Have you received a W-2 and a paystub with different numbers on them? Tax paperwork can be confusing, and many employees want to know the difference between a W-2 form and a paystub. These are two very important forms that all employees need to receive from their employers.
It’s crucial to know what they’re for, how they differ, and how to read the information on each one. This quick summary will let you know what to do with these two forms when it comes to managing your finances and filing your income taxes.
What Is a W-2 Form?
Did you receive more than $600 from an employer during the year or have you had income, Medicare, or Social Security taxes withheld by an employer? If so, that employer must produce a W-2 form and give it to you at the end of the year or by January 31st at the latest. You need to use the various numbers on this form – income, retirement plan contributions, health insurance payments, etc. – when you fill out your annual tax return.
What Is a Paystub?
A paystub is known by many other names, including payslip, wage statement, or earnings statement. Whatever the name used by your employer, this is a record of the money you earned as well as the taxes and other deductions you paid during a pay period. In most states, you must receive a paystub with every paycheck your employer gives you.
However, these paystubs can be on paper or electronic, which is much more common these days. They’re used for our personal records and as a way to double-check if your employer has paid you correctly.
Another kind of paystub is your year-end paystub which is also known as a final paystub. This paystub is different from your regular ones because it gives you a summary of your gross earnings, taxes, deductions, and net pay for the year.
It also includes a record of your non-taxable income which might include things like allowances or mileage reimbursements. This final paystub for the year may or may not have totals that are equal to those on your W-2 form.
You can even generate your own paystubs with Paystub Master’s free paystub generator.
FYI: The name “paystub” comes from the era of paper checks. Employees were issued checks from their employers and attached to them were the breakdowns of their earnings and deductions. The paychecks were detachable so you could deposit them at the bank and keep the smaller “stub” as a record of your pay.
How Are W-2 vs Paystubs Different?
W-2 forms and paystubs are different in a number of important ways. These include:
Regularity: Normal paystubs come with all of your paychecks. If you get paid every two weeks, for example, then you’ll also receive a paystub every two weeks. Your employer will only provide you with your W-2 form once at the end of each year. That’s because it’s a summary to be used for your annual tax return.
Purpose: The purpose of your W-2 is to let your employer declare the money it has paid you and the taxes and deductions it has taken from your pay. It’s also used as your official record when you fill out your tax return.
What’s Included: Your normal paystubs will tell you what you earned during your latest pay period and should also give you your total year-to-date earnings. However, the W-2 form you get at the end of the year will summarize the entire year of your earnings, taxes paid, and deductions to different benefit programs. Therefore, your W-2 will usually have higher numbers than your individual pay period paystubs.
Your year-end paystub, though, also summarizes the full year but will often have different numbers from those on your W-2. Why?
First, because the year-end paystub will also include non-taxable income that you received, such as mileage reimbursements and allowances. These were given to you by the employer, but don’t count as wages, so they don’t show up on your W-2. Second, your deductions for things like your retirement savings plan reduce your federal and state income tax amount. Your year-end paystub will show your salary in full, for example, $60,000, but if you paid $6,000 toward a 401(K), your income will show as $54,000 on your W-2 instead.
W-2 Form Breakdown
Your W-2 form is longer and more complicated than your paystub. After all, it’s a federal tax document. Keep in mind, though, that your employer does the hard part by filling this form out for you. This is what you’ll see on any standard W-2 form:
Boxes a-f
These boxes contain information related to the employer and your personal information. This includes:
- Box a – your Social Security Number (SSN)
- Box b – the employer’s Employer Identification Number (EIN)
- Box c – the employer’s name, address, and ZIP code
- Box d – control number (a unique number that identifies this W-2)
- Box e – your first name, initial, and last name
- Box f – your address and ZIP code
Boxes 1-20
These boxes show the specific information related to your earnings, tax withholdings, and deductions, as well as your employer’s state and local tax information as follows:
- Box 1 – Your federal income (wages, tips, and other compensation)
- Box 2 – Federal income tax withheld from your paychecks
- Box 3 – Your wages subject to Social Security tax
- Box 4 – Social Security tax withheld from your paychecks
- Box 5 – Your total wages and tips subject to Medicare tax
- Box 6 – Medicare tax withheld from your paychecks
- Box 7 – Your tips subject to Social Security tax
- Box 8 – Tips that were allocated to you
- Box 9 – Verification code to prove the W-2 is real (often left blank)
- Box 10 – Dependent care benefits your employer paid to you
- Box 11 – Amount that was paid to you from a non-qualified deferred compensation plan
- Box 12a – Uncollected Social Security or Railroad Retirement Tax Act (RRTA) tax on your tips
- Box 12b – Uncollected Medicare tax on your tips
- Box 12c – Taxable cost of group-term life insurance coverage over $50,000 provided to you
- Box 12d – Elective deferrals and designated Roth contributions
- Box 13 – Boxes ticked if you are a statutory employee, if you participated in a retirement plan, or if sick pay payments were paid to you by a third party
- Box 14 – Other deductions (ex. health insurance premiums deducted, state disability insurance taxes, union dues, etc. deducted from your paycheck)
- Box 15 – State and employer’s state tax identification number
- Box 16 – Your income (wages and tips) subject to state tax
- Box 17 – State income tax withheld from your paychecks
- Box 18 – Your income (wages and tips) subject to local tax
- Box 19 – Local income tax withheld from your paychecks
- Box 20 – Locality name (name of the city or town where you work)
Finally, a paper W-2 form has six copies for:
- State or local tax department (Copy 1)
- State or local tax filing (Copy 2)
- Social Security (Copy A)
- Federal tax filing (Copy B)
- the employee’s records (Copy C)
- the employer (Copy D
The copies you must receive from your employer include Copies 2, B, and C. If you file online, however, you’ll only see one form that will be automatically copied to the right authorities.
Paystub Breakdown
Paystubs are issued by individual employers and don’t have a standard format like the W-2 form from the IRS does. Their contents can also differ based on the laws of each state. Here, we’ll take the requirements of New York State as an example of the information that may be on your paystubs.
Paystubs in New York State (example)
In New York, employers are required to issue their employees paystubs that must include the details of their gross wages, deductions, withheld taxes, pay rate, and net wages. A typical paystub or wage statement in New York will give these details:
- The employer’s name, address, and phone number
- Your name
- The date range of the pay period
- Your salary or hourly wage and overtime rate
- The regular hours you worked
- The overtime hours you worked
- Allowances and credits
- Your total gross wages
- Deductions from your wages
- Taxes withheld from your wages (state and federal)
- Your total net wages for the pay period
- The date you were paid
These items can be presented in any order. In other states, more or less information may be required on payslips.
The Final Word on W-2 vs Paystubs
While both the W-2 form and the paystubs issued to you by your employer contain similar information, these are different documents used for different purposes. The W-2 form that you receive once a year shows your total taxable income for that year and is the reference you need to use when you file your federal and state tax returns.
The paystub you get with each paycheck lets you know your total gross income, including non-taxable income. These paystubs, including your year-end pay stub, are for your own financial records. In both cases, however, it’s necessary to keep these important documents safe, whether in your filing cabinet or your digital files.
