How to Read Your W-2: An Employer’s Guide to Answering Employee Questions

Every January, the same question shows up in HR’s inbox: “why doesn’t Box 1 match my salary?” Employees look at their W-2, see a number that’s lower than what they think they earned, and assume something’s wrong. Usually nothing is. Here’s how to answer the questions that come up most, before they turn into a wave of one-on-one explanations.

For the basics on what a W-2 covers and how it differs from a 1099, see our W-2 & 1099 Reporting Basics page, part of the Year-End Payroll and Tax Season Guide.

“Why is Box 1 lower than my actual salary?”

Box 1 shows taxable wages, not gross salary. Pre-tax deductions, 401(k) contributions, health insurance premiums, FSA contributions, all come out before Box 1 is calculated. An employee earning $60,000 who contributes 6% to a 401(k) and pays $200 a month in pre-tax health premiums will see a Box 1 number well under $60,000, and that’s correct, not an error.

“Why are Box 3 and Box 5 different from Box 1?”

Box 3 (Social Security wages) and Box 5 (Medicare wages) are calculated differently than Box 1. Some pre-tax deductions, like traditional 401(k) contributions, reduce Box 1 but not Boxes 3 and 5, since Social Security and Medicare taxes still apply to that money. Seeing three different wage figures on one form is normal, not a sign of an error.

“I got a bonus, why did so much of it disappear in taxes?”

Bonuses are taxed as supplemental wages, and employers choose how to withhold: a flat 22% federally, or the aggregate method, which combines the bonus with regular wages. The aggregate method treats the bonus check as if it were normal pay, so it often withholds more than employees expect. The flat rate can feel high for employees in a lower bracket and low for higher earners. Neither is a penalty. It’s a withholding method, and any over- or under-withholding true’s up when they file their return.

“My name or address is wrong on my W-2”

This is the one that actually needs action, not just an explanation. A wrong legal name or Social Security number requires a W-2c correction filed with the Social Security Administration. An address error alone typically doesn’t require a corrected form, since the address doesn’t affect the tax data itself, but update it in your system so future mailings go to the right place.

“I never got my W-2”

Employers are required to make W-2s available by January 31 (February 1 in 2027, since January 31 falls on a Sunday), by mail, secure portal, or both. If an employee says they never received theirs, check whether it was returned as undeliverable (common for employees who moved during the year) before assuming it was never sent. A self-service portal where employees can pull their own W-2 on demand cuts down this exact question significantly.

Frequently Asked Questions

This article is for general informational purposes only and is not legal, tax, or accounting advice. Consult a qualified professional for guidance specific to your situation.

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