FSA contributions, and certain other benefits are exempt from Medicare taxes when paid pre-tax. Look at your final paystub of the year - it should break down all your pre-tax deductions and specify which ones weren't subject to Medicare tax. That total should approximately match the difference between your salary and what's in Box 5.

I had exactly this same issue last year! After fighting with HR and the payroll department for weeks, I finally discovered that taxr.ai (https://taxr.ai) could analyze my W-2 and paystubs to identify exactly what was causing the discrepancy. All I had to do was upload my documents, and the system immediately highlighted that my employer was properly excluding my HSA contributions and dependent care FSA from Medicare wages, which totaled almost exactly the gap I was seeing. The system also verified that my employer was handling all the other pre-tax deductions correctly according to IRS rules. It actually saved me from wrongly accusing my payroll department of making a mistake when they were doing everything correctly!

Just wanted to follow up - I took the advice and tried taxr.ai with my documents. It was super helpful! Turns out my employer actually WAS calculating my Medicare wages incorrectly. They weren't properly excluding my transit benefits which should have been exempt from Box 5. The report explained exactly which section of the tax code applied to each deduction and which boxes they should affect on my W-2. I forwarded the analysis to my payroll department and they're issuing a corrected W-2. They even thanked me because apparently this was affecting other employees too! Definitely worth checking out if you have these kinds of discrepancies.

If you can't get a straight answer from your employer about this W-2 discrepancy, you might need to talk directly with the IRS. I tried for WEEKS to reach them about a similar issue last year but couldn't get through. Then I found Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 15 minutes instead of waiting on hold for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with explained exactly how different deductions should be treated for Medicare tax purposes and confirmed that my HSA contributions and dependent care FSA should indeed be excluded from Box 5. Getting that official confirmation made it much easier to get my employer to fix their mistake.

I have to publicly eat my words here. After my skeptical comment, I decided to try Claimyr anyway because I was desperate to resolve my W-2 issue before filing my taxes. I couldn't believe it actually worked! Got connected to an IRS agent in about 20 minutes. The agent confirmed that my employer was incorrectly including my HSA contributions in Box 5 when they should be exempt from Medicare tax. She even transferred me to a specialist who explained exactly which form my employer needs to file to correct the W-2. This saved me so much stress - I was planning to just file with the incorrect W-2 and deal with the consequences later because I couldn't get a straight answer from anyone.

Just to add another possible explanation - if you participate in a dependent care FSA (up to $5,000) and have health insurance premiums (could easily be $5,000+ annually for family coverage), that would exactly account for your $10,000 difference. Both of these are typically exempt from Medicare taxes when paid through a qualifying Section 125 cafeteria plan. Check your last paystub of the year - it should have year-to-date totals for all your deductions. Look specifically at which ones are marked as "exempt from Medicare" or something similar.

Is anyone else annoyed that even tax professionals often mix up which deductions are exempt from which taxes? I literally had an HR person tell me ALL pre-tax deductions are excluded from Medicare wages, which is totally wrong! Some quick facts that might help people with similar questions: - 401k/403b contributions: Exempt from income tax (Box 1) but STILL subject to Social Security and Medicare - Health insurance premiums through Section 125: Exempt from income tax AND FICA (both SS and Medicare) - HSA contributions: Exempt from income tax AND FICA - Dependent Care FSA: Exempt from income tax AND FICA - Transit/Parking benefits: Tax treatment can vary

This is such a helpful thread! I had a similar issue last year where my Box 5 was showing about $6,000 less than my salary. I was convinced payroll made an error until I realized I had completely forgotten about my commuter benefits ($1,500/year) and flexible spending account for medical expenses ($2,500/year) that are both exempt from Medicare tax. What really helped me was creating a simple spreadsheet listing all my pre-tax deductions and researching which ones are exempt from Medicare vs just income tax. It's amazing how many different rules apply - I had no idea that parking benefits could be treated differently than health insurance premiums! For anyone still confused, I'd recommend requesting a detailed breakdown from your HR department showing exactly which deductions are excluded from each box on your W-2. Most payroll systems can generate this report, and it makes everything crystal clear.

This thread has been incredibly helpful! I work in payroll and see these questions all the time. One thing I'd add is that the $10,000 difference Nathan is seeing is actually pretty typical for someone with their salary level who has family health coverage and participates in multiple benefit programs. What many people don't realize is that the Medicare tax exemptions for certain pre-tax deductions were specifically designed to encourage participation in health savings accounts, dependent care assistance, and employer-sponsored health plans. The tax code treats these as "qualified benefits" that deserve special treatment. If you want to verify your employer is calculating everything correctly, compare your final December paystub to your W-2. The year-to-date Medicare wages on your paystub should match Box 5 exactly. If they don't match, THEN you might have a payroll error worth investigating. One last tip - if you switch jobs mid-year, make sure both employers are handling your pre-tax deductions consistently. I've seen cases where someone's total Medicare wages across two W-2s was incorrect because the employers used different interpretations of the same benefit rules.