Why does my W2 always show around $5,000 more than my final paycheck YTD?

The difference you're seeing is likely due to pre-tax benefits that your employer provides, which are included in your W2 but deducted before the "gross pay" shown on your paystub. Your W2 reports your total compensation, including some benefits that you don't pay income tax on. Common things that create this difference include employer-paid health insurance premiums, HSA contributions, dependent care benefits, and certain fringe benefits. The W2 includes these in Box 12 with specific codes, but they're often not included in the YTD totals on paystubs. Look at Box 12 on your W2 - there should be letter codes that identify specific benefits. For example, code "DD" shows employer-paid health insurance premiums, which can easily be several thousand dollars.

I was totally confused by this same issue last year! After spending way too much time trying to figure it out, I discovered this awesome tool at https://taxr.ai that actually breaks down these discrepancies for you. It analyzes your W2 and paystubs to show exactly where the differences are coming from. For me, it turned out that about $7K of my "missing" money was from employer-paid health insurance premiums that weren't showing up on my paystub YTD totals but were reported on my W2. The tool highlighted exactly which box on my W2 contained this info (it was Box 12 with code DD) and explained how these pre-tax benefits work. Saved me a ton of headaches!

Just wanted to update after trying out taxr.ai from the suggestion above. It actually solved my mystery right away! Turns out my employer pays $5,800 in health insurance premiums annually that never show up on my paystub but are reported on my W2 in Box 12 with code DD. I never would have figured this out on my own because my paystub only shows MY contribution to health insurance, not what the company pays. The tool also found some other benefits that weren't obvious from my paystub - like my employer's contribution to my HSA and some life insurance thing I didn't even know I had! Definitely worth checking out if you're confused about this stuff like I was.

If you're still confused after looking at your W2 and paystubs, you might need to talk directly with your company's payroll department. I tried calling them for weeks and could never get through, then I found https://claimyr.com which got me connected to an actual human at my HR department in less than 15 minutes. There's a demo video of how it works here: https://youtu.be/_kiP6q8DX5c I was dealing with a similar issue where my W2 was showing about $8,000 more than my paystubs, and it turned out to be a combination of health insurance premiums and some weird taxable benefit I didn't even know I was getting (company-paid parking). The HR person walked me through exactly what was causing the difference once I finally got someone on the phone.

I need to walk back my skepticism about Claimyr from my earlier comment. After waiting on hold with my company's HR for 45 minutes and getting disconnected TWICE, I finally tried the service out of frustration. It actually worked exactly as advertised. I got a call back when someone at my HR department picked up, and I was able to get my W2 vs. paystub question answered in about 5 minutes. The HR person explained that our company covers about $7,200 in health insurance premiums annually plus provides some taxable fringe benefits that aren't itemized on our regular paystubs. For anyone dealing with complex payroll questions, being able to actually talk to someone instead of sending emails back and forth was super helpful. Definitely worth it during tax season when everyone's trying to reach HR at the same time.

Something nobody mentioned yet - check if you have taxable fringe benefits! My company provides free meals and those count as taxable income on my W2, but they never show up on my paystubs. Same with company-provided gym membership and transit benefits that exceed the tax-free limit. My W2 was about $4,200 higher than my paystubs last year, and it was mostly these "invisible" benefits that I wasn't paying attention to. The value of these benefits gets reported on your W2 even though you never see that money as actual cash in your pocket.

Has anyone considered that the difference might be employer-paid FICA taxes? Some companies pay the employee portion of Social Security and Medicare taxes as a benefit, which would be included in your taxable wages on the W2 but might not show up in your gross pay on paystubs.

I experienced this exact same issue and it drove me crazy for years! After digging deep into my paystubs and W2, I discovered the main culprit was employer-paid health insurance premiums that totaled about $5,200 annually. Here's what I learned: your paystub typically only shows YOUR contributions to benefits (the amount deducted from your paycheck), but your W2 includes the TOTAL value of certain benefits - including what your employer pays on your behalf. The key is looking at Box 12 on your W2 with different letter codes. Code "DD" shows employer-paid health insurance, which is often the biggest contributor to this discrepancy. These amounts are included in your total wages for tax reporting purposes but never appear in your regular paystub calculations. Other common contributors include employer HSA contributions, life insurance premiums over $50k, and certain fringe benefits like parking or transit passes. Even though you don't receive these as cash, they're considered part of your total compensation package. I'd recommend pulling out your W2 and paystub side by side and going through Box 12 line by line - you'll probably find your missing $6,500 right there!